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 

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. 

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

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 

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:

Time to pay:

Grants under Self Employed Income Support Scheme – SEISS 3

Applications have opened today for this.

The numbers involved are the same as for the first grant – based on the same year’s profits, with 80%, to a maximum of £7,500, available. To make a claim for the third grant, it is not necessary to have claimed before if you are eligible at this point. No new categories of taxpayer have been added as being eligible.

Taxpayers must meet a number of conditions, some of which are new. In particular, they must reasonably believe their trading profits will be significantly reduced between November and the end of January due to coronavirus and:

  • either be currently trading but are impacted by reduced business activity, capacity or demand, or have been previously trading but are temporarily unable to do so due to coronavirus
  • declare that they intend to continue to trade, or restart trading, and that they reasonably believe that the impact on their business will cause a significant reduction in their trading profits
  • only claim if the reduction in profits is caused by reduced business activity, capacity or demand, or inability to trade due to coronavirus – reduction in profits due to increased costs (such as having to buy masks, new technology or longer working hours) does not make a business eligible for this third SEISS grant.

HMRC ask claimants this time to make ‘an honest assessment about whether they reasonably believe their trading profits will be significantly reduced’ compared to what they would otherwise expect during November December January. They ask that taxpayers consider their ‘wider business circumstances’. There is no definition given of what ‘significant’ means here. For taxpayers who have other/new types of income, eg a different, salaried temporary job, it is ultimately a personal decision whether to claim or not.

HMRC’s SEISS helpline 0800 024 1222 is open  8am – 4pm weekdays.

Business must have been impacted on or after 1 November 2020 and claimants need to keep evidence of the impact (eg cancelled work). For taxpayers who are uncertain, my suggestion would be to wait until later in the claim window, which closes 29‌‌ January 2021, before deciding – by that point it should be possible to compare profits for those three months with those from a year ago. Proof of the impact of coronavirus (the figures themselves and cancellations or eg diary records) become part of taxpayers’ records for tax purposes.

As before, any amount claimed will be subject to income tax and national insurance in the return for the year to 5 April 2021.

There are some examples on‌‌ G‌‌‌‌O‌‌V‌‌.UK to help taxpayers considering whether they should be claiming‌‌ and claims can be made here: 

A fourth grant is planned for February‌‌ 2021.