SEISS extension – not business as usual

It came as something as a surprise last month when the chancellor announced as part of his Winter Economy Plan that the Self Employed Income Support Scheme (SEISS) would be extended with a further third and fourth round of grants. While no doubt welcome for those who qualify, there are some important changes from the previous round of grants which claimants and their advisers need to understand.

Who qualifies for a grant under the extension?

The starting point to qualify for the third and fourth rounds of the SEISS are the same conditions which had to be met for the earlier first and second round of grants (though you don’t actually have to have made a claim under either of those earlier rounds).

However, there are also two new conditions which will have to be met in the relevant qualifying period:

For the third round of grants the relevant qualifying period will be between November 1 and the date of claim. The claim window is yet to be announced. The relevant qualifying period for the fourth round of grants has not yet been confirmed.

Our understanding is that the first of these new conditions means that if you are not trading at all, for example because you work in a sector which has not yet opened up, you will not be eligible to claim the third or fourth round of grants. This is different from the position under earlier rounds of the SEISS, where a claim was possible if you had temporarily ceased to trade due to the coronavirus. The Government’s position is that this change is consistent with the new Job Support scheme (also announced as part of the Winter Economy Plan), which requires employees to work at least 33 percent of their normal hours to qualify – a departure from its predecessor (the Job Retention Scheme) where employees could be furloughed completely.

The second new condition requiring the trade to be impacted by reduced demand differs from the previous SEISS requirement for the trade to be adversely affected by the coronavirus. Although we are still waiting for HMRC to publish further details, on first reading it appears that this new condition is likely to be more restrictive. In particular, the reference to reduced demand indicates that you may have to focus purely on the level of trade in the business, and not other factors such as staff absence or increased expenses (which could be taken into account when deciding whether a business was adversely affected).

How much is the SEISS extension worth?

Another way in which the two new rounds of SEISS grants will differ from previous rounds is that they are much less generous.

The third round of grants will cover the period from the start of November 2020 until the end of January 2021 and be worth:

This is significantly lower than the percentages of monthly trading profit and caps which applied for the first and second round of grants (80 percent / £7,500 and 70 percent / £6,570 respectively).

The fourth round will cover the three-month period from the start of February until the end of April 2021. The government have indicated that they will review the level of support offered under the fourth round and set this in due course. Depending on the state of the economy, and the number of claimants for the third round of payments, it is possible that this will be lower still.

What should advisers do?

We are currently waiting for more detailed guidance from HMRC on a number of important points regarding the SEISS extension, including what is meant by impacted by reduced demand and when the claims window for the third round of grants will open.

In the meantime, it is worth emphasising to relevant self-employed clients that the third and fourth round of payments have stricter qualifying conditions, and are much less generous than the two previous rounds. The two additional conditions mean that it should not be assumed, just because someone qualified for the SEISS under a previous round, that they will necessarily qualify for future rounds.

One final point to note is that HMRC will use the same average monthly trading profits figures as were used to calculate the first and second grants. This means that there is no point in rushing to file 2019-20 self-assessment returns in the hope that it might improve the chances of getting a grant, or the amount received – although those filing early will of course benefit from the usual extra time to plan for tax bills.

More information on the SEISS scheme can be found on the ATT website, including detailed guidance notes on the SEISS and accompanying FAQs. These will be updated as more information is received from HMRC.

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