There are enough highlights about the mayhem caused due to the COVID-19 pandemic. It is now the ideal time for focusing on implementing the recovery measures to overcome this mayhem. With the bid to further fuel the recovery efforts against the adversities of COVID-19, the UK Government has introduced the second SEISS Grant. The UK Chancellor, as we know, already made an official announcement about the second leg of SEISS on 27 May 2020.
The first rung of the initial SEISS (Self-Employment Income Support Scheme) concluded in July 2020. We have previously discussed the first SEISS Grant. The British Government launched the first grant scheme with the motive to deploy financial aid to the Self-Employed Individuals. Under the first round, the deadline to apply for the grant was 13 July 2020. Earlier, the impacted business entities could claim lower of £7500 or 80 percent of the average monthly profits for the preceding three financial years.
Self-employed individuals whose fundamental source of income are their self-owned businesses and adversely affected as a result of the COVID-19 crisis can benefit from the grant. Let us now understand the different aspects of the sequel of the SEISS Grant Scheme.
Eligibility Conditions for the second SEISS Grant
Any Self-employed individual or a partner in a partnership firm adversely affected as a result of the Coronavirus crisis can claim the second SEISS Grant. The critical points to determine an individual’s eligibility are as follows:
- There is an adverse effect on the self-employed individual’s business due to the pandemic on or after 14 July 2020.
- The self-employed individual should have traded in the year 2018 to 2019. He should have submitted his self-assessment tax return for the stated year by 23 April 2020.
- As per the self-assessment tax return for the tax year 2018 to 2019, the trading profits of the self-employed individual should be up to £ 50,000. The trading profit must be more than or equal to the non-trading earnings.
- The business of the self-employed individual also traded in the tax year 2019 to 2020.
- The self-employed individual aims to continue trading in the present tax year 2020 to 2021.
The person who has claimed the Maternity Allowance will witness no impact on the SEISS Grant eligibility. A person shall be ineligible for the grant if he trades through a trust or a limited company. A company director also remains incompetent as, for PAYE purposes, directors are treated as employees of the company.
HMRC has not explicitly defined the term “adversely affected." However, an adversely affected business is the one that faces a temporary halt in its trading activities, incurs additional cost, or scales down its operations as a consequence of the pandemic. HMRC shall regard businesses as adversely affected even when their owners are facing a negative impact. They can either be self-isolating or shielding themselves or are on sick leave for themselves or any family member or have caring responsibilities.
A person who receives the SEISS grant can continue to work as a self-employed individual and even start a new trade or take up voluntary work if needed. There is no requirement for a person to have claimed the first grant to remain eligible for the second SEISS.
One should maintain proper records, showcasing how his business has been adversely affected for the relevant period and the reason for the effect.
Period covered under the second SEISS Grant
A self-employed individual eligible for the SEISS scheme can now file his claim for the second round from 17 August 2020. The last date for making applications under the next part of the self-employment income support scheme is 19 October 2020. Please confirm with the HMRC that you can make a claim, and your business is adversely affected since 14 July 2020.
The amount available under the second SEISS Grant
A taxable grant shall be available to the self-employed individual based on the 3 preceding tax years. The three tax years are 2016-2017, 2017-2018, 2018-19. The HMRC shall calculate an average trading profit using the sum of the total trading profits or losses for the three years divided by 3.
The trading profits are calculated based on the tax returns filed for the specified previous years. HMRC shall estimate the amount after deducting allowable business expenses and adjusting brought forward losses from preceding years. The authority shall consider the amount stated as the total taxable profits of the business in the return.
In the case of self-employed individuals who have more than one trade in a given year, the HMRC shall account for all the profits and losses for all the trades a self-employed individual undertakes in the relevant years.
Under the second SEISS, a person will receive 70 percent of his average monthly trading profits subject to the maximum sum of £6,570. The HMRC shall pay the due grant amount in a single instalment covering the 3 months’ profits. The self-employed individual shall receive the amount directly in his bank account.
Method to make the Claim for the second SEISS Grant
The self-employed individuals who satisfy the SEISS grant eligibility criteria can apply for the same through the official Gov.uk website. Make sure that you retain the necessary information while filing your claim. The essential details include:
- One must have his UTR, which stands for the self-assessment unique tax reference number.
- He shall need his Government gateway user ID and password.
- The individual must possess his National Insurance number.
- The relevant bank details.
Taxability of the amount received under the SEISS Grant
The sum derived from the first and second SEISS grant schemes is subject to tax. HMRC shall treat both the grants as taxable incomes of the eligible self-employed individuals for the year 2020-2021. Any tax and NIC payable on the SEISS income is due on or before 31 January 2020.
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