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SEISS grant to be 80% of average profits

The self-employed income support scheme (SEISS) will be open for two further grants, the first of which will be set at 80% of average profits. This article has been amended with new information released on 5 November 2020.

3rd Nov 2020
Tax Writer Taxwriter Ltd
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There have been two rounds of grant support for the self-employed so far (see table), which have both been based on the trader’s average profits to for the three tax years to 2018/19. Those with annual average profits exceeding £50,000, or where self-employed income made up less than half of their income were not eligible to claim the SEISS grants.

On 24 September 2020 Chancellor Sunak announced that there would be two more SEISS grants payable in the six months from November 2020, indicating that the first of those grants would be restricted to 20% of average profits. This percentage  was then increased to 40%, and raised again to 55% on 2 November.

Boosted SEISS

On 5 November 2020 Sunak boosted the level of the next SEISS grant to 80% of average monthly profits for the entier period of the grant from November 2020 to Janaury 2021, capped at £7,500. This will be paid in a single lump sum after the applications are processed. Applications for this third SEISS grant will open on 30 November 2020.

No details have been released concerning the fourth SEISS grant.

In summary the SEISS grants are expected to be:

Grant number Percentage of average monthly profits Maximum per month

£

Maximum grant

£

Deadline for applications
1 80% 2,500 7,500 13 July 2020
2 70% 2,190 6,570 19 October 2020
3 80% 2,500 7,500 TBA
4 unknown ? ? TBA

Who qualifies?

HMRC has yet to publish legislation to set the rules for the next two SEISS grants, but we expect the following conditions to apply: 

  • The trader must have been eligible for the previous SEISS grants (even if he didn’t apply for them).
  • The business has not ceased permanently at the date of the claim.
  • If the business is not actively trading there is an intention to resume trading before April 2021.
  • The business has been adversely affected by the covid-19 pandemic in the period from 1 November 2020 to the date of the claim.

The third SEISS grant will be based on the trader’s reported self-employed profits in the three years to 2018/19, or parts of that period when he was in business as a self-employed individual or partner. 

Fourth grant

The government has promised a fourth SEISS grant payable for three months from February to April 2021. We have no information about the level of this grant, or the capped amount.

In September 2020 HMRC indicated that this fourth grant would be based on the trader’s average annual self-employed profits for the tax years: 2016/17 to 2018/19. By the time the fourth SEISS grant is paid in early 2021, almost two years of recent trading results will have been left out of that profit calculation. It is quite possible that the Chancellor will change his mind again by February 2021 to allow profits from 2019/20 to be included in the averaging calculation.

Universal credit

The level of the SEISS grant may not be enough to support the trader, in which case they should consider applying for universal credit (UC), which can be received in addition to the SEISS grants. The trader should bear in mind that it can take five to six weeks for the first UC award to arrive following the initial claim.

A disadvantage of the claiming UC is the operation of the minimum income floor (MIF). Self-employed individuals are assumed to make profits at least equal to the MIF when applying for UC. The MIF is broadly equivalent to the national minimum wage for 35 hours per week (or the hours the claimant is expected to work), less tax and NIC due on that notional income.

The MIF does not apply in the first 12 months the individual starts their self-employed trade, or for the first 12 months of a new UC claim by a self-employed individual submitted from 23 September 2020. On 3 November the DWP confirmed that the MIF would be suspended until 30 April 2021

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Replies (17)

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By aa-ltd
26th Oct 2020 11:06

The most annoying feature of the SEISS is that it takes no account of business running costs. My profits have been quite minimal over the seven years that I've been a sole trader, with the last two payments serving on each occasion to cover one month's rent payments on my premises and little else.

I have to keep the premises in order to store and maintain my somewhat substantial stock of equipment which I use in the events industry. If I got rid of the equipment I would have no business to resume once all this pandemic faff has gone away.

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By Marky
03rd Nov 2020 15:01

Is the 80% just available in England. Average monthly profits x 80% + AMP x 40% + AMP x 40%.

If someone from the rest of the UK applied would it be averaged at AMP x 40% x 3 months.

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By Marky
03rd Nov 2020 15:01

Is the 80% just available in England. Average monthly profits x 80% + AMP x 40% + AMP x 40%.

If someone from the rest of the UK applied would it be averaged at AMP x 40% x 3 months.

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By Marky
03rd Nov 2020 15:01

Is the 80% just available in England. Average monthly profits x 80% + AMP x 40% + AMP x 40%.

If someone from the rest of the UK applied would it be averaged at AMP x 40% x 3 months.

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By kenny achampong
03rd Nov 2020 16:35

Apologies if this has been answered elsewhere already, but isnt 80% for one month, and 40% for two month 53.33% ? How do you arrive at 55% ?

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Replying to kenny achampong:
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By afwdon
04th Nov 2020 09:52

I make it 53.33% too

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Replying to afwdon:
By kenny achampong
05th Nov 2020 13:07

Rather than trying to work out why he'd got the percentage wrong, he might as well just change it back to 80%. Much easier. Or maybe it's actually 71% and he's rounding it up again. Not that it matters, it could be anything by this time next week.

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By Paddingtonbros
04th Nov 2020 11:35

Re Average profits of £50K or less doesn't HMRC look at profits of 18/19 OR the average of 16/17, 17/18 & 18/19. Does that mean if 18/19 profits are £50K but the 3 year average is above £50K you still qualify?

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Morph
By kevinringer
04th Nov 2020 14:11

Rebecca says for SEISS3 'The business has been adversely affected by the covid-19 pandemic in the period from 1 November 2020 to the date of the claim.' But that isn't actually what HMRC have said. The 'adversely affected' condition was SEISS1 and SEISS2. For SEISS3 and SEISS4 it has been replaced with:
'either:
'are currently actively trading but are impacted by reduced demand due to coronavirus
'were previously trading but are temporarily unable to do so due to coronavirus

For example. Trader incurs a bad debt because a customer has gone bust because of covid. That meets 'adversely affected' for SEISS1+2 but fails 'reduced demand' for SEISS3+4.

Another example, the purchase of PPE to enable covid-safe trading meets the 'adversely affected' condition for SEISS1+2, but purchase of PPE is not a 'reduced demand' for SEISS3+4.

See https://www.gov.uk/government/publications/self-employment-income-suppor....

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By Glenys
04th Nov 2020 14:45

Just a note about the Minimum Income Floor.
It is currently suspended until end of April 2021.
Therese Coffey's announcement:
https://questions-statements.parliament.uk/written-statements/detail/202...

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By AndrewV12
05th Nov 2020 09:37

Forgive me (if I have not read it properly), when can clients claim the latest SEISS grant).

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Replying to AndrewV12:
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By Glenys
05th Nov 2020 10:40
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Replying to Glenys:
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By AndrewV12
05th Nov 2020 12:27

Thanks Glenys

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Replying to Glenys:
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By AndrewV12
05th Nov 2020 12:28

Thanks Glenys

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Replying to Glenys:
By kenny achampong
05th Nov 2020 13:09

It's 30th November by the way Glenys.

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Replying to kenny achampong:
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By Glenys
05th Nov 2020 13:15

oops. typo!

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By richard.daclark.co.uk
05th Nov 2020 14:06

SEISS does not help those “self employed” taxpayers who trade via a Limited Company.PreCovid these individuals would receive money by way of dividends and minimal directors’ pay under PAYE from their limited companies.
Why can’t the Chancellor help these individuals?
HMRC suggested it was too complicated to undertake the calculations.
Or is it because HMRC are annoyed that IR35 is not working, and the Government is trying to force the above mentioned individuals to receive their pay fully under PAYE, which then entitle them to join the furlough scheme.
Sceptic Of Dorking

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