by David Watkinson www.watkinsonblackaccountants.co.uk
THE portal for claiming the fifth Self Employed Income Support Scheme (SEISS) grant is now open and the deadline for claiming the grant is 30 September 2021.
As with earlier grants the fifth grant is taxable income and in this instance should be included on the 2021-22 tax return for the claimant.
The rules for grant five are largely the same as those for grant four with the key exception of a new turnover test or, to be more exact, the “financial impact declaration test”. This test is not to decide whether you can claim the fifth SEISS; it comes into play only once the person is satisfied that they meet the conditions for making a claim. Instead, it determines the amount of the grant that can be claimed.
So what is the turnover test and how does it affect the grant claimable?
The turnover test is met when the person’s turnover for the pandemic period is at least 30% less than turnover for the reference period. If the turnover test is met, the person may claim an amount equivalent to 80% of their average profit for three months, capped at a total of £7,500. Where, however, the turnover test is not met, the grant is reduced by more than half to 30% of their average profit for three months, capped at £2,850.
This test may sound a fairly straightforward process. However, as is frequently the case, applying the rules may prove more difficult.
Meaning of ‘turnover’
‘Turnover’ means the takings, fees, sales and money earned by the business calculated in accordance with GAAP or the cash basis as appropriate. Importantly, turnover excludes any ‘coronavirus support payments’, including SEISS grants, Eat Out to Help Out payments and local authority or devolved administration grants.
Meaning of the ‘pandemic period’
The ‘pandemic period’ is the 12-month period beginning on a day falling within the period from 1 April 2020 and 6 April 2020; for example, the year to 31 March 2021 or, where more appropriate, the year to 5 April 2021.
Meaning of the ‘reference period’
The ‘reference period’ is the tax year 2019-20. However, the taxpayer can use 2018-19 where they feel this more accurately reflects their turnover for a typical 12-month period. HMRC has issued guidance that includes examples of where this may be appropriate such as:
-where the person was on carers’ leave,
-was on long term sick leave or had a new child,
-they carried out reservist duties during the period, or
-they had lost a large contract.
The turnover to be taken into account is the turnover for the basis period for the relevant tax year. The basis period is the accounting period ending within the reference period. If the accounts are drawn up to 5th April each year then the turnover for 2019-20 is the year to 5th April 1920. However, if the accounts are drawn up to, say, 31st May each year then the turnover is that of the accounts for the year to 31st May 2019.
In all cases, the turnover can be found on the person’s tax return for 2019-20 (or 2018-19, as appropriate), as follows:
-SA200 completed: box 3.6
-SA103S: completed: box 9
-SA103F completed: box 15
-SA800 completed: box 3.24 or 3.29 (for partnerships)
Where the basis period for the reference period exceeds 12 months, the turnover figure is apportioned on a just and reasonable basis (eg, on a time basis).
Partnerships
Special rules apply in the case of partnerships.
Briefly, where the person does not carry on a trade outside of the partnership, turnover is the turnover of the partnership. The turnover of the partnership is adjusted by reference to the profit-sharing arrangements where:
-the person carried on another trade (whether alone or in a different partnership) in the reference period; or
-the person started to carry on a new trade in partnership in the pandemic period and also carried on another trade (again, whether alone or in partnership).
What if I get it wrong?
Where a claim is made on the basis that the turnover test is met, and it is later found that this was not the case (based on the turnover figure reported in the person’s 2020-21 tax return), the person must return the excess amount immediately (subject to a de-minimis amount of £100).
WatkinsonBlack have considerable experience in all areas of taxation and business services, including providing a very cost-effective payroll bureau service. If you want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us. Our office is now open during all normal office hours. Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.
