Time to Pay can aid SEISS users forced from frying pan to fire in 2021

With the festive period almost here, HMRC has just announced that the self-employed’s uptake of the third SEISS grant has been significant, with 1.7million applications and £4.8billion paid out in just over a fortnight, writes Kevin Humphreys, head of tax and forensic investigations at Integrated Dispute Resolution.

Where we are with the SEISS now, as 2020 concludes

This latest, penultimate tranche of the Self-Employed Income Support Scheme opened to freelancers, sole traders and the unincorporated self-employed on November 30th, shortly after the welcome announcement that the percentage of average profits to be applied in calculating the grant had been uplifted to 80%. This fourth uplift to the coverage available happened just 72 hours after the chancellor had raised it from 40% to 55%.   

The latest SEISS grant sits precisely on par with the very first, which saw over 2.7m claimants receiving £7.8bn.

Positively, the HMRC portal for the grants will remain open to the self-employed for current applications until January 29th 2021.

Tighter, extra hoops for the self-employed to jump through

But for those sole traders yet to make their claims, it is important to re-emphasise the changes to the SEISS eligibility criteria in this tranche. The rules have been tightened, so claimants must carefully consider the new rules before applying online.

In particular, to qualify for this third SEISS grant, an unincorporated business needs to not only be “adversely affected” because of Covid-19 but also:

• be currently trading -- yet be impacted by reduced demand due to coronavirus /coronavirus restrictions; or
• have been trading -- yet be temporarily unable to do so due to coronavirus.

The latest HMRC guidance on SEISS includes an additional test which is that the taxpayer must:

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

Are you ready to make an honest assessment?

As the grant covers the period to January 31st 2021, HMRC’s guidance requires applicants to essentially forecast a portion of their financial results by an 'honest assessment’ if they claim sooner rather than later in this current window.

A date for the opening of the fourth grant (the final grant of the scheme -- currently), covering the three months to April 30th 2021, has yet to be announced.

And while we await the detail on what level of average profits will be covered by the government, previous events suggest that the first announcement may well be subject to change, and maybe more than once!

Far from festive backdrop, fiscally

Standing back from the Self-Employed Income Support Scheme, the short-term economic outlook, driven by the latest surge in reported coronavirus cases provides little room for festive cheer – for freelancers and every other taxpayer.

The government’s new ‘Tier’ system is now sweeping more regions into the more acute and ‘very high alert’ Tier 3 category than it is relaxing them elsewhere.

This will inevitably have further adverse effects on small and medium-sized businesses, including one-person enterprises.

Yesterday's rapid covid response: furlough and BBL extended

Seeming to anticipate further negative impact to come, the government yesterday reacted to putting more areas into the most critical coronavirus category by further extending both the furlough scheme to April 2021, and the Bounce Back Loan Scheme until March 2021.

This is about as instant a reaction to a worsening coronavirus spread that we have seen from the government since the pandemic began in this year’s first quarter.

Further uncertainty is set to arise in specific trade sectors, including the creative industries, with the arrival of Brexit. In fact, if Britain enters a ‘no-deal’ scenario, we are likely to see severe restrictions on travel with those individuals who contract and freelance in EU countries potentially suffering severe disruption due to the scheduled end of free movement.

Out of the Covid frying pan, into the Brexit fire

Business opportunities for creatives may narrow even further if the UK does not have access to the single market. With trading relationships and supply chains potentially in disorder, the complexities that may arise for business soloists providing services if an 11^th hour deal is not secured could prove extremely upending.

In this sense, and as this massive unknown for commercial suppliers is just a few days after the festive break (when the 'transition period' ends), any freelancer that uses SEISS grants to get through the pandemic’s paralysis may simply feel like they’ve jumped out the frying pan of covid and into the fire of Brexit.

Finally, the significance of January 31st 2021 extends far beyond the cessation date of the 3^rd SEISS period. It is deadline day for filing 2019/20 self-assessment tax returns and the next ‘due date’ for tax and NIC payments.

Taxing times ahead

For many FreelanceUK readers, that might include 19/20 balancing payments, as well as the first Payments on Account for 2020/21. Ominously, tax liabilities may well have been calculated on profits made before businesses were adversely affected by the pandemic earlier this year.

For this reason alone, it is imperative that taxpayers seek assistance from HMRC under the covid-19 Time to Pay offering, where appropriate and where the Revenue is forthcoming.

Specifically, if your debts are £30,000 or less and you do not have other payment plans or debts with HMRC, applications for a Time to Pay arrangement can now be made online. For those seeking such assistance, it is strongly advised that you engage with HMRC sooner rather than later. Contact with the Revenue must be made a fortnight prior to the ‘due date’ of payment, so while there is very little time left to agree a payment plan if you haven’t already, there is still time!

A Revenue respite might be the best gift this Christmas

Let me acknowledge that this tax deferral activity is hardly what freelancers will want to spend their time doing as the festive season gears up. But as this year has taught us more than most, needs must. And my Christmas message to freelancers is this – really actively pursue this extra Time To Pay with HMRC.

Getting a tax respite as a way to alleviate financial stress for you and your family may be a gift that gives now and keeps giving well into the first quarter – a quarter which partly thanks to the add-on of Brexit, it’s hard to envisage being anything other than even more challenging than last year’s, when today’s unprecedented difficulties took root.