- Be currently trading but are impacted by reduced business activity, capacity or demand, or have been previously trading but are temporarily unable to do so due to coronavirus
- Declare that they intend to continue to trade, or restart trading, and that they reasonably believe that the impact on their business will cause a significant reduction in their trading profits
- Only claim if the reduction in profits is caused by reduced business activity, capacity or demand, or inability to trade due to coronavirus – reduction in profits due to increased costs (such as having to buy masks) does not make a business eligible for the third SEISS grant.
Tests 1 and 3 are tighter than the previous versions and really need you to have up to date books for the tax year before you claim it to ensure you can meet them. I came across a great example where one self employed individual used to travel to clients so had much higher costs pre pandemic but obviously travel has not been allowed for much of the year.
Since the pandemic, work has been conducted via a virtual platform and there has materially been less work so test 1 is met.
The business is trading and will continue to trade with reduced turnover so test 2 is met.
Interestingly with a lower cost base, profits are running at only a slightly lower level than the previous year so further work was needed on costs to determine if test 3 is met before the sole trader could confirm compliance with test 3. If profits are expected to be similar after the additional work then the grant should not be claimed.
The moral of the story is that you may need to update your books before you claim this grant as the declarations are much stricter. This grant is not clear cut and you must retain good records! Further examples can be found here:
All SEISS grants will be declared on a separate box on your 2020/21 tax return. The grants are subject to tax and National Insurance like any self employed income and this should be budgeted. Good practice will be to make notes on the tax return as to why the claim for the grant was made to reduce the likelihood of a compliance check and the possibility of having to repay the grant.