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Claiming Self-Employed Income Support Scheme grants

Under the third Self-Employed Income Support Scheme (SEISS) grant, claimants received up to 80% of average trading profits for November and December 2020, and January 2021. This meant that a maximum grant for the three months of £7,500 was made available to those who met the eligibility requirements. The claim window for this grant has now closed.

The government has confirmed that a fourth SEISS grant will be made available from 1 February 2021 to 30 April 2021. The level of this grant and application criteria for this fourth grant will be announced at Budget day on 3 March 2021.

It is likely that the same qualification rules will apply as was the case for the third grant. This means that you must be currently trading but have been impacted by reduced demand due to coronavirus or have been trading but temporarily are unable to do so due to coronavirus disruptions.

HMRC’s guidance states that the concept of reduced demand can apply if your business has been impacted by reduced activity, capacity or demand due to coronavirus.

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 cannot claim if the only impact on your business is increased costs. The SEISS grant is treated as taxable income and is also subject to National Insurance contributions.

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Emerging from lockdown

The Prime Minister has set out the government’s objectives for easing lockdown restrictions.

If the planned opening of schools, social interactions and businesses is achieved without significant increases in infection, after 21st June 2021, there will be no legal limits on social contact. Which means, all businesses including hospitality and entertainment concerns will have the opportunity to reopen.

Initially, the focus is to get children back to school (from 8 March 2021). There will also be gradual relaxation in rules for mixing outdoors including outdoor sporting amenities (from 29 March 2021). From 12 April 2021, indoor leisure, increased outdoor mixing, zoos, theme parks, hairdressers and other family events will be eased.

Businesses that can take advantage of these changes will need to consider their options. Many will have had their finances stretched by the seesaw lockdowns and closures.

Now is the time to plan for recovery. Please call if you would like to discuss your options.

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Buying equipment for your job

Employees who need to buy substantial equipment to use as part of their employment may be able to claim tax relief. In most cases they can claim relief based on the full cost as it usually qualifies for a type of capital allowance called the Annual Investment Allowance. Any tax relief would be reduced if the employer provides a contribution towards buying the item.

The way to claim tax relief depends on the amount you are claiming for. HMRC provides the following information on making a claim:

Claims up to £2,500
You should make your claim:
– using a Self-Assessment tax return if you already fill one in
online or by printing and posting form P87 if you don’t already fill in a tax return
– by phone if you’ve had a successful claim in a previous year and your expenses are less than £1,000 (or £2,500 for professional fees and subscriptions)


Claims over £2,500
You can only claim using a Self-Assessment tax return. You need to register if you don’t already complete a return.
There are different rules for employees claiming for their own uniforms, work clothing and tools for work.

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Financial outcomes for your business

There are three possible financial outcomes for your business, each with their own challenges:

– Make a profit
– Breakeven, or
– Make a loss


Making a profit

Clearly, this will be your goal. If you make profits – and taxation will never eat up all your profits – this will generate cash resources that can be accumulated in the business or used to finance working capital or other investments in equipment.

Also, importantly, profits provide the means to repay loans and reward shareholders for their investment in your business.

Profits are associated with buoyant trading conditions and provide prima facie evidence that all is well.

Breakeven

Breaking even in this context usually means that revenue/sales are equal to all costs. No profit, no loss.

It’s the equivalent to marking time and equates to any activity producing no additional resources for your business. However:

You can keep your team together
You can maintain contact with customers and suppliers
Your bank will be happy as they will see that your cashflow in’s and out’s are matching.
Many businesses during the current COVID disruption would be delighted to breakeven. Those that fail will experience the last option…

Making a loss

Losses occur when costs exceed revenue. Losses can be funded for a period of time but will be terminal for a business if, and when, cumulative losses – less any recovered taxation – exceed cash reserves or the ability of a business to borrow to cover a growing deficit.

Business owners who find themselves in this latter position should seek professional help. There are options including steering the businesses back towards breakeven/profitability.

Act early. Don’t wait until you have exhausted yourself and your remedial options. Pick up the phone, we can help.

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Post-Brexit review of workers’ rights cancelled

In an apparent U-turn, the Business Secretary has confirmed during a television interview that a proposed post-Brexit review of EU-derived workers’ rights, due to be carried out by the Department for Business, Energy & Industrial Strategy (BEIS), has been cancelled. The review was expected to consider proposals to amend the Working Time Regulations 1998, including the possible termination of the 48-hour maximum working week, changes to rules on rest breaks and excluding overtime pay from the calculation of some holiday pay entitlements. The Business Secretary has also stated on Twitter that the government wants to “protect and enhance workers’ rights going forward, not row back on them”.

It therefore now seems to be the case that no changes to EU-derived employment law will be pushed through by the government in the short term. In the longer term, that position may well change.

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Simplified export declarations

Following the end of the Brexit transition period, businesses need to make customs declarations when exporting goods to the EU as well as to the rest of the world. Businesses can make customs declarations themselves or hire a third party such as a courier, freight forwarder or customs agent.

Businesses can use simplified export declarations to help export most goods. The use of simplified export declarations allows businesses to export goods out of the UK by providing basic details to HMRC. This is usually done electronically. Once the goods for export are cleared, they can then be exported without needing to present any supporting documents.

To use simplified declarations for exports, authorisation is required from HMRC. If you are thinking of applying you need to:

– have a good customs compliance record, including VAT returns and duty deferments
– have a regular pattern of customs declarations against their Economic Operator Registration Identification (EORI) number
show how they will record all declarations for no less than four years after their submission date
– have access to the Customs Handling of Import and Export Freight (CHIEF) system. The Customs Declaration Service will eventually replace CHIEF.
Businesses are still required to complete a more detailed customs declaration known as a supplementary declaration, but this can be done at a later point in time.

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Present criteria for claiming via the furlough scheme

The detailed Furlough Scheme rules were last updated 4 February 2021.

People who are unable to work can receive up to 80% of their wages. This payment is subject to a monthly maximum amount of £2,500 per employee (for hours not worked). Employers have the discretion to top-up the payments if they so wish.

To use the extended scheme – to 30 April 2021 – the steps that are required are:

– Check if you can claim
– Check which employees you can put on furlough
– Steps to take before calculating your claim
– Calculate how much you should claim
– Claim for your employees’ wages online
– Report a payment in PAYE real time information (RTI)
To be eligible to claim, employees must have been registered on their employers PAYE payroll by 23:59 on 30 October 2020. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.

Employees employed as of 23 September 2020 and on payroll, who were made redundant or stopped working for the employer afterwards can also qualify for the scheme if they are re-employed and placed on furlough.

Employers must also have a UK, Isle of Man or Channel Island bank account.

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Self-Employment Income Support Scheme

Claims for the third Self-Employed Income Support Scheme (SEISS) grant closed on 29 January 2021. Under this grant, the self-employed received up to 80% of average trading profits for November and December 2020 and January 2021. This meant that a maximum grant for the three months of £7,500 was made available to those who met the eligibility requirements.

It had previously been confirmed that a fourth SEISS grant will be made available from 1 February 2021 to 30 April 2021. The level of this grant has not yet been confirmed and details will not be announced until the Budget on 3 March 2021. Accordingly, self-employed traders will not know how much money they will receive until after the fourth grant period starts.

Under the eligibility rules for the third grant, self-employed individuals, including members of partnerships, had to meet the following criteria:

have been previously eligible for the SEISS first and second grant (although they did not have to have claimed the previous grants)
declare that they intend to continue to trade and either are currently actively trading but are impacted by reduced demand due to coronavirus or were previously trading but are temporarily unable to do so due to coronavirus.
The current level of support is based on similar terms and conditions to the support offered to furloughed employees. The SEISS grants are taxable income and also subject to National Insurance contributions.

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Claims to adjust payments on account

Self-Assessment taxpayers are usually required to pay their Income Tax liabilities in three instalments each year. The first two payments are due on:

– 31 January during the tax year e.g., for 2020-21 the first payment on account was due on 31 January 2021.
– 31 July following the tax year e.g., for 2020-21 the second payment on account is due on 31 July 2021.
These payments on account are based on 50% each of the previous year’s net Income Tax liability. In addition, the third (or only) payment of tax will be due on 31 January following the end of the tax year.

There is no requirement to make payments on account where your net Income Tax liability for the previous tax year is less than £1,000 or if more than 80% of that year’s tax liability has been collected at source.

The payments are based on 50% of your previous year’s net Income Tax liability. If you think that your income for the next tax year will be lower than the previous tax year, you can apply to have your payment on account reduced. This can be done using HMRC’s online service or by completing form SA303.

HMRC’s internal manuals are clear that a reason for requesting a reduction in the payments on account must be given. A request without a reason is not a valid claim.

There are no restrictions on the number of claims to adjust payments on account a taxpayer or agent can make. However, there is a time limit which means that the claim must be received before the 31 January following the tax year in question. There is no requirement to notify HMRC if your taxable profits have increased year on year.

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New Treasury Directive re furlough scheme

An updated Treasury Direction under sections 71 and 76 of the Coronavirus Act 2020 concerning the extended Coronavirus Job Retention Scheme (CJRS) was published on 25 January 2021. The new direction formally extends the CJRS until 30 April 2021.

There were no changes to the amounts that employers can claim for the period from 1 February to 30 April 2021. This means that employers can continue to claim 80% of an eligible employee’s salary for hours not worked with the usual £2,500 monthly cap. Employers will continue to have to cover employers’ employees’ NIC and pension costs for the hours the employee does not work.

This is the sixth Treasury Direction on the CJRS and effectively mirrors the fifth Treasury Direction updated for the period 1 February to 30 April 2021 with some minor amendments mainly affecting variable rate employees from 1 March 2021.

The deadlines to submit claims and make amendments in respect of the months February, March and April 2021 are as follows:

– February: 15 March 2021 (amendments until 29 March 2021).
– March: 14 April 2021 (amendments until 28 April 2021).
– April: 14 May 2021 (amendments until 28 May 2021).

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