Self-Employment Income Support Scheme – Fourth Grant
The HMRC portal for the fourth and penultimate grant for the Self-employment income support scheme is now open.
What period does this grant cover?
The fourth grant covers the period from 1 February 2021 to 30 April 2021.
How long do I have to make a claim?
From the date that HMRC advise that the portal opens for you until 1 June 2021.
How will HMRC work out if I am eligible to make a claim?
- HMRC will firstly look at your 2020 tax return. Your trading profits must be no more than £50,000 and at least equal to or more than your non-trading income.
- If you are not eligible based on your 2020 tax return, they will then look at the tax returns for the 2017, 2018, 2019 and 2020 years.
Find out more information on how HMRC works out trading profits and non-trading income for the self-employment income support scheme.
How different circumstances may affect your eligibility
There are some circumstances that can affect your eligibility such as if:
- your return is late, amended or under enquiry
- you are a member of a partnership
- you had a new child
- you have loans covered by the loan charge provisions
- you claim averaging relief
- you are a military reservist
- you are non-resident or chose the remittance basis
If you claim Maternity Allowance this will not affect your eligibility for the grant.
Find out more information on how your circumstances affect your eligibility
What are the conditions for applying?
To be eligible for the fourth grant you must be a self-employed individual or a member of a partnership. You cannot claim the grant if you trade through a limited company or a trust.
You must have traded in:
- 2019 to 2020 and submitted your 2020 tax return on or before 2 March 2021
- 2020 to 2021
You must either:
- be currently trading but are impacted by reduced demand due to coronavirus
- have been trading but are temporarily unable to do so due to coronavirus
You must also declare that you:
- intend to continue to trade
- reasonably believe there will be a significant reduction in your trading profits
What is reasonable belief
In order to claim the fourth grant, you must reasonably believe that you will suffer a significant reduction in trading profits, due to reduced business activity, capacity, demand or inability to trade due to coronavirus between 1 February 2021 and 30 April 2021.
You will need to keep evidence that shows how your business has been impacted by coronavirus resulting in less business activity than otherwise expected.
What is significant reduction?
You must decide if the impact on your business between 1 February 2021 and 30 April 2021 will cause a significant reduction in your trading profits for the tax year you report them in.
HMRC have stated that they cannot make this decision for you because your individual and wider business circumstances will need to be considered when deciding whether the reduction is significant.
They advise that you should wait until you have a reasonable belief that your trading profits are going to be significantly reduced, before making a claim. You will of course need to decide on this by 1 June 2021 as this is the deadline to submit any claim.
You do not have to take into account any other coronavirus scheme support payments that you have received when deciding if you have had a significant reduction in your trading profits.
HMRC have published some examples to help you to decide if you can make a claim.
Note that they state that you must not claim if the only impact on your business is increased costs. For example, if you have had to purchase face masks and cleaning supplies. This would not be considered as reduced demand. You also cannot claim if reduced demand is due to self-isolation after foreign travel.
If I am eligible, how much can I claim?
The fourth grant is calculated at:-
- 80% of 3 months’ average trading profits and capped at £7,500 in total
HMRC will work out your average trading profits using up to 4 years of submitted tax returns. This may affect the amount you will get, which could be higher or lower than your previous grants.
HMRC will take into account your trading profits from the 2016/2017, 2017/2018, 2018/2019 and 2019/2020 tax years. If you have a gap in the years you have traded, they will only use your most recent returns after the gap to work out the grant.
The grant will be treated as part of your income for 2021/2022 and will be subject to income tax and Class 4 National Insurance. It will also count towards your annual allowance for pension contributions.
Example
If your average trading profits were £42,000 over the last 4 tax years:
- Start with your average trading profit (£42,000)
- Divide by 12 = £3,500
- Multiply by 3 = £10,500
- Work out 80% of £10,500 = £8,400. In this example you would receive £7,500 due to the cap.
How and when will I get the grant?
The grant will be paid directly into your bank account in one instalment within 6 days of a successful claim being made.
HMRC have advised that if you have not heard anything from them within 10 working days of making a claim, you should get in touch with them.
How do I apply?
As for the first, second and third grants, HMRC will contact you if they believe that you are eligible for the scheme and will invite you to apply online.
Anyone eligible for the scheme will be able to apply directly to HMRC for the taxable grant using an online form. As for previous claims, you will need your Government gateway ID and password.
If you cannot make the claim online, you can contact HMRC by telephone on 0800 024 1222 from Monday to Friday between 8am and 4pm. The lines may be busy and you will probably have to hold for a while before you can speak to an advisor.
Unfortunately, HMRC will not allow us to make the claims on behalf of our clients as this could trigger a fraud alert and delay the processing of the claim.
Beware of scammers
The only way to access the scheme will be via the Gov.UK website or by calling HMRC.
You can check a list of genuine HMRC contacts if you receive any suspicious texts, calls or emails claiming to be from HMRC as this may be a scam.
You can read more about the scheme here: –
The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.
Photo by Gabriella Clare Marino on Unsplash
