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Tougher criteria for third SEISS grant

Written by admin on . Posted in COVID-19, Self-Employed, Tax. No Comments on Tougher criteria for third SEISS grant

Applications for the third Self-Employment Income Support Scheme (SEISS) grant opened from 30 November, and you have until   29 January 2021 to make a claim. Be warned, however, that some of the conditions for this grant are different from those applicable to the previous grants.

Due to Covid-19, you must either:

  • Be currently trading but impacted by reduced demand, or
  • Have been trading but are temporarily unable to do so.

This status must be met during the period 1 November 2020 to 29 January 2021.

Additionally, you must declare that:

  • You intend to continue to trade, and
  • You reasonably believe there will be a significant reduction in your trading profits.

Make sure you keep evidence showing how your business has been unable to operate as normal due to Covid-19, so that your case for a loan is robust. The criteria are defined as follows.

  • Reduced demand – You have fewer customers or clients than you would normally expect, or contracts have been cancelled and not replaced. Simply having increased costs is not a reason for making a claim.
  • Temporarily unable to trade – Your business has had to close due to government restrictions, or you have been instructed to shield, self-isolate, have tested positive for Covid-19 or cannot work due to parental caring responsibilities. You cannot claim if you can work from home or have to self-isolate after going abroad.
  • Significant reduction – There must be a reduction in your trading profit for the whole accounting period, not just between 1 November and 29 January 2021. If you prepare accounts to 31 March or 5 April this shouldn’t be too difficult to establish, although there is a disincentive to work longer hours to make up lost income. It is impossible to apply if you are just starting your accounting period with, say, a 31 October 2021 year end, but it seems likely that HMRC will overlook this as profits will not be reported until 31 January 2023. The first two SEISS grants must be included in your 2020/21 trading profit.

HMRC has further guidance on what is meant by reduced demand and temporary closure, along with some examples.

If you are planning on applying for the third SEISS grant and need clarification, please get in touch.

Photo by Arthur Osipyan on Unsplash

Brain Teaser For The Self Employed – Thinking of Retiring?

Written by admin on . Posted in Self-Employed. No Comments on Brain Teaser For The Self Employed – Thinking of Retiring?

My regular readers will know that I like to ponder out loud, my meandering musings in my blogs, so they won’t be surprised I’ve come up with another quick quiz:

  • Are you self-employed?
  • If so, have you contributed to a private pension in the last year?

The Institute for Fiscal Studies (IFS) examined the answers to these two questions and found the probability of answering yes to both is much the same. Drawing on government data, the IFS calculated that in 2018:

  • 1% of the UK workforce – some 4.8 million people – were self-employed.
  • Just 16% of the self-employed contributed to a private pension.

As the graph shows, the proportion of pension contributors among the employed and self-employed workforce was on a steady decline from 1998 until 2012. In October 2012, pension automatic enrolment was launched, and by March 2019, over 10 million workers had joined a workplace pension arrangement. The self-employed were left out of auto-enrolment, hence the sharp divergence of the employee and self-employed lines from 2012 onwards.

The IFS research struggled to establish why only one in six of the self-employed were saving in a private pension, two thirds less than 20 years ago. It found that the characteristics of the self-employed workforce have changed over that period – it now consists of more females, an older demographic and an increase in part-time workers  – but none of these factors were enough to account for the fall in pension contributions. Given the tax relief which pension contributions attract, one surprising discovery was that the largest decline in self-employed contributions came from the higher-income bracket and the long-term self-employed.

If you answered yes to the first question and no to the second, then you may be expecting the state pension to make up the largest slice of your retirement income, a view shared by more than a quarter of the self-employed.  At present, the state pension amounts to £175.20 a week. If that sounds like a less than comfortable retirement plan, perhaps you need to rethink the answer to that second question…and please don’t turn to me, I’m just a lowly solicitor. I’m not qualified to advise on pensions. I just like to muse about these things. Especially on a Friday evening!

Self-Employed Granted Furlough Extension

Written by admin on . Posted in Budget, COVID-19, Self-Employed, Tax. No Comments on Self-Employed Granted Furlough Extension

Two further grants under the SEISS were announced in September and have now been updated.

Following the announcement last week, of a second lockdown, the government’s new package of support measures announced in the Chancellor’s Winter Economy Plan has been reworked, including an increase to the self-employed income support scheme (SEISS).

The extension covers a six-month period divided into two additional grants. The level of the upcoming third grant has now been increased from its initial 40% to 55% of average monthly profits. Applications for the third grant covering the three months from November 2020 to January 2021 will open on 30 November and will be capped at a maximum of £5,160, paid in a single instalment.

The fourth grant will cover the three months from February to April 2021, however, no further details have been released as yet.

Eligibility

To be eligible for the third grant you must have been eligible for the previous two (even if they were not actually claimed), so this excludes anyone with:

  • average annual profits exceeding £50,000; or
  • self-employed income that makes up less than 50% of total income.

In addition, you will have to declare that you intend to continue trading and are either currently actively trading, but are impacted by reduced demand due to Covid-19, or were previously trading but are now temporarily unable to do so due to Covid-19. The requirements to be actively trading and to be impacted by reduced demand are new and might indicate that HMRC is tightening up the rules.

The first two grants were based on average profits for the tax years 2016/17, 2017/18 and 2018/19. At this point, there is no indication if HMRC will allow profits for 2019/20 to be taken into consideration.

The Chancellor’s latest round of grants have faced widespread criticism offering less support than that available for employees who cannot work due to Covid-19, and, even with the increased level of 55%, the third grant is still less than 70% of the amount paid under the first grant.

If you need help with any support grants, please get in touch.

Photo by Markus Winkler on Unsplash                     

Defining ‘adversely affected’ for the self-employed

Written by admin on . Posted in COVID-19, Law, Self-Employed, Tax. No Comments on Defining ‘adversely affected’ for the self-employed

Many self-employed workers will have already claimed their second, and final, Self-Employment Income Support Scheme grant, but otherwise have until 19 October to do so. A key condition is that the business must have been ‘adversely affected’ by Covid-19 on or after 14 July 2020, and HMRC has provided guidance as to what this means.

Timing

Since applications will close on 19 October, the adverse effect must occur before then. However, if a business subsequently recovers, eligibility will not be affected.

Amount

There is no minimum threshold over which income or costs need to have changed, so just a small drop in income or an increase in costs will meet the ‘adversely affected’ requirement. Of course, the change must be Covid-19 related.

There are several ways in which Covid-19 could impact on income and costs. For example:

  • Not being able to work due to shielding, self-isolation, sickness or having caring responsibilities;
  • Having to scale down or stop trading due to supply chain interruptions, fewer customers or clients, staff being unable to work or having contracts cancelled; and
  • Additional costs incurred to buy protective equipment to meet social distancing rules.

A business is still classed as ‘adversely effected’ should contracts lost prior to 19 October be subsequently revived.

Records

You need to have records of how and when the business has been adversely affected. This should be fairly straightforward and will often just be a case of noting relevant dates when you were unable to work or trade or saving invoices for additional costs.

As regards income, retain any correspondence for cancelled work. A comparison to the same period for previous years may be needed if a business is open but has fewer customers.

The ‘adversely effected’ requirement will not be met if income has risen compared to last year, even if income would have been even higher if not for the Covid-19 pandemic.

Full details of HMRC guidance can be found here,

Photo by Andre Benz on Unsplash