SEISS 5 Challenges Taxpayers with Turnover Test
SEISS grant 5
Self-employed traders will be able to apply for the SEISS grant 5 from late July to cover the months of May to September 2021 according to HMRC.
However, for the first time, the amount applicants will receive through the self-employment support scheme will be dictated by how much their business has been affected by Covid-19. This is because the fifth grant will be determined by how much the claimant’s turnover has been reduced in the year April 2020 to April 2021.
Let’s find out more.
Turnover Reduction Test
News of a turnover reduction test regarding the new SEISS 5 scheme has left people wondering just how much they’ll be entitled to. And what calculations they’ll need to make before claiming their grant. Until now, HMRC has carried out all of the necessary calculations to work out if someone meets the grant conditions and to establish how much they’re entitled to. This time round, claimants need to do the graft themselves and perhaps seek help from a professional advisor in advance of making a claim.
More guidance is expected regarding the turnover reduction test and the calculations needed. However, HMRC has set out the scope of the grant as shown below. To summarise, it’s all to do with whether or not your business had a turnover reduction of more or less than 30%. To know this requires accurate record-keeping and strong accountancy skills.
Why is the Turnover Test Needed?
The turnover test has likely been designed to eliminate overpayments and to ensure those that have been impacted by Covid-19 the most get the biggest pay-outs. In the past, businesses who met the relevant criteria received their entitled grant regardless of how much they were impacted by the pandemic in a sort of all or nothing approach. This actually ended up with some people actually receiving grants that exceeded the amount of profits their business had lost. This is a loophole that’s now being covered.
Despite the new turnover test, the eligibility criteria for an SEISS 5 grant remains the same as for the SEISS 4 grant. Those who are self-employed or in a partnership must have traded in 2019/20 and submitted their tax return on or before March 2, 2021 and traded in 2020/2021 subject to coronavirus restrictions. HMRC will be contacting eligible claimants directly, as it has with earlier grants, in mid-July. The taxpayer will then be given a date that they can make their claim from.
The turnover test associated with SEISS 5 claims has highlighted the importance of record keeping. Essentially, claimants need to prove why they qualify for a grant just in case HMRC challenges their claim. Businesses must also be able to show through clear and easy-to-understand calculations whether their turnover is reduced by more or less than 30%.
With so much to do on a daily basis, factoring in time to make yet more business calculations is sure to be tricky. So why not seek professional accounting advice and rely on the help of experts? Get peace of mind that you’ll receive the grant amount you’re entitled to and that all calculations are correct.