As the Self Employed Income Support Scheme winds down for, what we can only hope is the final time, there are some additional complexities to consider in the claims process. There are two levels of grant award available on this occasion, calculated as either 80% or 30% of pre-pandemic income. The level of grant available to you will be determined by how much your turnover has been reduced during the pandemic. We consider the important questions below:
- Do you qualify for the fifth grant?
- If so what level of grant will you be eligible for?
- How will the grant be calculated?
- How do you claim the fifth grant?
1. Do you qualify for the fifth grant?
You do not need to have claimed the fourth grant to be eligible for the fifth grant. To qualify for the fifth grant, you need to meet all of the following conditions:
- you must carry on a trade which has been adversely affected due to coronavirus;
- you must have submitted your 2019/20 tax return on or before 2 March 2021;
- you must have carried on a trade in 2019/20 and 2020/21;
- you must intend to continue to carry on a trade in 2021/22 at the time you claim the grant;
- you must meet the profits condition for the fifth grant (see below)
- your trade must have suffered reduced activity, capacity or demandin the period 1 May 2021 to 30 September 2021;
- at the time you make the claim, you must reasonably believe that you will suffer a significant reduction in trading profits for a ‘relevant basis period’ (see below) compared to what you would have reasonably expected if you had not suffered that reduced activity, capacity or demand.
You are unable to claim the fifth SEISS grant if your business has been affected solely because you, or someone you care for, have had to self-isolate in the UK following an overseas trip.
Profits condition for the fifth grant
In most cases, the profits condition is met if your trading profits for 2019/20 were:
- more than nil, but less than £50,000; and
- at least equal to your non-trading income in that tax year (in other words, at least half of your income was from self-employment).
You may not have met this condition for the 2019/20 tax year. In this case, you were allowed to consider your average profits for 2019/20 and earlier tax years as follows:
|Traded in the year?
||Years to average for the profits condition
||2016/17, 2017/18, 2018/19 and 2019/20
||2017/18, 2018/19 and 2019/20
||2018/19 and 2019/20
Different rules may apply if you have been non-resident, have been subject to the loan charge or you were on maternity leave or working as a military reservist.
Relevant basis period for fifth grant
A relevant basis period for the fifth grant is a basis period which overlapped with the period 1 May 2021 to 30 September 2021. A basis period is usually 12 months.
If your basis period ended in the period 1 May 2021 to 30 September 2021, then you will have two relevant basis periods. For example, your basis period ended on 30 June 2021, your relevant basis periods are:
- The basis period ended 30 June 2021; and
- The basis period beginning 1 July 2021.
In this case, you only need to have had a reasonable belief that you would have a significant reduction of trading profits in one of the two periods.
2.What level of grant are you eligible for?
The FID (Financial Impact Declaration test) will be used for some fifth grant claimants to see what level of grant you are eligible for.
If you started your self-employment or became a partner in a partnership in 2019/20 and had not been self-employed or in a partnership in any of the 2016/17, 2017/18 and 2018/19 tax years, then you will not have to complete the FID and will automatically receive the fifth grant calculated using 80% of three-twelfths of the profits shown on your 2019/20 tax return.
If you have been self-employed or a partner in a partnership at any time during the 2016/17 to 2018/19 tax returns you must do the FID test, even if you ceased being self-employed (or being a partner) during this time and then started a new business during 2019/20.
The FID test is a comparison between turnover in the pandemic period and a reference period. We explain what these terms in bold mean below.
The level of the fifth grant depends on how much your turnover has been reduced (see example Kate below).
If the FID test shows turnover has reduced by at least 30% then the grant you can claim will be 80% of three-twelfths of your average profits shown on your tax returns, capped at a total maximum of £7,500.
If the FID test shows turnover has reduced by less than 30% then the grant you can claim will be 30% of three-twelfths of your average profits shown on your tax returns, capped at a total maximum of £2,850.
We provide examples of how to calculate your reduction in turnover below.
What is turnover?
Turnover includes the takings, fees, sales and money earned or received by the business. It is calculated using the accruals basis or the cash basis.
Do not include any coronavirus business support grants such as SEISS grants or Eat Out to Help Out when calculating your turnover for the pandemic or reference periods.
If you are self-employed then turnover should be the amount you would include in either box 9 (self-employment supplementary short pages) or box 15 (self-employment supplementary full pages).
If you are in a partnership then see our guidance below.
What is the pandemic period?
If you have to complete the FID then you will be expected to provide the turnover figures for the pandemic period as part of the claim process. The pandemic period is a 12-month period which can start from any date between and including 1 April 2020 to 6 April 2020.
For example, Mason is self-employed and prepares his accounts to 5 April. The simplest dates for him to choose for the pandemic period are from 6 April 2020 to 5 April 2021 and that should tie in with the information he is using to prepare his Self Assessment tax return.
Finding this information for the FID test will probably be easiest for businesses which use a basis period ending on 31 March or 5 April as they will need this figure for their 2020/21 tax return.
If you have a basis period which is either not 12 months or does not begin with a date from 1 April 2020 to 6 April 2020, then you need to look at your business records and choose a date between 1 April 2020 and 6 April 2020 then calculate your turnover for the 12-month period beginning with that date.
Don’t worry if you have not submitted your 2020/21 tax return – you do not need to have filed it with HMRC before you claim the fifth grant. Instead, you can calculate what your turnover was in the pandemic period (remember to keep any records you use to work this out).
What is the reference period?
The reference period is either the turnover from either:
- The 2019/20 tax year – which should you be able to pick up from your submitted tax return; or
- The submitted 2018/19 tax return, if you reasonably believe that the 2018/19 tax year more accurately reflects the usual turnover of the businessin a typical 12-month period. For example, if you were on maternity leave during the 2019/20 tax year you may consider the turnover from your 2018/19 tax return to be a more accurate reflection of a ‘typical’ year.
If the basis period used for the reference year is not 12 months, then the turnover needs to be apportioned on a ‘just and reasonable’ basis so that only 12 months is used for the FID test. For example, if your basis period is 16 months long and your total turnover is £32,000 then you may decide it is reasonable to apportion £24,000 to the pandemic period (£32,000/16 x 12 months).
If you are partner in a partnership only (see below if you also have a self-employment trade) then you should use the total partnership turnover figure for both the pandemic period and the reference period, regardless of your profit share in the partnership.
The turnover figure to be used should be from box 3.24 or 3.29 of the SA800 partnership tax return. However, as explained above this may need to be adjusted if the basis period is not 12 months or does not begin between 1 April 2020 and 6 April 2020.
If you are not the nominated partner of the partnership you may need to ask for copies of the partnership tax returns for the FID test. If the 2020/21 partnership tax return has not been submitted to HMRC or you need to make an adjustment – for example, if the partnership has a different basis period – then you may need to ask for additional information from the nominated partner.
If you have more than one self-employment (otherwise known as multiple trades) then you need to include the turnover from all your self-employment businesses in both the pandemic period and the reference period.
If you are a self-employed sole trader and a partner in a partnership, then for the FID (turnover) test you need to include your turnover from your sole trader self-employment and your share of the turnover from the partnership (this differs to the turnover used if you are in a partnership only – see above).
For example, Fergus is self-employed and a 10% profit-sharing partner in a partnership. The turnover for both businesses which have basis periods ending on 31 March, are as follows:
||What to use in the turnover test?
|2020/21 (pandemic period)
||£15,000 (£7,000 + £8,000 which is 10% of £80,000)
|2019/20 (reference period)
||£31,000 (£18,000 + £13,000 which is 10% of £130,000)
Fergus compares £31,000 to £15,000, which is a fall of £16,000. £16,000 is about 52% of £31,000 (£16,000/£31,000 x 100 = 51.6%), so Fergus concludes his profits have fallen by at least 30%. His fifth grant will be calculated using 80% of three months’ worth of average profits.
Examples of the FID (turnover) test
Below are some examples on how the FID test works with different scenarios. There is also information on the FID test on GOV.UK.
Kate (5 April year-end, 12-month basis period using 2019/20 as the reference period)
Kate has been self-employed for ten years, she meets all the eligibility condition for the fifth grant. As she did not become self-employed for the first time in 2019/20, she needs to complete the FID test when making her claim. Her basis period has always been the same as the tax year so from 6 April to 5 April.
Pandemic period: As Kate uses a tax year as her basis period when preparing her self-employment accounts, she decides that her pandemic period will be 6 April 2020 to 5 April 2021. Kate has yet to submit her 2020/21 tax return, so she works out her turnover figure by using her bank statements to work out what business sales she has received between 6 April 2020 and 5 April 2021. Kate does not include any of the SEISS grants she received during this time (she received no other coronavirus business support grants). Kate calculates that her sales in the pandemic period are £9,800.
Reference period: Kate’s business income is usually fairly similar each tax year, so she decides to use the 2019/20 tax year for her reference period. The turnover figure from box 9 on her submitted 2019/20 tax return is £17,100.
FID test: the reduction in turnover is (£17,100 – £9,800)/£17,100 x 100 = 43%
This means that Kate’s fifth grant will be calculated using 80% of three months average profits.
Fionn (30 June year-end and 12-month basis period using 2019/20 as the reference period)
Fionn meets all the eligibility conditions for the fifth grant and prepares his accounts each year to 30 June.
Pandemic period: Fionn cannot use his ‘usual’ accounting period (basis period) to calculate his turnover for the pandemic period because his year-end does not fall between 31 March and 5 April, so decides to use the 12 months from 1 April 2020 to 31 March 2021. He uses his accounting records to work out that his turnover during this period is £15,700. Fionn makes sure he does not include any coronavirus business support payments in his pandemic period turnover figure.
Reference period: Fionn considers his business income in the 2019/20 tax year to be an accurate reflection of his business, so he will use the turnover figure (box 9) on his submitted 2019/20 tax return, which is £18,250. Please note that Fionn will be comparing his turnover from 1 July 2018 to 30 June 2019 with the period of 1 April 2020 to 31 March 2021.
FID test: the reduction in turnover is (£18,250 – £15,700)/£18,250 x 100 = 14%
As this is less than 30%, Fionn’s fifth grant will be calculated using 30% of three months’ average profits.
Asif (5 April year-end and 12-month basis period using 2018/19 as the reference period)
Asif is eligible to claim the fifth SEISS grant but as he traded for five years he needs to perform the FID test to see what level of grant he can claim. Asif prepares his accounts to the 5 April each year.
Pandemic period: Asif has already submitted his 2020/21 tax return to HMRC so uses the turnover figure (box 9 on the self-employment supplementary pages), which is £37,000. This figure should not include any coronavirus business support grants which should be disclosed on other boxes on his tax return.
Reference period: Asif looks at his turnover for both the 2019/20 and 2018/19 tax years. Unfortunately, Asif was seriously ill during the 2019/20 tax year so his turnover is significantly lower than in previous years. Asif reasonably believes that the 2018/19 tax year is a more accurate reflection of his usual turnover from his business, so he uses the turnover from his 2018/19 tax return, which is £46,000.
FID test: the reduction in turnover is (£46,000 – £37,000)/£46,000 x 100 = 20%
This means that Asif’s fifth grant will be calculated using 30% of three months’ average profits.
3.How will the grant be calculated?
The fifth grant will either be calculated using 30% or 80% of an average of three months’ profits. The table below explains what percentage will be used in calculating your grant and examples showing how the grant is calculated.
The grant will be liable to tax and Class 4 National Insurance contributions in the tax year in which it is received (for the fourth and fifth grants, this should be 2021/22).
||Percentage used for grant
|Started self-employment in 2019/20 and not been self-employed nor in a partnership in any of the 2016/17, 2017/18 or 2018/19 tax years
|Started self-employment in 2019/20 but had been self-employed or in a partnership either in 2016/17, 2017/18 or 2018/19
||30% or 80% depending on the FID test (see below)
|FID test shows a reduction of turnover of less than 30%
|FID test shows a reduction of turnover of 30% or more
Fifth grant – newly self-employed
If you started your business in 2019/20 and had not been self-employed nor a partner in a partnership in any of the 2016/17, 2017/18 or 2019/20 tax years then you do not have to do the FID test. This means your SEISS grant will be calculated at the 80% level.
So, if you started self-employment for the first time in 2019/20, then your trading profits will be divided by 12 (irrespective of when you started trading) and then multiplied by 3 and then 80%. The figure is capped at £7,500. This is same as the fourth SEISS grant.
Because your profits are divided by 12 and not the number of months you had traded in the year, the amount of the grant may be less than you expect.
Sam, who has previously only been employed, started his self-employment business in January 2020 and his trading profits for the 2019/20 tax year were £4,000.
Sam meets all the eligibility conditions of the fifth grant and as he is newly self-employed will not have to complete the FID test.
To calculate the grant, Sam’s profits for the year are divided by 12, giving £333. This is then multiplied by 3, giving £1,000, and then 80%, giving £800. The grant will be paid in one instalment.
Fifth grant: 30% grant calculated on the FID test
If the FID test means you have a 30% grant, then it will be calculated using an average of trading profits as shown in the table above. The grant is capped at a total of £2,850.
Sinead meets the eligibility conditions of the fifth SEISS grant and has traded since 2016/17. Her trading profits are as follows:
Sinead’s grant will be calculated as:
Average profits for the four tax years are £20,575 (£14,500 + £26,000 + £18,500 + £23,300)/4.
The grant is calculated as 3 months of average profits multiplied by 30%, which is £1,543 (£20,575 x 3/12 x 30%). The grant will be paid in one instalment.
Fifth grant: 80% calculated on the FID test
If the FID test means you have an 80% grant, then the calculation is the same as the fourth grant and will be calculated using an average of trading profits as shown in the table above. The grant is capped at a total of £7,500.
Connie started self-employment in 2018/19 and earned profits in her first year of trading of £15,800 and in 2019/20 of £26,500. She meets all the eligibility conditions for the fifth grant which is calculated as follows:
Average profits for the two tax years of trading are £21,150 (£15,800 + £26,500). The grant is calculated as 3 months of average profits multiplied by 80%, which is £4,230 (£21,150 x 3/12 x 80%). The grant will be paid in one instalment.
4.How do you claim the fifth SEISS grant?
HMRC should contact potential claimants in mid-July to explain how you can claim the fifth grant through the GOV.UK website. Like the fourth grant, you will be given a claim date when you can process the online system – you will not be able to access the claim process before your personal claim date.
The claim process will open from late July and will remain open until 30 September 2021.
If you are unable to make a claim online then you should call the HMRC SEISS helpline (please note, the helpline is expected to be extremely busy when the claim process opens).
If you traded in any of the 2016/17, 2017/18, and 2018/19 tax years, it may be helpful to sort out the information you need for the FID test before your personal claim date so you can complete the claim process more easily. Please note a claim for the fifth SEISS grant cannot be amended after the claim process closes on 30 September 2021.
What if I have amended my 2019/20 tax return since 2 March 2021?
Unlike the first three grants under the scheme, if you claimed the fourth and/or fifth grant you may need to pay some or all of the grant(s) back if you amend a tax return after 2 March 2021 and the amendment either:
- reduces the amount of the fourth or fifth grant you would have been entitled to claim (this includes reducing the level of the fifth grant using the FID test from 80% to 30%); or
- means you would not have been eligible to claim the grants at all.
However, if the amount that you need to pay back is £100 or less, it is ignored for this purpose.
This can apply even if you made the amendment before making the claim for the fourth and/or fifth grant. In this case, you would need to have paid back some or all of the grant(s) immediately.
If you make such an amendment after making the claim then you are technically required to pay the amount back immediately – although you are allowed up to 90 days from the date of the amendment (or claim to the grant, if later) to notify HMRC. Penalties can apply if you are late.
If you are concerned about what level of grant you qualify for, or need assistance in preparing the relevant figures for your claim please get in touch.