April 15, 2021: Wheelers Words

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April 15, 2021 | COVID-19: Self-employment Income Support Scheme (SEISS) Update

HMRC have now released details of the 4th SEISS grant which will be available to apply for from 22nd April 2021. If you have applied before you should receive a text/email with details on the day that you will be able to apply from.

The grant is similar to the first three (which are now closed for applications) in that the grant is calculated by HMRC based on data held by them and we cannot submit a claim on your behalf as agents. The grant covers the period from 1 February 2021 to 30 April 2021 and the window for applications closes on 1st June this year.

The grant is open to all those who are eligible regardless of whether they have claimed any of the first three grants. The conditions are as follows:

  • Traded in 2019/2020 and are continuing to trade in 2020/2021
  • A tax return for 2019/2020 must have been submitted by 2 March 2021

Income Tests

  • Average trading profits must be £50,000 or less
  • Trading income must be at least equal to non trading income (50% test)

The income tests will be applied to 2019/2020, and if failed applied to the average of the four years to 2019/2020.

The grant will be capped at the higher of £7,500 or 80% of your average profits for a three-month period.

Impact Tests

HMRC are keen to stress that the business must have been ‘adversely affected’ by coronavirus and have a reasonable belief that there will be a ‘significant reduction in trading profits’ during the period covered by the grant.

Examples of adversely affected

  • Unable to work due to shielding, self isolating, coronavirus sick leave or caring responsibilities
  • Scale down or temporary cessation of trade, including supply chain interruptions, fewer customers, staff unable to work or contracts being cancelled.
  • Additional costs of PPE

There is no definition of significant reduction in relation to profits, but HMRC have stated they will look at the whole period for the reduction in profits and not just the claim period for the grant. They have also said this reduction could be based on a forecast for the period rather than a prior year. HMRC have requested that taxpayers make an ‘honest assessment’. You are not required to take into account previous grants when accessing the impact of coronavirus on your business.

Unfortunately, if the only impact is some minor additional PPE costs and loose contracts not being renewed this is unlikely to be enough to claim the fourth grant. Evidence that supports your claim should be produced and retained in case of any future enquiry by HMRC.

The fourth grant does allow the newly self-employed to apply if they submitted a 2019/2020 tax return by 2 March 2021. These new trades have been contacted by HMRC to carry out some pre compliance checks. If you have been contacted but you are concerned about the validity of the letter or call, please let us know.

All the SEISS grants will be taxable in the year received, which may be different to your accounting period. Please make sure we know of any grants received before 5/4/2021 when we prepare this year’s tax returns on your behalf.

We fully expect HMRC to investigate the validity of grant claims, so it is important to realise that the claim could be challenged at a later date and have to be repaid.

Recovery loan Scheme (RLS)

With non-essential retail and outside hospitality having reopened their doors for 12 April, the Government has started to roll out a further wave of financial support to businesses known as the recovery loan scheme (RLS).

Chancellor Rishi Sunak unveiled the programme in his budget speech on 3 March as a replacement for the bounce-back loan scheme (BBLS) and coronavirus business interruption scheme (CBILS), which ended on 31 March.

The scheme launched on 6 April 2021 and aims to help businesses of various sizes, "from coffee shops and restaurants, to hairdressers and gyms" through Government-guaranteed loans as they balance on the tightrope to economic recovery.

The loans offered under the RLS vary in size with £25,001 to £10 million being up for grabs. Invoice and asset financing is available from £1,000, as well as revolving door credit from some lenders.

The loans are 80% backed by the Government, meaning the Government will pay lenders 80% of the original loan amount if a claimant business defaults.

Businesses are liable to repay the entirety of the loan along with the interest accrued on the payment.

The Government has capped rates at 14.99%, but the Treasury is expecting interest rates to be lower than the top limit, with ministers reportedly urging lenders to keep rates down to "help protect jobs".

Claimants can access term loans and asset finance facilities that last from three months up to six years, with overdrafts and invoice finance lasting from three months to three years.

To claim, businesses must apply through one of the 18 accredited lenders directly, which are listed on the British Business Bank (BBB) website, the organisation that is administering the scheme.

The applicant's business must have been negatively affected by COVID-19 to qualify for the RLS, although the finance can be used for any legitimate business purpose including cashflow management, growth and investment.

Individual RLS accredited lenders are in control on deciding whether a business is eligible for the scheme.

No form of personal guarantee is needed for loans below £250,000, but the BBB stipulates above this, "the maximum amount that can be covered under RLS is capped at a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of business assets have been applied".

Lenders must still undertake standard credit, fraud and know-your-customer checks for all applicants, but owing to the RLS's focus on coronavirus support, lenders are more likely to overlook poor short-to-medium business performance.

Businesses still need to be equipped with a viable business plan, on top of management accounts and asset details to present to lenders.

Businesses that received loans from BBLS and CBILS can still apply for the RLS, but participation in previous support schemes may reduce the amount claimants can receive.

The deadline for applications to the BBLS and CBILS closed on 31 March 2021.

VAT Deferral

HMRC has confirmed that companies may be liable for a 5% penalty or interest if they do not pay in full or make an arrangement to pay deferred VAT by 30 June 2021. Details of your options and how to make an arrangement are detailed on our previous release, dated 13 April 2021.