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SEISS amended conditions may affect taxpayers

The SEISS claims portal reopens today Monday 30 November, but taxpayers must declare their trade has been impacted by reduced demand before they claim the third grant.

When anyone qualifies for the SEISS (3) grant the taxpayer will receive one lump sum payment to cover the three-month period:

1 November 2020 to 31 January 2021. It will be paid at 80% of the taxpayer’s average trading profits for 2016/17 to 2018/19, the same manner as initial SEISS grant.

The maximum SEISS (3) grant payable is £7,500, or £2,500 per month, which aligns with previous claims.

Declarations

The HMRC guidance confirms the individual must be:

·         currently trading and be “impacted by reduced demand”

·         has been trading but the business is temporarily closed due to coronavirus.

The trader must also confirm they are:

·         intending to continue to trade

·         they reasonably believe that the impact on their business will cause a significant reduction in their trading profits due to reduced business activity, capacity or demand, or inability to trade due to coronavirus during the period 1 November 2020 to 31 January 2021.

The previous “adversely affected” test was met if the business turnover had decreased, or alternatively if business costs had increased, due to the pandemic. There was no minimum threshold for the adverse effect, so even a small increase in costs or drop in sales meant the business would qualify.

The new reduced demand test requires the trader will suffer a “significant” reduction in trading profits for the relevant basis period. In English, “Significant” is not defined, so it must take its normal definition as having a great effect, or something that affected a situation to a noticeable degree.

The HMRC make it clear that increasing in costs alone, resulting in a drop in profits, will not allow the trader to qualify for the grant

The reduction in sales can be due to several factors, but it must also lead to a reduction in profits. If the volume of sales has decreased but the value of each sale has increased so profits are constant, the business does not qualify.

However, if the reduced sales activity is solely due to the business owner having to self-isolate because they, or someone they care for, has travelled into the UK, again the business doesn’t qualify for the SEISS (3) grant. Self-isolation due to Covid-19 symptoms, testing or on instruction due to medical vulnerability is accepted as a cause of reduced sales.

Relevant basis period

The new HMRC Direction makes it clear that the significant reduction in trading profits must be measured over the current accounting period, and that is the period that includes November 2020 to January 2021.

How accountants can help

The SEISS grant must be claimed by the individual taxpayer, online through the HMRC portal, by 29 January 2021. However, before claiming the taxpayer made need help in forecasting their turnover for the full accounting period that includes the period November 2020 to January 2021. Having professional support at this stage may ensure a more accurate filing.