Self-employed? There’s just a few hours left to claim the third SEISS grant

Forget ‘fast-approaching,’ which is often what us tax experts like to say about deadlines – the deadline for self-employed people to claim the third SEISS grant is today, Friday January 29^th 2021, writes Kevin Humphreys, a forensic accountancy and tax investigation specialist at Integrated Dispute Resolution.

Let's start with another deadline day

As with the first and second Self-Employment Income Support Scheme grants, it is important to remember that the third grant is also subject to Income Tax and self-employed National Insurance.

And it must be reported on 2020-21 Self-Assessment tax returns.

These returns will be issued in early April by HMRC and must be completed and submitted by ‌‌January 31st 2022.

Undecided? Unsure? You're eligible for SEISS if...

For those freelancers and self-employed individuals still undecided on their eligibility, it is imperative that careful consideration is given to the government’s amended qualifying criteria for the third grant. In particular:

Your sole trader business needs to not only be adversely affected due to coronavirus but also to:

• be currently trading and in addition, impacted by reduced demand due to coronavirus; or
• have been trading but be temporarily unable to do so due to coronavirus. 

But there’s a new, dual-hurdle to jump over too, to get the third SEISS grant.

SEISS eligibility test two -- 'and,' not 'or'

The latest HMRC guidance on checking if you can claim under the SEISS includes the following additional two-fold test. As a self-employed person, you must:

• intend to continue to trade; and
• reasonably believe there has been a significant reduction in trading profits due to reduced activity, capacity or demand or inability to trade due to coronavirus.

The use of ‘and’ in this second, two-fold test and ‘or’ in the previous test could trip up some freelancers.

But it’s the latter test (using ‘and’) that stipulates a ‘significant reduction in trading profits’ which should be doubly-noted, as this test must be applied to your self-employed business’s accounting period as a whole.

Where HMRC is being helpful (and where it's not)

For those 11^th hour applicants who do meet the new criteria, HMRC has helpfully issued a reassuring reminder that such individuals do not have to consider any other coronavirus scheme support payments that they have already received before applying.

But now, something potentially not so helpful. Once today’s deadline of January 29^th for the third SEISS grant has passed, there will be no new information from the Revenue on the fourth SEISS grant payment until early March; over one month after the beginning of the period that the fourth grant is designed to cover. Instead, the announcement will be specifically covered as part of the government’s Budget 2021 and will be delivered by chancellor Rishi Sunak on the afternoon of Wednesday March 3rd 2021.

There is currently some optimism that this timing could herald some significant changes to the SEISS framework and may mean that some of the three million people who have found themselves previously excluded from the support scheme, could be able to access the fourth SEISS grant.

Another good reason to have your tax return in order

Some elements of the media have surmised that those self-employed who file their 2019/20 tax return by the self-assessment deadline of January 31st 2020, may be able to have their returned profits incorporated into their assessment of SEISS grant four. Whether this is ultimately borne out in the chancellor’s Budget remains to be seen.

Yet it would be wise for all self-employed to at least optimise that opportunity by ensuring that their 2019/20 tax returns are submitted on time.

Be aware that, due to covid-19 impacts, HMRC has formally announced a waiving of the fixed £100 penalty for anyone who misses the January 31^st filing deadline – this Sunday, and has agreed not to penalise anyone before February 28^th 2021.

However, HMRC stressed that the due date of payment remained fixed at January 31st 2021. Importantly, the tax authority has also emphasised that interest will still be applied to any tax liability paid late.

A reasonable excuse? The taxman is suggesting we've all now got one

Nonetheless, this last-minute extension of the 2019/20 tax return filing window is an appropriate relaxation of the usually rigid HMRC self-assessment rules, which had previously stipulated that only those appealing the late filing fixed penalty, who offered a 'reasonable excuse' (including coronavirus-related reasons) could see the £100 waived.

This time around, no reasonable excuse is needed as the February 28^th deadline applies to all taxpayers no matter what -- a welcome if not slightly grim acknowledgement by the department of just how many individuals have been affected, and are still being affected by coronavirus. It seems to make today’s SEISS deadline for the self-employed all the more critical for freelancers to meet.