This article has been updated – 25 November 2020
Changes to this article are in relation to new criteria from the Government for the third SEISS Grant.
Government announcements on CV19 support schemes change regularly, please check our Covid-19 Support Hub for the latest information.
On 5 November 2020, the chancellor announced a further change to the third SEISS (Self-Employment Income Support Scheme) which covers the the Autumn/Winter 2020 period.
(updated 25 Nov) HMRC expects you to make an honest assessment about whether you reasonably believe your business will have a significant reduction in profits.
The Self-Employment Income Support Scheme Grant Extension will be paid in two grants, available from the three month periods covering:
- 1 November 2020 to 31 January 2021
- 1 February 2021 to 30 April 2021
Grant 1 (Nov – Jan)
- The first grant will cover a three-month period from 1 November 2020 until 31 January 2021.
- The Government will provide a taxable grant covering 80% (increased as of 2 November 2020) of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £3,750 in total.
Grant 2 (Feb – Apr)
- The second grant will cover a three-month period from 1 February 2021 until 30 April 2021.
- The Government will review the level of the second grant and set this in due course.
Note: Changes in this section are in italics based on the new criteria announced on 25 November 2020.
The updated eligibility criteria is:
- have been previously eligible for the Self-Employment Income Support Scheme first and second grant (although they do not have to have claimed the previous grants)
- have traded within the 2018/19 and 2019/20 tax years
- declare that either:
- are currently actively trading but are impacted by reduced demand due to coronavirus
- were previously trading but are temporarily unable to do so due to coronavirus
- You must also declare that:
- you intend to continue to trade
- you reasonably believe there will be a signifiant reduction in your trading profits due to reduced demand or your inability to trade
Impacted by reduced demand
This applies to your business if it has been impacted by reduced demand, activity or capacity due to coronavirus.
For example, you:
- have fewer customers or clients than you’d normally expect, resulting in reduced activity due to social distancing or government restrictions
- have one or more contracts that have been cancelled and not replaced
- carried out less work due to supply chain disruptions
The key item here is the top option. If you have fewer customers due to social distancing or government restrictions, you would meet the criteria listed above.
This new criteria has appeared overnight 24-25 November and is a new eligibility requirement of the third SEISS.
HMRC’s guidance states:
In order to claim, you must reasonably believe that you will suffer a significant reduction in trading profits due to reduced business activity, capacity or demand or inability to trade due to coronavirus during the period 1 November to 29 January 2021. You must keep evidence that shows how your business has been impacted by coronavirus resulting in less business activity than otherwise expected.
As this could be difficult for you to estimate, HMRC have suggested that claimants wait until they have reasonable belief that their trading profits are going to be significantly reduced before they make a claim.
A number of examples are provided on their website.
It may be an option to wait until later into the new year to understand if your profits were impacted – we’ve provided details of evidence and paperwork below.
Reminder: January 2020 Price Increase
In January, new member fees take affect. Remember that this will contribute to your income, and therefore may result in higher profit levels than before for this month, when comparing to January 2020.
Evidence / Paperwork
If you are planning to claim, you will need to keep evidence of the significant reduction in your profits due to the reduction in demand.
This isn’t just about member numbers
When you complete your tax return, you are required to provide three key figures to HMRC. They will ask for your income (money you’ve received from sales), expenses (where your business has spent money in order to operate) and once these two are deducted from each other, your business profit (or loss).
HMRC do not look into the full details of your accounts, such as the number of groups you run, whether you’re a Team Developer or if there has been a difference in member numbers. They are interested in the above three numbers.
If they ask to view your reports for an audit or check, this is where the full use of your business documentation (such as spreadsheets or tables) will be used, therefore it’s essential these are up to date.
- Malgra Spreadsheets: If you are using our spreadsheets, you can view the income and expenses from previous months using the ‘Annual Report‘ on the 19/20 version.
You should then compare this to the income and expenses on your current 2020/21 spreadsheet on the new Annual Report (20/21).
The current spreadsheets don’t calculate your monthly profit/loss, as this hasn’t been required before. However, to work out the actual figure, you can simply print out the relevant sheet and calculate the difference to find your monthly profit.
In the example below, you can see that for November 2019, the income was £1,002.10 and expenses £650.75. Deducting the income from expenses means that the profit was £351.35.
You would then compare this with the profit for the same month in the current (2020) year from your current 2020/21 spreadsheet. If the profit is lower, this suggests you’d be eligible to claim. However, remember that this is based on a three month period, so you’ll need to add the three month values together to calculate the total.
- Malgra Printed Guide: If you have used our printed guide for both 19/20 and the current year, 20/21 you will be able to compare the values on on relevant monthly pages using the boxes at the bottom of the page.
- MalgraBooks Clients: If you had a MalgraBooks package during 19/20 and a current 20/21 package which is up to date with paperwork, contact our support team directly and we’ll happily check your documents for you.
- Your own records: Compare the values for the relevant periods from 19/20 and 20/21 to check if there has been a significant reduction.
Tax and National Insurance
The grants are taxable income and also subject to National Insurance contributions. You should keep a record of the amounts received, as these will need to be declared on your 2020/21 Tax Return.
Claiming the grant
Should I claim?
There is no easy answer here – however as no-one has a crystal ball or knows what’s going to happen next, the best option to be sure is to wait.
It may not seem like the most practical thing to do, and the financial impact on this year has been difficult for a lot of people, however it is the only way you’re guaranteed to check if you have had significantly impacted profits and meet the eligibility criteria listed above.
Under the ‘Evidence/Paperwork’ section above, there is a simple example of how to check. We would recommend that to be sure, in mid January, schedule in a date to check your profit from the three months which the third grant covers (Nov, Dec, Jan) and compare to the previous year (Nov, Dec, Jan).
Some key things are to remember:
- there is a price rise in member fees for January, so you may have higher income for that period
- your costs may be reduced (e.g. less rent to pay, less mileage costs, etc) so you may have less expenses
If the profit (take away the allowable expenses from income) is significantly lower than last year, you should be eligible to claim based on this information. If the profits haven’t been significantly lower, you’re likely to be ineligible.
There is still no easy ‘yes’ or ‘no’ to this – everyone’s accounts are totally different – but the only way you’ll be able to check for sure is to wait and compare in the new year.
You can follow the discussion around this topic on the Facebook chat thread here.