The second round of grants for the self-employed was announced on 29 May and is due to be made available in August. The qualifying conditions will remain the same as for the first SEISS grant (see our initial blog on SEISS here), however this second grant can only be claimed for businesses which have been adversely affected by Coronavirus on or after 14 July 2020.
There will be a reduction in value of the grant for this second tranche, in a similar fashion to the Job Retention Scheme (CJRS), and will now be worth 70% of average monthly profits for a 3 month period, capped to a total of £6,570.
It is also important to note that the deadline for claiming the first SEISS grant is 13 July 2020, if you have not already done so.
Given the steps taken and those planned in transitioning from lockdown, the Government is expecting fewer businesses to be affected by Coronavirus moving forward. The second grant will therefore only be available to those businesses who have been adversely affected on or after 14 July 2020.
Generally speaking, a business will have been adversely affected if it has temporarily stopped trading or has continued to trade at a reduced level, with the causes of this being:
- A interruption to the supply chain
- Fewer customers or clients
- Staff being unable to work
A self-employed worker being unable to work because they are shielding, self-isolating, have had covid-19 or have caring responsibilities will also qualify as being adversely affected.
In order to provide further guidance on this, HMRC has released examples of where businesses would have been adversely affected and be eligible for the grant https://www.gov.uk/guidance/how-different-circumstances-affect-the-self-employment-income-support-scheme#adversely-affected-examples.
This also highlights that a business can claim for the second grant if they were not eligible for the first grant, but their circumstances have changed.
Unlike the CJRS, the self-employed can continue to work while claiming this grant.
Whilst there is no specific guidance on what subsequent checks will be undertaken, we do expect the Government to check the validity of the grant claims at some point, so it would be advisable to document how and when the business has been adversely affected to support any review by HMRC.
Taxation of the SEISS grant
The SEISS grant is taxable income for the recipient and so could have implications for the tax positions of self-employed individuals who have made a claim.
It would be wise to review the position regarding payments on account for future tax years, given taxable income levels might change as a result of the period of disruption. In certain circumstances, the result might be higher payments on account being made than is actually required, or conversely insufficient payments on account being made might leave a higher balancing payment to be made.
Given that the grant is taxable, this might have a larger impact on self-employed workers who pay income tax at source through the CIS scheme. Whilst many subcontractors are not used to making payments on account, they will now be in receipt of grant income which has not been subject to tax deducted at source, meaning balancing payments might arise and future payments on account are automatically generated. It is therefore important to be aware of this upcoming tax liability and to consider future earnings, which might mean payments on account can be reduced the following tax year. This would mitigate the need for a payment to be made, followed by a tax refund at a later date.
There might also be the need to apportion grant receipts where the accounting year end straddles the period in which the grant covers.
If you have any queries on the scheme, please do get in touch.