The COVID-19 Self-Employment Income Support Scheme (SEISS) has been extended with a fifth and final grant covering May 2021 to September 2021, with further guidance on eligibility for the fourth grant.
Once again, the most recent continuation of furlough (for further details please see "Furlough scheme extended to September 2021") has been mirrored by an extension to the SEISS until September 2021.
In 2020 the first SEISS grant during the initial lockdown provided support of up to 80% of average profit for three months (capped at £7,500 in total), and then there was a further three-month grant at a reduced rate of 70% of profits (capped at £6,570 in total), in line with the scaling down of the furlough scheme (for further details please see "Financial support for self-employed extended in line with employee furlough scheme").
Prior to the second lockdown, with restrictions in place under Tiers 1 to 3, a third grant was announced at a further reduced rate. Once the second national lockdown was announced in November 2020, Chancellor of the Exchequer Rishi Sunak confirmed that the third grant (covering 1 November 2020 to 31 January 2021) would be based on three months' profit at 80% (with a £7,500 cap) like the original grant (for further details please see "Self-employed financial support extended until April 2021"). It was also announced that a fourth grant, covering 1 February 2021 to 30 April 2021, would be made available in due course.
Further details of the fourth grant and the new fifth grant have now been published.
What can be claimed under the fourth and fifth grants?
The fourth grant will be calculated at 80% of three months' average trading profits and will be capped at a total of £7,500, like the first and third grants.
Grants must still be claimed via the online claims service. This was expected to open for claims from March 2021; however, the government has now stated that in order to allow time for processing recently submitted tax returns for the 2019/2020 tax year, the service will be available from late April 2021 until the end of May 2021. Her Majesty's Revenue and Customs (HMRC) will contact those eligible in mid-April 2021 to provide their personal claim date and there will be further guidance in due course. The fourth grant will be paid in a lump sum.
A fifth and final grant can be claimed from late July 2021 and will be calculated on a different basis from the previous grants, reflecting the government's intention that businesses should be operating more normally by the end of June 2021. It will be based on the reduction of turnover in claimants' businesses in the year from April 2020 to April 2021, as follows:
- for a turnover reduction of 30% or more, the grant will remain at 80% of three months' average trading profit (capped at £7,500 in total); and
- for a turnover reduction of less than 30%, the grant will be 30% of three months' average trading profit (capped at £2,850 in total).
Further details on the fifth grant will be made available in due course. Despite widened eligibility criteria (see below), the sliding scale may mean that fewer people benefit fully from the final grant.
Both the grants will be subject to tax and national insurance contributions.
There has been a change in the eligibility criteria compared with the first three grants under the SEISS. Eligibility will now be based on tax returns submitted for the 2019/2020 tax year (rather than the 2018/2019 tax year).
Thus, self-employed people who had previously claimed under the first three grants may not be eligible for the same amount as previously. If someone is not eligible based on their 2019/2020 tax return, HMRC will look at the three previous tax years.
Notably, the change also means that some people may be able to claim who were previously ineligible (eg, because they became self-employed only after the end of the 2018/2019 tax year). It has been estimated that an additional 600,000 people may be eligible for a grant under the new criteria.
Claimants must have traded in both the tax years 2020/2021 (the current year) and 2019/2020, and must have submitted last year's tax return by 2 March 2021. The other requirements remain the same; claimants must:
- have average annual trading profits of £50,000 or less;
- be currently trading but be affected by reduced demand due to COVID-19, or be temporarily unable to trade due to COVID-19; and
- declare that they:
- intend to continue to trade; and
- reasonably believe that there will be a significant reduction in their trading profits due to reduced business activity, capacity, demand or inability to trade due to COVID-19.
While the government has made clear that it intends its roadmap out of lockdown to be irreversible, the extension of both the SEISS and the furlough scheme to September 2021 suggests that it is building in leeway for the road to recovery being bumpier than might be hoped. It may indicate low confidence in the target date of 21 June 2021 for the complete lifting of social-distancing restrictions.
Given the near certainty of significant tax increases in years to come, it seems unlikely that the SEISS and the support currently being provided will be extended further merely in the event that the easing of lockdown needs to be more gradual than currently planned.
