Second Stage of The Self Employment Grant Scheme Opens

The impact of COVID-19 on businesses across the UK has been considerable so far, and more pain may come if the number of cases peaks later in the year. According to a survey of 3,700 small business owners by Simply Business, the pandemic has cost small businesses on average around £11,000, with the cost being much more in some cases. In London, the average loss of income was over £17,000, and in Scotland nearly £15,500. Such losses could make the difference between being able to trade and being forced into closing down, with the loss of jobs and livelihoods.

Qualifying businesses have had some help from the Treasury in the form of the Self Employment Income Support Scheme (SEISS) which initially ran until 13th July 2020. It is estimated that the government-backed scheme helped over 2.7 million self-employed people who collectively received £7.8bn. To the relief of many businesses adversely affected by COVID-19, on 17th August 2020, the government announced the opening of the second stage of the SEISS.

Chancellor of the Exchequer Rishi Sunak said:

“Our self-employment income support scheme has already helped millions of hard-working people, who get up and go drive is crucial to our economy. It means that people’s livelihoods across the country will remain protected as we continue our economic recovery - helping them get back on their feet as we return to normal”.

In this article, we will outline what you need to know about the SEISS if you are not yet familiar with the scheme, and how your business can apply for financial assistance.

Second and Final Call for the SEISS

Under the second phase of the SEISS, self-employed individuals financially hit by COVID-19 since 14th July 2020, will be able to apply for a ‘second and final grant’ equivalent to 70% of their monthly trading profits (up to a maximum of £6,570). Applicants in the first phase could apply up to a maximum of 80%, hence there has been a slight reduction in the amount which can be requested.

Following a successful application, a single payment spanning three months of profits will be paid within six working days of submitting the claim. Self-employed individuals will be able to make an application under the SEISS whether they claimed under the first phase or not. Unlike the furlough scheme, those who make a successful SEISS claim will be able to work, and crucially, the grant does not need to be repaid.

The scheme is currently open to applications and will run until 19th October 2020.

Can I Claim Under SEISS Phase Two?

Not all self-employed people will be able to claim, but many will. You will need to satisfy the following eligibility criteria :

• you are a self-employed individual or a member of a partnership and your business has been adversely affected due to coronavirus, and;
• your business has been affected on or after 14th July 2020, and;
• your trading profits were no more than £50,000 and at least equal to your non-trading income
• you traded in the tax year 2018 to 2019 and submitted your Self-Assessment tax return on or before 23 April 2020 for that year, and;
• you traded in the tax year 2019 to 2020, and;
• you intend to continue to trade in the tax year 2020 to 2021.

You will also need to prove that your business has been adversely affected by COVID-19. The government’s guidance explains that there is no minimum requirement on how much your income or profit must have fallen in order to make a claim; “HMRC expects you to make an honest assessment about whether your business has been adversely affected.” If you believe that your business has genuinely and significantly suffered as a result of COVID-19, you will be asked to a) keep records of how and when your business has been adversely affected and b) confirm to HMRC that your business has been adversely affected by coronavirus.

When making a determination if your business has been adversely impacted by COVID-19, you will need to take into account:

• whether you have been unable to work due to being diagnosed, shielding from, or quarantining due to COVID-19
• your business has been unable to continue as normal due to clients cancelling, staff being unable to work, your supply chain is affected, and/or government policies meant your business was forced to close

If your business has been impacted, for example, due to the government policy on social distancing, you may have grounds for making a claim.

You may be asked to provide evidence when submitting your SEISS claim that your business has been affected by COVID-19, including:

• business accounts showing lower turnover or increased expenditure
• the dates your business had to close due to lockdown restrictions
• any dates you or your staff were unable to work due to coronavirus symptoms, shielding or caring responsibilities
• correspondence (emails or letters etc) which show your clients have cancelled contracts with you

You will need to make your claim on the HMRC website.

How Much Will I Receive from the SEISS?

In terms of how your trading profits are assessed, HMRC’s guidance states that if you are not eligible “based on the 2018 to 2019 Self-Assessment tax return, we will then look at the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019”.

The taxable amount you will receive will be based on the average of your trading profit for the last three tax years; 2016 to 2017, 2017 to 2018, 2018 to 2019.

Final Words

One of the challenges that self-employed people impacted by COVID-19 have had to grapple with is that while they had assistance for March, April, and May 2020 in the first phase of the SEISS, and will be reimbursed from mid-July in the second phase, they will not have their earnings for June and the first half of July covered. The true impact of this funding gap will remain to be seen. We can only hope that most affected businesses managed to bridge the six-week gap, and will now be able to claim the much-needed financial assistance.