Insights on How and When to Report a Seiss Grant on Your Tax Return

Insights on How and When to Report a Seiss Grant on Your Tax Return

On 3rd March 2021, most self-employed people in the UK were delighted after the Self-employment Income Support Scheme (SEISS) was extended to September 2021.

The UK government had initially introduced the SEISS in May 2020 to cushion the self-employed individuals whose profits had been affected by the Covid-19 pandemic and subsequent lockdown.

What Entails the Extended Scheme?

Since its inception, the SEISS grant is expected to offer its 4th and 5th grants in April and May, respectively.

HMRC estimates that close to 300,000 taxpayers who started trading in 2019/20 can now qualify for the fourth and fifth grants. More than 300,000 self-employed individuals who were ineligible for the initial grants may also be eligible for the same.

SEISS 4

The fourth round of claims is expected to open in late April, and it will cover up to 80% of the trader's monthly profit for three months and will be worth £7,500, which should be paid in one instalment.

In this grant, HMRC will consider 2019/2020 tax returns which were filed by 2nd March 2021. The other requirements, however, will remain constant like in the previous grants.

HMRC will get in touch with eligible taxpayers, and applications will be open until the end of May 2021.

It will take some time for HMRC to check your 2019/20 UK Tax Return data and pre-verify before applications are open.

SEISS 5

The fifth SEISS grant application will start in late July and will cover May to September 2021. In this case, the amount received will depend on how much your business lost between April 2020 and April 2021.

If your turnover has dropped by 30% or more, you will get a grant worth 80% of the three months’ net profits, capped at £7,500.

On the other hand, turnovers that have dropped by less than 30% will receive a grant worth 30%, capped at £2,850.

The grants are calculated based on three months of business profit, despite covering five months. HMRC uses this approach to support traders as the economy begins to reopen.

It is also important to note that the 4th and 5th grants have broader eligibility as they cover newly self-employed people, taking into account the 2019-2020 tax returns.

Eligibility Criteria for Claiming a SEISS Grant

This scheme was set up to offer financial relief to self-employed individuals and partnerships adversely affected by the Covid-19 pandemic. To claim the SEISS grant, you need to complete the Self-Assessment tax return trading pages.

HMRC will calculate your claims based on the information you submitted during your tax returns. Therefore, you don’t need to provide any figures.

To qualify for the fourth round, you should prove that you have reduced demand or are completely unable to trade due to coronavirus.

Other SEISS Qualification Requirements:

  • Your gross trading profits should be less than £50,000 annually, and most of your income should come from trade.
  • You have been trading in the tax years 2019-20 and 2020-21, and you filed your 2019-2020 tax returns by 2nd March.
  • You need to show a 'reasonable belief' that your trading profits will significantly reduce.
  • You will also need to declare that you will continue trading.

If you're still ineligible for the SEISS grant on your tax return, you can still access tax reliefs, government loans, and other cash grants.

What the Adversely Affected Traders Mean

An eligible trader for the grant must have been adversely affected by coronavirus.

HMRC states that an adversely affected business by Covid-19 could include the following:

You can’t trade because you are:

  • Shielding
  • Self-isolating
  • Taking on caring responsibilities caused by Covid-19
  • On sick leave associated with coronavirus

Or you have been forced to reduce or temporarily stop trading due to:

  • An interrupted supply chain
  • Fewer or no clients
  • Cancelled contracts
  • Your staff being unable to report to work

You can only claim a grant if your trade has been adversely affected at the time of the claim and not based on potential future effects. HMRC will usually confirm this when claiming.

How to Apply for the SEISS Grant

The earliest you can apply for the fourth-round grant is in late April 2021. If you're eligible for a grant, HMRC will contact you in mid-April for your personal claim date.

When making an application, you will need the following information:

  • Self-Assessment UTR
  • Government Gateway ID and password
  • Bank account number
  • National Insurance number

Once you make your SEISS claim and it gets approved, the money should be in your account within six working days.

After receiving your SEISS Grant, you can continue trading, get employed, or start a new trade.

How to Account for SEISS Payments

Any amount you receive from the SEISS grant is subject to income tax and National Insurance.

However, you don't have to repay the money as it is a grant, not a loan. You are required to report the funding received on your self-assessment tax return.

The first, second, and third rounds of the grant are taxable in 2020/21 and don’t apply back to the tax year 2019/20.

At the Budget announcement on 3rd March, all grants will be taxed in the year received.

Online tax advice services or a tax agent can help you check whether you're eligible for the scheme. However, your agent cannot make the actual claim—you, as the taxpayer, must claim it personally. Your agent can help you request HMRC to review eligibility on your behalf.

If you're in business and adversely affected by coronavirus, don’t hesitate to apply for a SEISS Grant on your Tax Return! It will go a long way in cushioning the losses you’ve accrued.