Fifth Coronavirus Self-Employment Income Support Scheme (SEISS) grant

If we can help and advise you in any way, please get in touch with your usual RRL contact (direct dial numbers can be found here).

The fifth grant was announced in the Budget in March, and detailed rules and guidance have now been confirmed.

This fifth grant is different from the preceding four grants. There are two levels of grants and new conditions applied.

Summary of eligibility conditions

To qualify for the fifth grant, you need to meet all of the eligibility conditions:

  1. you must carry on a trade which has been adversely affected due to coronavirus;
  2. you must have submitted your 2019/20 tax return on or before 2 March 2021;
  3. you must have carried on a trade in 2019/20 and 2020/21;
  4. you must intend to continue to carry on a trade in 2021/22 at the time you claim the grant;
  5. you must meet the profits condition for the fifth grant (see below);
  6. your trade must have suffered reduced activity, capacity or demand in the period 1 May 2021 to 30 September 2021;
  7. at the time you make the claim, you must reasonably believe that you will suffer a significant reduction in trading profits for a ‘relevant basis period’ (the accounting year that overlaps the period 1 May 2021 – 30 September 2021, or if an accounting year ends in that period, the basis period can be either the year finishing or the year starting) compared to what you would have reasonably expected, if you had not suffered that reduced activity, capacity or demand.

Crucially, HM Revenue & Customs (HMRC) states that you should only claim the fifth grant if you think there will be a significant reduction in trading profits due to the impact of coronavirus between 1 May 2021 and 30 September 2021. This is an important point.

You must also intend to keep trading in the 2021/22 tax year.

You do not need to have claimed the fourth grant to be eligible for the fifth grant.

You must make your claim on or before 30 September 2021. HMRC should contact potential claimants from mid-July onwards to explain how you can claim the fifth grant. The claim process will open from late July.

Unlike the position with the previous grants, there are two levels of grant available and some claimants will need to consider the new Financial Impact Declaration test, which compares turnover between two periods.

Profits condition for the fifth grant

In most cases, the ‘profits condition’ is met if your trading profits for the 2019/20 tax year were:

  • more than nil, but less than £50,000; and
  • at least equal to your non-trading income in that tax year.

If this condition was not met for the 2019/20 tax year, you are allowed to consider your average profits for 2019/20 and earlier tax years going back to 2016/17 in which you were trading.

There are some specific rules for cases such as where: you were non-UK tax resident; subject to the loan charge; and/or your 2019/20 profits were impacted as a result of having a new child or being a military reservist.

Financial Impact Declaration (FID) test

The new FID test determines the level of fifth grant you are eligible for.

Firstly, if you started your self-employment in the 2019/20 tax year and had not been self-employed in any of the 2016/17, 2017/18 and 2018/19 tax years, then you will not have to complete the FID test and you will automatically receive the fifth grant calculated using 80% of three-twelfths of the profits shown on your 2019/20 tax return.

Consequently, the FID test only needs to be considered where you have been self-employed in any of the 2016/17 – 2018/19 tax years inclusive.

The FID test is broadly a comparison of turnover levels (excluding SEISS grants, “Eat Out to help Out grants etc) between different periods (broadly, current levels and pre-pandemic levels).

How your turnover affects your grant amount

When you make the claim, the online service will ask you for your turnover figures and compare them for you.  The claims service will tell you then if you can claim the higher or lower grant amount.

If your turnover is down by 30% or more, your grant will be worked out at 80% of 3 months’ average trading profits and will be capped at £7,500.

If your turnover is down by less than 30%, your grant will be worked out at 30% of 3 months’ average trading profits and will be capped at £2,850.

To make the claim you need to calculate two different turnover figures

  • April 2020 to April 2021 turnover

You can work out your turnover for a 12-month period starting on any date from 1st to 6th April 2020 (e.g 1 April 2020 to 31 March 2021 up to 6 April 2020 to 5 April 2021).

This figure must include the turnover from all of your businesses.

If you have an accounting year/period which is either not 12 months or does not begin with a date from 1 April 2020 to 6 April 2020, then you need to look at your business records and choose a date between 1 April 2020 and 6 April 2020 then calculate your turnover for the 12-month period beginning with that date. Records of your calculations should be retained.

You do not need to have filed your 2020/21 tax return for these purposes.

  • Previous year’s turnover for reference

In most cases you must use the turnover reported in your 2019/20 tax return as a reference year.  The figure needs to be based on a 12-month period and include the total turnover for all your businesses.  Your 12-month period does not need to start in April.

However, crucially, if the 2019/20 tax year was not a normal year for your business, you can use the turnover reported on your 2018/19 tax return.  The reasons for this would include long term sick leave, carers leave, maternity leave, you lost a large contract etc.

The turnover figure should be taken from the relevant box on your tax return.

If your accounting period was longer or shorter than a year, you will need to work out what your 12-month turnover was.

HMRC have issued guidance on calculating turnover for the FID test that some may fine useful – this can be found here.