Have you correctly claimed the third Self-Employment Income Support Scheme (SEISS) grant?
The claim process for the third Self-Employment Income Support Scheme grant (SEISS 3) is currently open until 29 January 2021. Although some of the eligibility conditions are the same as for the first two SEISS grants (SEISS 1 and 2), there are some extra conditions to consider for SEISS 3 which may mean you are not entitled to it even if you were able to claim SEISS 1 and 2.
This article explains what the new conditions are and what you should do if you have already claimed the grant when you should not have done so.
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How is the SEISS 3 grant different?
Some of the eligibility conditions are the same as for SEISS 1 and 2 grants; this means all the following must apply:
- You submitted a Self Assessment tax return for the 2018/19 tax year by the extended deadline 23 April 2020.
- You were self-employed or a partner in a trading partnership in the 2019/20 tax year and traded for at least part of that year.
- Your profits from self-employment or partnership share were £50,000 or less and were equal to or more than your non-trading income. The profits test is explained in more detail on our SEISS webpage.
- You carried on a trade that has been adversely affected by the coronavirus outbreak.
The additional new conditions which you also need to meet for a SEISS 3 grant are:
- your business must have suffered reduced activity, capacity or demand in the period from 1 November 2020 to 29 January 2021 compared to what could reasonably have been expected but for the adverse effect on your business of coronavirus. For example, you may not have been able to trade during part or all of this three-month period because of lockdown restrictions, or you may have fewer customers due to social distancing requirements.
- As a result of the reduced activity, capacity or demand suffered by the business (explained above), you must reasonably believe that you will suffer a significant reduction in trading profits for a relevant basis period (usually your accounting period). When considering this condition, you should look at the profits your business could have reasonably been expected to make if it wasn’t for the effect of coronavirus instead of, for example, your profits from the last accounting period.
HMRC do not say how much of a reduction in profits they would consider to be a significant reduction, but they explain you need to consider your individual and wider business circumstances when making this assessment.
As there must be a significant reduction in the profits for the basis period, it is likely you will need to decide this BEFORE your basis period has ended if possible. Consider the example below:
Peter has a window cleaning business and makes up his accounts to 31 March each year. He has previously claimed both SEISS 1 and SEISS 2 grants. During November 2020 and December 2020 his business has been adversely affected by coronavirus because many of the office buildings where he usually cleans have been closed. Peter has suffered from reduced demand for his services during this period, but he must also decide whether he reasonably believes his trading profits for the year ended 31 March 2021 (his basis period into which November and December fall) will be significantly reduced overall because of this to be eligible for SEISS 3.
We strongly recommend that you record any evidence you have which will support your SEISS claim in case HMRC check it afterwards. The GOV.UK website has examples of records you should keep if claiming SEISS 3.
Unlike SEISS 1 and SEISS 2 grants, you are not eligible to claim a SEISS 3 grant if your business has suffered increased costs as a result of coronavirus (such as for personal protective equipment, or extra staff costs) but not a reduction in activity, capacity or demand.
Also, if the reduced activity, capacity or demand for your business is solely as a result of having to quarantine after travelling to the UK from overseas you cannot claim a SEISS 3 grant.
The calculation of the amount of SEISS 3 grant is the same as SEISS 1; it is 80% of the average of three-months profits based on the qualifying tax years (2017/18, 2018/19 and 2019/20) up to a maximum claim of £7,500. Our SEISS webpage has an example showing how SEISS 3 is calculated.
What if my situation changes after making a claim for the SEISS 3 grant?
You may have claimed SEISS 3 with the reasonable belief that there will be a significant reduction in profits in the relevant basis period, but after claiming you have a boost to your trading profits and so it turns out that actually there has not been a significant reduction for that period.
In these circumstances, you were eligible to make the claim for the SEISS 3 grant because at the time you made the claim you had a reasonable belief that your trading profits would be significantly reduced for the relevant basis period. We strongly recommend you keep evidence at the time you make your claim setting out the reasons on how you met the eligibility conditions for SEISS 3.
I have claimed a SEISS 3 grant but realise I should not have done – what should I do?
As the SEISS 3 claim process is already open it may be the case that you have submitted a claim application or already received the grant from HMRC. If you now realise that you were not entitled to SEISS 3 because you didn’t meet all the qualifying conditions, then you should inform HMRC and repay the grant.
You must inform HMRC within 90 days of receiving the grant, otherwise you may have to pay a penalty as well as returning all of the grant. You can tell HMRC by using an online form on GOV.UK and there is further guidance on repaying the grants on our SEISS webpage. Alternatively, you can call the SEISS helpline however we understand this phone line is currently very busy.
The tax charity, TaxAid, may be able to help you if you are on a low income and unsure about how to repay any incorrectly claimed SEISS grants.
Where can I find more information on the SEISS grants?
There is more guidance on all three SEISS grants on our SEISS webpage including information on how these grants interact with tax credits and universal credit.
We also have a webpage explaining the change in the SEISS grant rules which allowed some additional self-employed individuals or partners to qualify for the scheme if certain pregnancy or parental responsibilities had affected their income in 2018/19.