Coronavirus: Second SEISS grant and new deadline

The Chancellor has announced that HMRC will extend the self-employed income support scheme (SEISS) for a further three months, but warned that this will be the final tranche of SEISS grants to be made available.

SEISS 2.0

Applications for the second SEISS grant will open in August, and further details of the exact timing will be released on 12 June. This announcement is expected to be followed by a more detailed plan to simulate the economy to be set out in a mini-Budget in early July.     

This second grant will be payable at a level equivalent to 70% of the taxpayer’s annual average profits, capped at £2,190 per month, so the maximum amount payable will be £6,570 to cover three months.

Conditions  

The HMRC factsheet confirms that the qualifying conditions for the second SEISS grant will be the same as for the first grant. There is no indication that traders who were excluded from the SEISS because they started their business on or after 6 April 2019 will be eligible for the second SEISS grant. 

We do know that eligible taxpayers will have to make a claim for SEISS 2.0, as the existing SEISS claim will not be rolled-over. Also, as part of that claim the taxpayer will have to confirm that their business has been adversely affected by coronavirus.

The term “adversely affected” is not defined in the HMRC direction (the law) which sets out the SEISS conditions, but HMRC guidance indicates it would include a reduction or temporary halt in business activity due any of these reasons:

• supplies not arriving
• fewer customers
• staff unable to work

Emma Rawson, technical officer of ATT, clarified that there is no monetary threshold for this test, the business just needs to show that it has been adversely affected in some way. Rawson recommends that business owners should keep records of how the business has been affected by coronavirus, just in case HMRC ask questions in the future.  

Deadline for SEISS 1.0

Applications for the first SEISS grants opened on 13 May 2020 and will close on 13 July.

HMRC has reported that 2.3 million SEISS claims have been submitted so far, out of a total potentially eligible population of 4.3 million self-employed individuals (ONS survey 17 April 2020).

This means around 2 million self-employed people have not applied for the SEISS so far. This could be because their profits are too high – above £50,000 on average per year, or because the business has not been adversely affected by coronavirus.

HMRC has confirmed that taxpayers do not have to claim the first SEISS grant in order to be eligible to claim the second grant.

Taxable grants

The SEISS grant is taxable income, or it will be when this draft legislation is passed, which is out for consultation until 12 June 2020.

This draft law brings into the taxation system all the coronavirus business support schemes including CJRS, grants paid out by local authorities, and any future coronavirus grant schemes which may be introduced. Given the timing, I would expect this draft law to be included in the Financed Bill 2020 which is currently before Parliament.

The coronavirus grants will be taxed entirely in the year of receipt (2020/21), and no part will be apportioned to 2019/20. The SEISS grants will have to be reported on the taxpayer’s 2020/21 self assessment tax return.        

Regulations will be laid to permit HMRC to raise assessments to collect tax from recipients of SEISS or CJRS, if they have received payments under those schemes to which they are not entitled. In the case of CJRS if the money has not been used to pay furloughed employee costs tax will be charged on the amount of CJRS grant received and penalties will be levied in cases of deliberate non-compliance. 

No VAT

Although the SEISS grant is taxable income of the business it is outside the scope of VAT (see VAT manual SC06312). This means there is no VAT to pay on that grant income if the business uses the VAT flat rate scheme. The SEISS grant should not be included on VAT returns as turnover and it must not be added to turnover for the last 12 months to assess whether the business has exceeded the VAT registration threshold of £85,000.