Last updated 4 October 2021
On 26 March 2020, the Government announced a support package for those who are self-employed or a member of a partnership and have lost income due to the COVID-19 crisis.
There were five rounds of grants under the scheme (referred to here as SEISS 1, 2, 3, 4 and 5).
Our main article on The Self-Employed Income Support Scheme (the ‘scheme’) sets out who was (and wasn’t) eligible for this scheme, how HMRC calculated the amounts due and the claims process. The purpose of this article is to further define some of the terms used by HMRC in respect of the scheme, as well as covering some other frequently asked questions.
Please use the menu below to navigate the FAQs included in this article
- Has the scheme been extended?
- What was meant by 'adversely affected'?
Has the scheme been extended?
Claims for the fifth and final round of SEISS grants closed on 30 September 2021. There has been no indication that any further grants will be made available.
What was meant by 'adversely affected'?
In order to be eligible for the grants, an individual had to carry on a trade which was adversely affected by COVID-19.
When looking at whether a trade has been adversely affected, there is no specific monetary threshold, and no requirement for income or profits to have fallen by a certain amount.
Instead, HMRC gave the following examples of how a business could be adversely affected by COVID-19:
you’re unable to work because you:
- are shielding
- are self-isolating
- are on sick leave because of coronavirus
- have caring responsibilities because of coronavirus
you’ve had to scale down or temporarily stop trading or incurred additional costs because:
- your supply chain has been interrupted
- you have fewer or no customers or clients
- your staff are unable to come in to work
- one or more of your contracts have been cancelled
- you had to buy protective equipment so you could trade following social distancing rules
Individuals should only claim a grant if their business had been adversely affected by COVID-19 at the time of the claim, and they were asked to confirm this to HMRC when claiming.
A claim could not be made based on an adverse effect that it was believed may happen in the future.
In order to claim under SEISS 1, the business had to have been adversely affected on or before 13 July. In order to claim under SEISS 2, the business had to have been adversely affected on or after 14 July 2020.
Those claiming under the scheme were advised to evidence how and why their business had been adversely affected by COVID-19 and keep a record of this.
If an individual's business recovered after they claimed, their eligibility will not be affected.
HMRC produced further guidance to illustrate when the criteria for being adversely affected might be met.
What was meant by reduced activity, capacity or demand?
The qualifying criteria for SEISS 3, 4 and 5 were stricter than for SEISS 1 and 2 in that they required the trade to not just be adversely affected by COVID-19, but specifically be suffering from 'reduced activity, capacity or demand'.
HMRC's guidance broke this requirement into two separate circumstances, indicating that this condition can be met if you:
- were currently trading but impacted by reduced demand due to COVID-19; or
- had been trading, but were temporarily unable to do so due to COVID-19.
In both cases, you must also have intended to continue to trade, and reasonably believed that the reduced demand or temporary inability to trade would result in a significant reduction in your trading profits for a basis period (or periods) in which the following fell:
- 1 November 2020 to 29 January 2021 (for SEISS 3)
- 1 February 2021 to 30 April 2021 (for SEISS 4)
1 May 2021 to 30 September 2021 (for SEISS 5)
See below for more on this.
HMRC indicated that you may be impacted by reduced demand if, for example, you:
- had fewer customers or clients than you would normally expect due to social distancing or other government restrictions;
- had one or more contracts cancelled and not replaced; or
- carried out less work due to supply chain disruptions.
The guidance made it clear that increased costs alone (for example from having to buy PPE or cleaning supplies) would not qualify as reduced demand. You will therefore not have been eligible for SEISS 3, 4 or 5 if this was the only impact on your business.
HMRC indicated that you may qualify due to temporary inability to trade if, for example:
- your business had to close due to government restrictions;
- you were instructed to shield or self-isolate and couldn't work from home (with the exception of self-isolating as you had returned to the UK from abroad, which did not count);
- you tested positive for COVID-19; or
- you could not work due to having parental caring responsibilities (e.g. because schools or childcare facilities were closed).
HMRC's guidance set out some examples of when they believe these conditions may, and may not, have been met.
What was meant by 'reasonable belief' that there will be a 'significant reduction in trading profits'?
In order to claim SEISS 3, 4 or 5, you had to reasonably believe that the reduced activity, capacity or demand due to COVID-19 would result in a significant reduction in trading profits for your basis period (or periods) which include:
- 1 November 2020 to 29 January 2021 (for SEISS 3)
- 1 February 2021 to 30 April 2021 (for SEISS 4)
1 May 2021 to 30 September 2021 (for SEISS 5)
Note that this test was forward looking, and required the position across the whole basis period to be considered. For example, a business with a 31 March year end would have needed to consider whether the qualifying reduction in activity, capacity or demand would significantly reduce trading profits:
- for the year ending 31 March 2021 (for SEISS 3)
- for the years ending 31 March 2021 or 2022 (for SEISS 4)
for the year ending 31 March 2022 (for SEISS 5)
HMRC did not publish any detailed guidance setting out their interpretation of 'reasonable belief' or 'significant reduction'. Instead, they indicated that you need to make an honest assessment, and that this decision could not be made for you by HMRC as it requires individual and wider business circumstances to be considered.
HMRC guidance confirms that you did not have to consider any other coronavirus scheme support payments you had already received when deciding whether you reasonably believed that you will suffer a significant reduction in trading profits.
Given the forward looking nature of this test, HMRC advised that you should wait until you have reasonable belief that trading profits would be significantly reduced before making your claim.
HMRC's guidance does set out some basic examples of when they believe this condition may, and may not, have been met.
What were my ‘trading profits’?
The level of an individual’s trading profits affected both their eligibility for the scheme, and the amount they may have received.
HMRC guidance indicated that, in calculating trading profits, they would deduct:
- Allowable business expenses (e.g. deductible costs of travel, premises, staff stock etc.).
- The £1,000 trading allowance (where claimed instead of actual expenses)
- Capital allowances
- Flat rate expenses
However, they would not take into account:
- The personal allowance
- Any losses carried forward from previous years.
Effectively, this means that trading profits should:
- For the self-employed, be the amount shown on your tax return as ‘total taxable profits from this business’, after adding back any losses brought forward from previous years.
- For partners, be the amount shown on your tax return as ‘your share of the total taxable profits from the partnership’s business’, after adding back any losses brought forward from previous years (see below for more on how the scheme operates for partners).
- For paper short returns, be the figure shown as ‘profit’.
Other points to note:
- If you had more than one trade in the same tax year, HMRC would add together profits and losses of all those trades when calculating your trading profit.
- If you claimed averaging relief as a farmer, market gardener, creative author or artist, HMRC would use the amount of profit before the impact of averaging claims to work out eligibility and how much you will receive.
How did HMRC calculate my ‘average trading profits’?
The level of an individual’s average trading profits affected both their eligibility for the scheme, and the amount they may have received.
To work out average trading profits, HMRC added together all profits and losses for all tax years in which you had a continuous trade.
Average trading profits for SEISS 1 to 3
This means that, for SEISS 1, 2 and 3, exactly how average trading profits were calculated depended upon which of the tax years 2016-17, 2017-18 and 2018-19 you traded in:
- If you traded in all three tax years, it will be the average trading profits for all three years.
- If you did not trade in 2016-17, it will be the average trading profits for the tax years 2017-18 and 2018-19
- If you did not trade in 2017-18, HMRC will use the trading profits for 2018-19 only
When looking at average trading profits, HMRC did not take into account the fact that you may have only traded for part of a tax year. For example, if you started trading part-way through a tax year – so on 1 September 2017, say, - then although you only traded for seven months in 2017/18, the average will have been calculated assuming that you traded throughout 2017/18.
Different rules applied for those subject to the loan charge (effectively, these ignore the trading profits in the tax year 2018-19). The examples below assume that the taxpayer is not subject to the loan charge.
A taxpayer traded in all three tax years 2016-17, 2017-18 and 2018-19 and had the following profits and losses:
- 2016-17: £60,000 profit
- 2017-18: £60,000 profit
- 2018-19: £30,000 loss
Their average profit = (£60,000 + £60,000 - £30,000)/3 = £30,000
A taxpayer did not trade in 2016-17, but traded in 2017-18 and 2018-19 and had the following profits and losses:
- 2016-17: Did not trade
- 2017-18: £25,000 profit
- 2018-19: £45,000 profit
Their average profit = (£25,000 + £45,000)/2 = £35,000
Average trading profits for SEISS 4 and 5
When calculating average trading profits for SEISS 4 and 5, the process was similar to that for SEISS 1 to 3, but also included data from 2019-20 tax returns. This meant that:
- If you traded in all four tax years, it was the average trading profits for all four years.
- If you did not trade in 2016-17, it was the average trading profits for the tax years 2017-18, 2018-19 and 2019-20
- If you did not trade in 2017-18, it was the average trading profits for the tax years 2018-19 and 2019-20
- If you did not trade in 2018-19, HMRC used the trading profits for 2019-20 only
As before, when looking at average trading profits, HMRC did not take into account the fact that you may have only traded for part of a tax year. For example, if you started trading part-way through a tax year – so on 1 September 2019, say, - then although you only traded for seven months in 2019/20, the average will have been calculated assuming that you traded throughout 2019/20.
Different rules applied for those subject to the loan charge (effectively, these ignore the trading profits in the tax years 2018-19 and 2019-20).
What was my non-trading income?
The level of an individual’s non-trading income was taken into account when determining their eligibility for the scheme.
When calculating your non-trading income, HMRC will have taken the figure for total income received on your tax return and deducted your trading income. Non-trading income will therefore include:
- Property income
- Savings income
- Overseas income
- Miscellaneous income (including taxable social security income).
How was turnover calculated for the purposes of SEISS 5?
One big change for SEISS 5 was that the amount received depended upon how much your turnover had decreased in the year April 2020 to April 2021 compared to either 2019-20 or 2018-19:
- If your turnover had reduced 30% or more, the grant will be worth 80% of 3 months’ average trading profits, capped at £7,500.
- If your turnover had reduced less than 30%, the grant will be worth 30% of 3 months’ average trading profits, capped at £2,850.
Importantly, this change meant that you needed to calculate the relevant turnover figures yourself before going to claim SEISS 5 – HMRC did not work this out for you.
HMRC’s guidance provides more information on how to work out turnover for these purposes, including examples.
In summary, you needed to calculate the following two figures before going to make your SEISS 5 claim:
- your turnover for a 12-month period starting on any date between 1 April 2020 and 6 April 2020 (your ‘pandemic year’ turnover); and
- your turnover from either 2019-20 or 2018-19 (your ‘reference year’ turnover).
If your pandemic year turnover had reduced by 30% or more compared to your reference year, you were entitled to the higher grant. If your pandemic year turnover had reduced by less than 30% compared to your reference year, you would receive the lower level of grant.
The only exception to this was if you started trading in 2019-20 and did not trade in any of the tax years 2016-17 through 2018-19. In that case you didn’t need to calculate any turnover figures, and your grant will have been set at the higher level.
In most cases, 2019-20 will have been used as the reference year. However, if you felt this was not a normal year for your business (for example due to taking to time off to have a child or through illness, or losing a large contract) you could choose to use 2018-19 instead.
Turnover for these purposes did not include any previous COVID-19 support grants (including SEISS grants, local authority grants or Eat Out to Help Out payments).
Other points to note include:
- If you started or ceased trading during 2020-21 you should have used your actual turnover in the pandemic year, even if this was less than 12 months (i.e. do not pro-rata turnover for that year).
- If your reference year (i.e. 2018-19 or 2019-20) had an accounting period of more or less than 12 months, you should have pro-rated your turnover to make sure it covered a 12-month period (see HMRC’s examples).
- If you had more than one sole trader business you should have used the total turnover across all your businesses
- If you were a member of a partnership, you should have used the partnership’s total turnover (and not just your share). The only exception to this was where you were a member of a partnership and also had you own sole trade, in which case you should have used your share of the partnership turnover only (see HMRC's guidance for more on calculating turnover of partnerships).
- If you had Lloyds income the rules are different (see HMRC’s guidance).
I only traded for part of a tax year - did HMRC take this into account?
No - subject to the comments above regarding calculating turnover for SEISS 5, when considering eligibility for the scheme, and the amount eligible individuals receive, HMRC only looked at the overall figures declared on submitted tax returns. They did not pro rata or annualise any of these figures to take into account the fact an individual only started to trade part way through a tax year.
What happens if I amend my tax return?
For the purposes of SEISS 1 to 3, if you amended a tax return after 26 March 2020 any changes will not have been taken into account when working out your eligibility or amount. However, there is no requirement to repay any grants you have received which would have been lower taking the amended return into account.
For the purposes of SEISS 4 and 5, only amendments made by 2 March 2021 will have been taken into account in working out your eligibility or amount. If you amend a return on or after 3 March 2021 which would have resulted in you no longer being eligible for a grant you have received, or your grant being lower, you have to notify HMRC and pay back the excess amount of the grant. The only exception is where your original SEISS 4 or 5 grant was £100 or less, or the amount you would have to repay is £100 or less.
The deadline for notifying HMRC depends on when you amended your return:
- If your return was amended before claiming your grant, you must notify HMRC within 90 days of receiving your grant.
- If your return was amended after receiving your grant, you must notify HMRC within 90 days of making the amendment.
For more information see ‘Will I have to pay back my grant? below.
I am a company director – was I eligible?
We received a number of queries about company directors – particularly those running family businesses and those with personal service companies (PSCs) – asking if they can claim under the scheme.
These individuals often receive a modest salary and take the rest of their income as dividends. While some may consider themselves effectively self-employed, they are not actually self-employed from a legal perspective, and were therefore not eligible for the self-employed scheme.
Could non-resident and non-domiciled individuals claim under the scheme?
The scheme was open to non-residents, and those claiming the remittance basis.
However, they were required to certify that their trading profits were at least equal to their other worldwide income (including overseas income) for any relevant tax years.
How did the scheme work for partnerships?
If you were a member of a partnership, eligibility was worked out based on your share of the partnership’s trading profits.
As a partner, trading profits were effectively the amount shown on your tax return as ‘your share of the total taxable profits from the partnership’s business’, after adding back any losses brought forward from previous years.
Depending on partnership profit share ratios, this could result in some partners in a partnership being eligible for the scheme, whereas others were not.
For example, for the purposes of SEISS 4, let’s imagine a partnership only traded in 2019/20, and neither of the partners nor the partnership had any other income. The partnership made £100,000 of trading profits in tax year 2019-20 and distributed these between their two partners as follows:
- Partner A - £25,000
- Partner B - £75,000
Partner A would have been eligible for SEISS 4, as their trading profits did not exceed £50,000. However, Partner B would not have been.
Did the scheme apply across the UK?
The SEISS was a UK wide scheme, meaning it was available in all four nations. However, the devolved administrations also set up additional schemes for eligible businesses in those countries. These included schemes specifically for the newly self-employed and company directors, who would not normally qualify for the SEISS.
You can find more information on the additional support available at the following links:
Could my tax agent help me claim?
Agents could help their clients to check whether they were eligible for the scheme.
However, the actual claim could be made by an agent – the taxpayer had to make the claim personally. Tax agents could however help or support the taxpayer in doing so.
All claims were made online, and the process was relatively straightforward.
When did I need to claim?
Claims for all SEISS grants are now closed:
- Claims for the first grant opened on 13 May and closed on 13 July 2020.
- Claims for the second grant opened on 17 August and closed on 19 October 2020.
- Claims for the third grant opened on 30 November 2020 and closed on 29 January 2021.
- Claims for the fourth grant opened in late April 2021 and closed on 1 June 2021.
- Claims for the fifth grant opened on 27 July 2021 and closed on 30 September 2021.
More information on how claims could be made can be found in our main SEISS article.
What happened when a claim was submitted?
Claimants should have been told straight away if their claim was approved, and payment should then have followed within six working days. Payment was by way of a single instalment directly into the claimant's bank account. Once a claim had been approved the claimant could check the status of their payment online.
Claimants should have kept a record of the amount claimed, their claim reference number and evidence that they met the eligibility criteria.
What records do I need to keep?
You should, in line with normal self-employment record keeping requirements, keep a record of:
- the amount claimed; and
- the claim reference number.
For SEISS 1 and 2 you should also keep any evidence that your business has been adversely affected by coronavirus. HMRC's guidance indicates that this could include:
- business accounts showing a reduction in turnover
- confirmation of any coronavirus-related business loans you have received
- dates your business has to close due to lockdown restrictions
- dates your staff were unable to work due to coronavirus symptoms, shielding or caring responsibilities due to school closures.
For the purpose of SEISS 3, 4 and 5, you also need to keep evidence to show you have been affected by reduced activity, capacity or demand as a result of COVID-19. HMRC's guidance indicates that this could include:
- business accounts showing reduction in activity compared to previous years;
- records of reduced or cancelled contracts or appointments;
- fewer invoices;
- a record of dates where you had reduced demand or capacity due to government restrictions;
- a record of dates where you had to close due to government restrictions;
- NHS Test and Trace communications - if you've been instructed to self-isolate and are unable to work from home (unless you have to self-isolate due to beging abroad which does not count);
- a letter or email from the NHS asking you to shield;
- test results if you've been diagnosed with COVID-19;
- letters or emails from your child's school if you were temporarily unable to trade due to parental caring responsibilities.
For the purposes of SEISS 5, you should also keep a record of how you calculated the turnover figures used to determine your grant level.
What if I disagreed with HMRC?
If you believed you were eligible for the scheme, but HMRC stated you were not, you could ask HMRC to review their decision.
If HMRC agreed you were eligible, but you disagreed with their calculation of the amount you were entitled to, you should have completed your claim anyway to ensure that you received a payment. You could then ask HMRC to review their decision.
For SEISS 1 HMRC provided an online form which individuals and their agents could use to request a review of eligibility or a review of the grant. This form was withdrawn for the second and subsequent rounds, and reviews could only be requested by contacting HMRC via telephone or webchat.
If you think you’ve been overpaid, you should notify HMRC. Failure to do so could result in HMRC recovery action and penalties. Further details on how to do this can be found below under 'What happens if a business claims the grant when they are not entitled to it?'.
Could I keep working if I made a claim?
If you received a grant under the scheme you could continue to work in your existing trade, start a new trade, take on employment (including voluntary work) or perform duties as an armed forces reservist.
There was therefore no need to ‘down tools’ just because you had made a claim under the scheme. However, as set out above, your business did need to have been affected by COVID-19, and you will have been asked to confirm this when making a claim.
How do I account for any payments received?
Grant will have been paid directly into your bank account in one instalment.
The amount received will be subject to income tax and National Insurance contributions, but does not have to be repaid. You will need to report the grant on your self-assessment tax return.
The entire first, second and third SEISS grants are taxable in 2020/21, with no apportionment back to the tax year 2019/20. This is regardless of the year end of the business, and whether they apply the cash or accruals basis. The only exception is where a grant has been accounted for to a partnership and not retained by the individual partner - for more information see HMRC's Business Income Manual.
SEISS 4 and 5 grants are taxable in the tax year they are received (likely to be 2021/22). Legislation to provide for this is included in s32 of Finance Act 2021.
The Low Incomes Tax Reform Group (LITRG) have produced a detailed factsheet on where SEISS grants should be included in the self-assessment tax return.
If you claim Universal Credit, any amounts received should have been reported as part of your self-employment income and may have affected the amount of Universal Credit you received. If you claim tax credits, you should have reported the grant as self-employment income and that you’re working 16 hours a week. The grant should have beeb treated as income received on the day it's paid for any Universal Credit claims or tax credit changes. More information on the interaction with tax credits and Universal Credit can be found on the LITRG website.
Will I have to pay back my grant?
The starting point is that SEISS payments are grants, and therefore not repayable. However, there may be a requirement to repay a grant if:
- you were not eligible for it at the time it was received (see below);
- for the purposes of SEISS 4 and 5 only, you amend a return on or after 3 March 2021 such that, if the amended figures were taken into account, you would not have met the profit condition, or you would have received a lower grant; or
- for the purposes of SEISS 5 only, you made a mistake in reporting your turnover which led to you receiving a higher grant than you should have.
Where a return amendment would have resulted in:
- you receiving no grant (because the profits condition would not have been met) the full grant received must be repaid to HMRC immediately;
- a lower grant, any excess must be repaid to HMRC immediately.
However, this is subject to a de minimis limit, which means that no repayment is needed if:
- the amount of the SEISS 4 or 5 grant you received was £100 or less; or
- the excess to be repaid is £100 or less.
More detail on how to notify HMRC and pay them back can be found here. Wherever possible repayment and notification should be undertaken using the online form provided.
Where a business does not repay an amount which is due as a result of a return amendment, HMRC have the power to recover this under Schedule 16 of Finance Act 2020 (as amended by clause 32 of Finance Bill 2021) and penalties and interest may apply. More information on penalties, including when one might be payable, and how this will be calculated, can be found in the SEISS compliance factsheet.
What happens if I claimed a grant when I was not entitled to it?
If you were paid a grant to which you were not entitled, you need to tell HMRC and pay them back. The deadline for notifying HMRC is the latest of:
- 20 October 2020
- 90 days after receiving the grant.
More detail on how to notify HMRC and pay them back can be found here. Wherever possible repayment and notification should be undertaken using the online form provided. However, if this is not possible, taxpayers should call HMRC rather than writing to them.
Legislation included in s102 and Schedule 15 of Finance Act 2020 provides for HMRC to claw back any amounts paid to businesses under the scheme who are not actually eligible. In summary, the amount incorrectly claimed will be taxed at 100%, and recovered by either raising an assessment or requiring individuals to show the amount as a tax charge on their return.
The same legislation also allows for HMRC to charge penalties where an individual has claimed an amount they are not entitled to and does not notify HMRC. Where a business has claimed the grant knowing they were not eligible for it, and does not notify HMRC or pay them back, this penalty could be up to 100% of the amount overpaid. More information on penalties, including when one might be payable, and how this will be calculated, can be found in the SEISS compliance factsheet.
What should I do if my client refuses to repay a grant when they are required to?
If an agent becomes aware that a client has claimed an amount to which they are not entitled, they should consider their obligations under PCRT. The ATT has published specific guidance on members’ obligations in relation to the reporting of SEISS grants.
However, it should be remembered that decisions on eligibility had to be made based on the facts available to the individual at the time of the claim. If, for example, a business was genuinely adversely affected at the time of the claim, but later recovered, this will not affect their eligibility and there should be no need to repay the amount received.
Can I make a voluntary repayment?
If a business has received a grant to which they were entitled, they can voluntarily choose to pay back some or all of the amount received.
To make a voluntary repayment, businesses should use the same online system as for those who are required to make a repayment (due to not being eligible).