Self Employed: Could Your Next Tax Return Affect Your SEISS Claim?

Categories: Employment & skills, Tax

In November, the government announced an extension to the self-employed income support scheme (SEISS), which would provide two further pay-outs for those struggling to trade during the COVID-19 pandemic.

They will cover the following periods:

  • 1st November 2020 to 31st January 2021
  • 1st February 2021 to 30th April 2021

However, some self-employed workers are worried that submitting an early 2019/20 tax return could negatively impact their ability to claim the fourth taxable grant from the government.

The deadline for submission is looming. Self-assessment returns for 2019/20 must be sent on or before midnight on 31st January 2021. Around 10.7 million returns were sent in last year, neatly illustrating how many people this could affect.

So, if you’re self-employed, should you be worried?

A short history of the SEISS

The self-employment income support scheme first offered a pay out of up to £7,500 for the period of March to July 2020. A second followed for July to October, albeit at a reduced ceiling of £6,570.

To be eligible, claimants needed to declare that they intended to continue trading despite their business being impacted by coronavirus. Those who had to temporarily suspend trade due to the virus could also claim.

The amount paid was based on 80% of average trading profits, up to the maximum previously noted. The payment arrived as a lump sum, but was subject to tax and National Insurance contributions, as you might expect.

When it comes to the fourth grant, details are still scarce, but the grants will be issued based on either a cash or accrual basis of your calculated trading profits. In some cases, the grants may need to be apportioned between 2012/20 and 2020/21.

Who will be eligible for the fourth SEISS grant?

At the time of writing, the government is yet to release full details about the fourth SEISS grant, beyond the cover period of February to April 2021.

However, we can take an educated guess, based on the requirements for the third grant. Therefore, it’s likely that you’ll:

  • need to have been eligible for the previous SEISS grants;
  • be able to offer an honest assessment of whether your business will have a significant reduction in profits due to COVID-19;
  • need to confirm that there has been a new or continuing impact from coronavirus; and
  • have trading profits of up to £50,000 per year.

Please bear in mind that the above are currently assumptions made in December 2020. Keep an eye on the government’s official claimants page for more information.

Why are self-employed worried about their next SEISS claim?

The first taxable SEISS grant, which covered 1st March 2020 to 31st May 2020, was provided for self-employed workers who either had to close or who saw a negative impact on business because of COVID-19.

This covered the final five weeks of the 2019/20 tax year, which ended on 5th April 2020. Based on profits of up to £50,000 during 2018/19, the pay-out’s timing back then has left many self-employed workers understandably concerned that an early return might negatively affect their claim for the fourth grant.

Will my tax return affect the fourth SEISS grant?

The government is yet to confirm if they’ll use updated figures from 2019/20 or continue using historic data. However, the assumption is that the fourth claim will be based on existing criteria.

With that in mind, submitting your 2019/20 tax return early shouldn’t impact your entitlement to the fourth taxable grant. It’s therefore still a good idea – and definitely good practice – to submit your return as early as possible.

It’s also worth bearing in mind that, if you didn’t qualify for the grant previously (for instance, because your income was too high or your non-self-employed income was more than 50% of your total income), submitting the return now might be a good idea. This is because, when they announce the criteria for the fourth grant, it might only take into account tax returns filed at that date. That means you’d miss out if the new return makes you eligible, but you haven’t filed in time.

Confused? Worried about your ability to claim the next SEISS grant?

We can help; just get in touch with the Chandlers team and hit us with your questions.