Brought to you by
tax cloud

Tax Cloud is an R&D Tax Credits claim portal.

Save content
Have you found this content useful? Use the button above to save it to your profile.

How Round 3 Of The SEISS Scheme Is Tougher Than Before

23rd Dec 2020
Brought to you by
tax cloud

Tax Cloud is an R&D Tax Credits claim portal.

Save content
Have you found this content useful? Use the button above to save it to your profile.

Eligibility is tighter

In November 2020, Chancellor Rishi Sunak extended the COVID-19 Self-Employed Income Support Scheme (SEISS). HMRC then published new guidance on who is eligible for the third grant - but the criteria is far stricter than for the previous two instalments. Claimants must satisfy three new criteria and all of these criteria must be met, not just one or two.

In this article we look at part three of the SEISS grant in more detail. You may find it useful if any of your own firm’s clients are looking to claim or are unsure if they qualify. There’s also our recent article: Millions Of Self-Employed People Excluded From The SEISS Scheme - Here's Why.

1. There must be a COVID-related effect on the business

Eligible businesses are also able to claim even if they didn’t claim parts 1 and/or 2 of the scheme.

To claim, businesses must have been affected by COVID-19 between the 1st November 2020 and the 31st January 2021. They can either be “continuing” to be affected, or be newly affected. This means that if your client’s business was struggling in previous months - over the summer for example - but is now no longer affected, then they are ineligible to claim.

2. There must have been a ‘significant reduction’ of some kind due to COVID-19

Claimants MUST reasonably believe that COVID-19 will have a 'significant reduction' on their trading profits up until the end of January. However ‘significant’ is rather subjective, so judgement must be used.

For some businesses the effects of COVID-19 restrictions will be obvious and pretty catastrophic, but for others it won’t be so clear cut. Bear in mind that some of your clients would do well to wait until later in January, in case their business picks up again (for example, after Christmas).

HMRC has made it clear that as every business is different, it’s down to individuals to decide if their trading profits have been hit hard enough. However, it’s essential that records are maintained as to how coronavirus has resulted in less trading activity than usual (more on this later).

3. There must have been reduced demand, or an inability to trade altogether

There are only really four things that will make a business eligible to claim part 3 of the SEISS. They must have:

  • Suffered reduced capacity or activity
  • Experienced reduced demand
  • Been told by the government they have to close
  • Temporarily ceased trading entirely, for example because demand is non-existent

If any of these apply, then claimants may well have to prove that they’ve had fewer customers or clients than normal. This could be due to reduced activity or because of government restrictions. They may also need to show that at least one contract has been cancelled and not replaced.

Some businesses will also have suffered COVID-related supply chain issues and this would be acceptable for a claim too.

What if the business recovers after my client has received the grant?

This isn’t a problem. As long as they originally claimed in the full belief that their trading profits would continue to be negatively affected then they shouldn’t worry.

Note was well that just because a business has picked up some extra COVID-related costs they’re now not automatically eligible for SEISS part 3. Perhaps they’ve had to buy PPE or additional cleaning supplies - HMRC has been clear that this alone will not mean a grant should be awarded.

The burden of proof for non-traders

If a business has had to temporarily close down completely due to COVID-19, claimants must be able to prove at least one of the following:

  • The closure was due solely to government restrictions
  • That a positive COVID-19 test has made them unable to work
  • That the NHS had advised them that they need to shield or self-isolate. They must be unable to work from home in this case. It doesn’t count if the person has just returned from abroad and therefore is automatically self-isolating
  • That they have been unable to work due to caring responsibilities. An example would be if their child’s nursery was closed

If a business was already closed before the 1st November and remains closed for a period of time up to the end of January 2021, then a claim for SEISS can be made. This is as long as the other criteria are met.

Evidence, evidence, evidence

The third instalment of the SEISS scheme puts a far stronger emphasis on evidence. If a business has suffered due to closure, reduced demand or supply chain problems, then details records must be kept as evidence. It is recommended that evidence should include, where relevant:

  • Dates the business was closed due to lockdown restrictions
  • A record of dates where there was reduced demand or capacity due to government restrictions
  • Business accounts showing a reduction in turnover and/or fewer invoices
  • Records of cancelled or reduced appointments or contracts
  • Test results if the claimant was diagnosed with COVID-19
  • Shielding or caring responsibilities due to school/nursery closures
  • NHS Test and Trace communications
  • NHS letters asking the claimant to shield or self-isolate

R&D Tax Credits

Don’t forget that if your client’s company has invested any money in research and development recently, they may well be able to claim back a large chunk of the costs. This is thanks to the R&D Tax Credits scheme.

Open to all UK companies regardless of their size or industry, the scope for eligible R&D activities that will attract the relief is huge. Perhaps your client’s company has recently created a brand new product, service or process? Or they may have substantially improved/changed an existing one, for example in expanding a product line.

Claims can be worth as much as 33 pence back per £1 of R&D expenditure so we’re not talking small change here. The credit either serves to reduce the company’s Corporation Tax bill, or can be administered as a cash payment for loss-making companies.

In these tough economic times, R&D Tax Credits can go a long way in supporting your clients’ innovative R&D activities. To find out more and how to apply, please do take a look at our R&D Tax Credits page. You can also see how the Myriad Associates team can work with you in supporting your clients throughout their claim.

Send us a message today or call 0207 118 6045.