Second SEISS grant explained

To qualify for the second SEISS grant the business must be adversely affected by the coronavirus pandemic on or after 14 July 2020.

The online portal will open for the second SEISS grants on 17th August 2020. The amount of the grant will be calculated at 70% of the taxpayer’s annual average profits, capped at £2,190 per month, and payable for three months.

The other conditions to qualify for the second grant remain the same, please see below to see if you qualify.

Who qualifies?

The SEISS grant will be payable to taxpayers who meet these conditions:

  • registered with HMRC as self-employed
  • submitted tax returns for 2016/17 to 2018/19 (or years within that period when trading) which include self-employed trading income
  • was trading in 2018/19 and 2019/20.
  • is still trading in 2020/21 (or would be if it were not for the coronavirus shutdown)
  • has lost trading profits due to coronavirus.
  • self-employed profits make at least half of their annual average income.
  • average self-employed profits for 2018/19 do not exceed £50,000 and were more than nil or
  • average annual self-employed profits for 2016/17 to 2018/19 do not exceed £50,000 and were more than nil.

Adversely affected

The main addition to the HMRC guidance for SEISS is further emphasis on the requirement for the business to have been “adversely affected” by the coronavirus pandemic as a pre-condition for claiming the grant.

Accurate recording of the timing of trading conditions and costs for the business will be crucial, as the second SEISS grant can only be claimed if the business is adversely affected on or after 14 July 2020.

To be considered adversely affected, HMRC says a business must have either temporarily stopped trading, or has been scaled back, and it suggests three possible causes for this reduction or cessation in trade as:

  • supply chain has been interrupted
  • fewer or no customers or clients
  • staff were unable to work

Those three categories broadly cover supplies, sales, and staff, but there could be other reasons for a reduction in profits, such as increased costs.

For example, many businesses have had to undertake more cleaning, install screens and signage, and provide protective equipment to staff. The HMRC guidance does not appear to consider these increased costs as being adversely affected, but it certainly would be, as at the margins such cost increases could mean the business is no longer viable.

In addition, HMRC states that the business will have been adversely affected if the owner(s) can’t work because they are:

  • shielding themselves or someone else in their household
  • self-isolating
  • on sick leave because of coronavirus; or
  • have caring responsibilities because of coronavirus

In all cases, the taxpayer should keep records of how and why they believe their business has been adversely affected, and for which periods.

Continue to work

HMRC emphases that the self-employed taxpayer can continue to work in their business while receiving the SEISS grant, which is in stark contrast to the conditions for directors of their own companies. If directors choose to furlough themselves and claim CJRS for their pay, they must cease all productive work for their company and any connected businesses, while they are furloughed.

Timing

Accurate recording of the timing of trading conditions and costs for the business will be crucial, as the second SEISS grant can only be claimed if the business is adversely affected on or after 14 July 2020.

Tax hit

HMRC provides no guidance on how long the period of non-trading must last for, or by what percentage the normal level of trading business has to reduce by, for the business to qualify as adversely affected. One could argue that a cessation of trading for as little as a few days would be enough.

The SEISS grant is taxable income for 2020/21, so the tax will be payable by 31 January 2022.

For construction industry subcontractors, who are used to receiving their income with CIS-tax deducted at 20% or 30%, the SEISS grant will be a cashflow fillip as no tax is deducted at source. This means those CIS subbies may well have tax to pay for 2020/21 rather than be due a tax refund.