Self employed grant 5

SEISS 5 is now open to claims until 30 September.

Claimants must have a continuing self employment (or intending to continue as soon as possible), must have traded during the years to 5 April 2020 and 2021, and must have submitted their 5 April 2020 tax return by 2 March this year, showing self-employed profits which were £50,000 or less and which represented at least half of their total income. If the 5 April 2020 return does not meet these criteria, HMRC will look at an average of the four returns back to the year ended 5 April 2017.

If you qualified for SEISS 4 but chose not to claim, that does not prevent a claim for SEISS 5.

HMRC have contacted some (but not all) taxpayers who meet the tests listed above.

SEISS 5 relates to 1 May 2021 to 30 September 2021. To be eligible for any payment under SEISS 5, you must believe at the time you claim that your self-employed profits 1 May 2021 to 30 September 2021 (including any partnership profits) will be ‘significantly reduced‘ because of the pandemic. You must also keep evidence to support this. This might be for example details of booked or pencilled engagements that were cancelled because of Covid restrictions, venues where you routinely work that were closed for some of this time, or details of work missed because you had to self isolate. Where any client is very unsure whether profits are likely to be reduced between those dates, I suggest waiting until mid September to decide whether they are eligible. The claim declaration asks whether the claimant reasonably believes that profits from May to September will be significantly reduced. If someone claims at a time they reasonably believe this, they are not obliged to repay any grant if that does not turn out to be the case. But they must be able to demonstrate that their belief was reasonable when they were claiming.

In order to claim, two sets of turnover figures (self-employed income, ignoring any SEISS or local grant and without deducting any expenses) are needed. The total turnover for the year to 31 March or 5 April 2021 needs to be compared to the total for either the previous year, or if that year was lower than typical, the one before that. The turnover is the amount at the top of your self-employed accounts page, and is shown on page SE1 of the tax return in box 15. The difference (how much the most recent year’s turnover is lower than the earlier year) affects the level of SEISS payment available. If the turnover to April 2021 is down by 30% or more compared to the earlier year, you qualify for a higher SEISS amount. If it is down by less than 30%, you qualify for a lower SEISS amount.

The latest year’s turnover needs to be given in the SEISS 5 claim. HMRC will check turnover figures in some cases.

Other income such as pension income, employment income taxed under PAYE,rent received from a tenant or savings income like bank interest, are all ignored both when considering May-September 2021 profits and also when finding total turnover.

The grant payable is based on three months’ average profits from the last four tax years (or fewer years for new traders). This three-month amount is multiplied by 80% for a ‘higher’ SEISS claim, capped at £7,500. Or the three-month amount is multiplied by 30% for a ‘lower’ SEISS claim, capped at £2,850.

As with the other SEISS grants, any amount received will be subject to income tax and national insurance and will need to be included in the relevant tax return.

There is an option to pay some SEISS grant back, for taxpayers who find hat they have claimed in error, or who simply wish to pay something back for any reason.

https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

 

 

Self employed grant 4

The next SEISS taxable grant, the fourth offered, may be claimed later in April.

Eligibility based on tax-return figures can be checked here

https://www.gov.uk/guidance/return-to-your-claim-for-the-self-employment-income-support-scheme 

I am suggesting that clients check eligibility as soon as possible. If eligibility is not showing as expected, there is a secure webchat to HMRC which can be used to query the outcome. One client with an incorrect result has already queried this and we expect it to be resolved by the end of April.

For making a claim, I recommend that clients wait until at least 1 May (a delay of only a few days – claims open at the very end of April) to decide whether they should make a claim. By that time, any self-employed income for the months February, March and April 2021 will be known, and it will be possible to compare to previous years where needed.

The claim window will remain open until the end of May. HMRC’s form will include a declaration that during the three months to 30 April this year your business income has been adversely affected by the pandemic. There are examples here to help taxpayers decide whether they qualify.

https://www.gov.uk/guidance/how-your-trading-conditions-affect-your-eligibility-for-the-self-employment-income-support-scheme#impactedbyrd 

This grant will also take into account self-employed (sole trader/partnership) profit figures from the tax return to 5 April 2020. This opens up the claim to some newer self-employed taxpayers. As with previous payments, eligibility on the figures alone does not mean that taxpayers qualify. As before there will be questions and declarations in the online form, which need to be answered at the time of application.

Anyone claiming must still be self employed, so must either still have some self-employed income, or be intending to restart once the rules allow.

There will be a further payment offered in summer, relating to May to July 2021.

With regard to the previous SEISS grants, some clients have asked me whether they can/should repay any. If for any reason the information given when you claimed a grant was incorrect at the time of the claim, it is compulsory to make an appropriate repayment. It is not necessary to revisit claims ‘in hindsight’, provided claims were made based on correct information or reasonable assumptions at that time. Some taxpayers will have ended up with higher profits during the last twelve months when they include their SEISS receipts: that does not automatically mean that anything should be repaid.

Information on repaying SEISS is here

https://www.gov.uk/guidance/tell-hmrc-and-pay-the-self-employment-income-support-scheme-grant-back

HMRC allows voluntary repayment for any reason, that is simply if a taxpayer chooses to pay back some or all of the money received. Any repayment does not count as tax paid. But because SEISS counts as part of taxable profits, it would lower any tax payable.

Anything received from SEISS 1, 2 and 3 must be included in the tax return to 5 April 2021. This is the case whatever date is used for your self-employed accounts. I am also asking all clients who received SEISS to supply brief details (a few sentences only) in support of their SEISS claims so that this is recorded in the tax return in the additional information. This, together with bank statements, contract or diary details and any other relevant notes, makes up supporting records for SEISS claims. Most of these are anyway part of the usual tax records needed in an ‘ordinary year’ (remember those?)

 

The Fiscal Drag King Has Spoken

Budget speech 2021. There was always going to be an announcement of further financial help for some taxpayers. And there was clearly going to have to be some extra tax found from somewhere. Detail will follow, but my first observations are these.

The following developments are welcome:

  • There will be two further self-employed grants, SEISS 4 and 5, with taxpayers whose first tax return was the 2020 return now included. I am adding a link to information available so far under TAX LINKS
  • The furlough scheme will continue until the end of September
  • VAT on hospitality will remain at 5%, rising to 12.5% from October until next March
  • Stamp tax concessions will be available until the end of September, which will help homebuyers.
  • The enhanced (+ £20) Universal Tax Credit will continue for another 6 months.
  • There is an attempt to weight the burden of rising tax onto large companies which have been profitable.

Less favourable points are:

  • The long wait to claim SEISS 4, intended to cover February, March and April, continues. Claims will open in ‘late April’, no date yet. This will be giving HMRC time to update the system to accommodate 2020 return figures. But it will have been nearly 6 months from SEISS 3 in November by the time it becomes available.
  • Aside from new traders, many others remain excluded. These include individuals who have been ineligible for SEISS because of profits over £50,000, agency workers, and those whose self-employed income is less than 50% of their total income.
  • A freeze in the tax-free personal allowance and tax rate thresholds, which will stay the same  from 2022 until 2026, does not immediately seem like a rise in tax. However effectively it is. It’s not as overt as the corporation tax rise for companies, but it creates ‘fiscal drag’, with the tax-free allowance not keeping up with the minimum wage, or with inflation. So people pay proportionately more of their income in tax as the years go by.
  • The ‘super deduction’ enhanced tax allowances for businesses which are investing in new equipment are for companies only. They are not available to sole traders or to partnerships.

Overall, this continues the snowplough of various debt and deficit towards the short-term future. That is not a bad thing, within what is still an emergency situation. But there is some stealth in freezing future personal allowances as an alternative to raising personal tax rates. And although there was praise for the NHS, there was no financial ‘thank you’ for NHS workers who continue to bear the brunt of bringing us out of the health crisis.

 

No surcharge on overdue tax until end of March

There is usually a 5% surcharge added to any Self Assessment tax outstanding at the end of February. For 2021, this has been delayed and will only be levied at the end of March. Another small but useful concession at a time when cashflow is a significant problem for so many.

Where a ‘time to pay’ arrangement has been put in place, in most cases no surcharge will apply, although interest does still run on any amount overdue (currently at 2.6%).

No £100 late filing penalty for February returns

HMRC have just announced that where 2020 tax returns are filed before the end of February 2021, no £100 late filing penalty will be charged.

There has been significant pressure for HMRC to offer some concession. Given the number of appeals they would be likely to receive, and the time and cost of processing all of these individually, this is a pragmatic step. It is also likely to be welcome news to tax advisers who have found that their own work or availability has been impacted, whether by illness, changed family arrangements, or time spent assisting clients with information on furlough arrangements or the SEISS grants.

Where any taxpayer’s return is delayed beyond the end of February for personal reasons – whether related to the pandemic or not – it will still be possible to appeal a late penalty in the usual way, asking HMRC to consider the circumstances.

Late-paid tax is still subject to interest – the current rate is 2.6% per annum. Any tax outstanding after the end of February attracts a 5% surcharge, although the surcharge does not apply where an instalment arrangement has already been agreed with HMRC.

 

Requesting extra time to pay tax

This year especially, a large number of taxpayers are finding they need to ask for a ‘time to pay’ arrangement, spreading their Self Assessment tax in instalments.

HMRC has opened an online request form for taxpayers to arrange a spread of payment https://www.tax.service.gov.uk/pay-what-you-owe-in-instalments 

HMRC’s Payment Support phone line is still open also, 0300 200 3822 Monday to Friday 8am to 6pm.

I am suggesting that any clients needing to make use of this try the online facility once the submitted tax return shows in Gateway (usually two or three days after it is submitted). If that is not possible, if the online facility is rejecting the application, or is offering a spread of payment that is not manageable, then try a phone request. It is best to have the tax calculation to hand when ringing.

It is possible that there may be further concessions offered later this year, and if so I shall add details here. HMRC has not extended the 31 January deadline (despite calls to do so). If a tax return is late for health or other reasons, whether Covid related or not, it is possible to appeal the £100 late penalty, explaining the circumstances. HMRC then consider each appeal individually to decide whether to waive the penalty.

Making payment: https://www.gov.uk/pay-self-assessment-tax-bill

Time to pay: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/business-payment-support-service