You will have noticed on your self assessment return and partnership returns for 2021 extra boxes for showing grants.
You must tell HMRC if, when you made the claim, you were not eligible for the grant. For example:
- for the first or second grant, your business was not adversely affected
- for the third or fourth grant, your business had not been impacted by reduced activity, capacity or demand or inability to trade in the relevant periods
- you did not intend to continue to trade
- you’ve incorporated your business
You must also tell HMRC if you:
- received more than we said you were entitled to
- amended any of your tax returns on or after 3 March 2021 in a way which means you’re no longer eligible or are entitled to a lower fourth grant than you received
You must reasonably believe that you’ll suffer a significant reduction in trading profits due to reduced business activity, capacity, demand or inability to trade due to COVID-19- between 1 May 2021 and 30 September 2021. You must keep evidence that shows how your business has been impacted by COVID-19 resulting in less business activity than otherwise expected.
HMRC expects you to make an honest assessment about whether you reasonably believe your business will have a significant reduction in profits.
What HMRC mean by impacted by reduced activity, capacity and demand
This applies to your business if it has been impacted by reduced activity, capacity or demand due to COVID-19. For example, you:
- have fewer customers or clients than you’d normally expect, resulting in reduced activity due to social distancing or government restrictions
- have one or more contracts that have been cancelled and not replaced
- carried out less work due to supply chain disruptions
You must not claim if the only impact on your business is increased costs. For example, if you’ve had to purchase face masks and cleaning supplies. This would not be considered as reduced activity, capacity or demand.
When you must tell HMRC
In most cases, if you’re not eligible and have to pay the grant back, you must tell us within 90 days of receiving the grant.
The 5th SEISS Grant
Full details of the fifth Self-Employed Income Support Scheme (SEISS) grant, including a new turnover test which determines the level of the grant, were published by HMRC on 6th July.
Although the eligibility for the fifth grant is the same as the fourth grant, the amount of the fifth grant will be determined by how much the turnover of the business(es) have reduced compared to the turnover in the reference year.
See: Check if you can claim a grant through the Self-Employment Income Support Scheme – GOV.UK (www.gov.uk)
The fifth grant is 80% of three months’ average trading profits capped at £7,500 for those whose turnover has reduced by 30% or more. Those with a turnover reduction of less than 30% will receive a grant based on 30% of three months’ average trading profits, capped at £2,850.
We have been waiting for the precise rules for determining turnover, but HMRC guidance provides more questions than answers and further clarification is still required.
See: Work out your turnover so you can claim the fifth SEISS grant – GOV.UK (www.gov.uk)
The turnover figure required is for a 12-month period starting on any date between 1 and 6 April 2020. Those who prepare accounts on a tax year basis will be able to use the same figure that will appear on the 2020/21 tax return.
That turnover figure is then compared to the turnover in the “reference period” which for most individuals will be the turnover figure from their 2019/20 tax return and there is an option to use 2018/19 if 2019/20 was not a normal year for the business.
The turnover figure will be the sum of all of the taxpayer’s businesses but should exclude coronavirus support payments (for example previous SEISS grants, eat out to help out payments and local authority grants). The rules for partners seem particularly illogical, especially where they are also involved in another business.