The last time I wrote about the Self-Employment Income Support Scheme (‘SEISS’), I compared it to the Star Wars franchise, with it a seemingly never-ending series of government grants being offered to the nation’s self-employed. Annoyingly, it has now been confirmed that the grants will be restricted to five instalments, which somewhat scuppers the analogy (although you could argue there have only been five decent Star Wars films).
I then struggled to think of any five film franchises, but turns out there are quite a few, if you are willing to accept those made for TV or straight-to-video. Nonetheless, I prefer the Star Wars analogy, mainly because it allows me to sum up my thoughts on the latest instalment of the grant by quoting Admiral Ackbar – it’s a trap.
The reason I say this is that the claim is still really easy to make – it is a simple online form. The form can only be done by the taxpayer, so tax advisors are less likely to be involved in the decision. Indeed, as this is only available for self-employed people with profits of less than £50,000, some of these people probably don’t have a professional advisor anyway. All that combines, in my opinion, for a fertile environment for incorrect claims.
The fourth instalment of the grant, which can be claimed until 1 June 2021, covers the period from 1 February 2021 to 30 April 2021. Like the previous instalment, HMRC want businesses to show their trade (and ultimately profits) have been truly impacted by the virus. HMRC gives various examples of what they think does and doesn’t qualify.
The risk of making an incorrect claim is that HMRC will demand a repayment, plus interest and penalties. Therefore, if you have made a claim you think was incorrect, arrange the repayment as soon as possible. Fortunately, as with the claim form, the repayment can be done using a pretty straightforward online form. I have already advised one client to make a repayment of a claim after their latest management accounts showed their profits have actually gone up since the pandemic started.
Eligible taxpayers for the fourth grant will be given 80% of three months profits, capped at £7,500. As I always like to remind you, this grant is still taxable income and will need to be included in the tax return for the year ended 5 April 2022.
There will be a fifth (and final) grant to cover the period from 1 May 2021 to 30 September 2021. This has added complexity, as the level of support will be dependent on the amount sales has fallen. If your sales have fallen by more than 30% you can still get 80% of three months profits (despite it being for a five month period) capped at £7,500. If the fall in turnover is less than 30%, the cap is £2,850.
I assume this still requires profits to have fallen, as with the examples above, to prevent businesses who have restructured, lowered income but retained profit levels (e.g. by firing staff) from making a claim, but we still do not have the full details. Otherwise we might have another trap in store soon.
These are general examples and not formal advice. Also, tax law is constantly changing, so the issues discussed here might now be out of date. Each taxpayer is different; therefore, we recommend that you consider your options carefully with an expert before taking any actions.
If you want to discuss any of the above, or any other matter, just give us a call on 020 7183 3383 or email info@kma-spotlight.com.
