Today’s blog is going to cover two topics that will interest self-employed clients and people who have had to self-isolate. First, the SEISS grant 4 is now open, meaning eligible self-employed people can now claim. The second topic concerns the £500 payments available under the Test and Trace Support Payment Scheme in England. We take a look at the tax implications of these grants.
Let’s start with the Self-Employment Income Support Scheme.
SEISS grant 4 opens for claims
One of the questions we’ve been asked a lot in recent weeks is: “When can I claim my 4th SEISS grant?”
Given that claims for the last grant closed at the end of January, it’s nearly four months since eligible people have received this form of government support.
The good news is that SEISS grant 4 opened for claims this week. It will remain open until 1st June 2021.
However, before you rush to put in your claim, you need to know that the fourth grant is a bit different to the previous three. Importantly, it’s the first grant you can apply for if you commenced trading in 2019/20 (as long as you submitted your most recent tax return by midnight on 2nd March).
The eligibility criteria are also more restrictive than before. You still need to be trading and affected by reduced demand, or you need to be temporarily unable to trade because of COVID-19. You need to intend to continue trading. Most importantly of all, you must reasonably believe that there will be a significant reduction in your trading profits.
The key question here is what qualifies as ‘reasonable belief’ that your profits will take a ‘significant’ dip. HMRC guidance says:
HMRC 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.
If you’re a THP client, you are welcome to discuss this with your account manager. However, it’s also essential that you keep good records. HMRC also says: “You must keep evidence that shows how your business has been impacted by coronavirus resulting in less business activity than otherwise expected.”
If HMRC believes coronavirus didn’t have sufficient impact on your business, you may have to repay your grant. You could also face penalties. So make sure you can make a good case for eligibility before you claim for SEISS grant 4!
You can make your SEISS claim here.
Are self-isolation payments taxable?
If you have had to self-isolate as result of COVID-19, you may have claimed the £500 Test and Trace Support Payment.
These payments give self-isolating people financial support they need to stay at home. The eligibility rules are rather complex but, if you’ve already claimed, that’s a maze you will have already navigated.
One question we’ve been asked, though, is whether self-employed people and others who have to fill in a Self-Assessment Tax Return need to pay tax on these grants.
The short answer is yes. The payments are taxable, but they are not liable to Class 2 or Class 4 National Insurance.
You need to report a self-isolation payment as income. Where you report it on your tax return depends on whether you are employed or self-employed. If you’re a THP client, we will report the payment in the correct place when we compile your return.
About Jon Pryse-Jones
Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.
An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”
Jon’s appreciation for THP extends to his fellow team members and the board. “They really know how to run a successful business,” he says. He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.