HMRC has emailed thousands of freelancers to explain how the fourth Self-Employment Income Support Scheme (SEISS) grant will work and how to apply.
Chancellor Rishi Sunak announced details of the grant in Wednesday’s Budget. The tax office is contacting workers who may be eligible for the fourth SEISS grant from mid-April to explain how they can claim. A fifth grant will be available from July.
The fourth and fifth grants will take into consideration 2019 to 2020 tax returns and will be accessible to those who became self-employed in the 2019 to 2020 tax year. This means that some self-employed workers may be able to claim, even if they were ineligible for previous grants.
In order to qualify, the 2019-20 self-assessment tax return must have been filed by 2 March 2021.
Fourth SEISS grant
The Government will pay a taxable grant calculated on 80pc of three months’average trading profits, to be paid out in one single payment and capped at a total of £7,500. The value of the grant is based on an average of trading profits for up to four tax years between 2016 and 2020.
The exact date has yet to be confirmed but will be available to claim by late April. Trading profits must not be more than £50,000, in line with previous grants and at the minimum not less than non-trading income to be eligible.
Eligibility for the fourth SEISS grant will also depend on whether you suffered a significant financial impact from coronavirus between February 2021 and April 2021. When assessing eligibility for the scheme, HMRC will take into consideration the 2019-20 return, which means the fourth grant could be higher or lower than previous grants.
The tax office states that workers must make ‘an honest assessment’ that there has been a significant reduction in trading profits due to ‘reduced demand or inability to trade’. There will be a need to keep relevant records as evidence, if a claim is made.
Newly self-employed workers
The fourth and fifth grants will be open to people who became self-employed for the first time between 6 April 2019 and 5 April 2020, unlike the first three grants. But some newly self-employed workers may yet fall through the cracks of the scheme.
Jeremy Coker, president of the Association of Taxation Technicians (ATT) warns that individuals will need to have filed their self-assessment tax return by midnight on 2 March 2021, to be eligible for future grants under the SEISS scheme. Anyone who has not yet filed a return will, therefore, be prevented from making a claim.
In addition, he said, those who moved from employment to self-employment part way through the tax year 2019/20 may not meet the requirement to have trading profits that are at the minimum equal to their non-trading income.
For instance, an individual who left employment in December 2019 and started a self-employed business in January 2020 could find their salary in the tax year exceeded their trading profits, meaning they are not entitled to a SEISS grant.
When the fourth grant can be claimed
HMRC will contact self-emploed workers it believes are eligible for the grant from mid-April. Those eligible will be given a personal claim date, which will be the earliest date a claim can be submitted. All claims for the fourth SEISS grant must be made by 31 May 2021.
The fifth SEISS grant
In the Budget on Wednesday, Sunak also announced that there will be a fifth and final SEISS grant, covering the period between May and September. Claims for this grant will be open from July.
The amount of the fifth grant will be decided by how much an individual’s turnover has been reduced. The grant will once again be worth 80pc of three months’ average trading profits, capped at £7,500, for those with a reduction in turnover of 30pc or more.
For those with a lower reduction in turnover, of less than 30pc, the grant will be worth 30pc of three months’ average trading profits.