Further grants for the self-employed

Further grants for the self-employed
The Self-Employment Income Support Scheme (SEISS) has provided grant support for self-employed individuals whose business has been adversely affected by the Covid-19 pandemic. An extension to the scheme was announced at the time of the 2021 Budget. As a result, it will continue to provide support until September 2021.
Three grants have already been made under the scheme. As a result of the extension, a further two grants will be available. In addition, individuals who started trading in 2019/20 may now be eligible to claim.
Fourth grant
The fourth grant covers the period from February to April 2021 and is based on 80% of three months’ average trading profits. The amount of the grant is capped at £7,500. It is paid out in a single instalment.
To be eligible, the trader must have filed his or her 2019/20 self-assessment tax return and traded in 2020/21. Only traders whose trading profit is not more than £50,000 in 2019/20 or, where trading profit exceeds this level in 2019/20, not more than £50,000 on average over the period from 2016/17 to 2019/20 can benefit from the grant. In addition, income from self-employment must account for at least 50% of the individual’s total income.
To qualify for the grant, the trader must either:
- be trading currently but demand has fallen as a result of the impact of the Covid-19 pandemic; or
- have been trading but is unable to do so temporarily as a result of the Covid-19 pandemic.
The trader must also declare that:
- they intend to continue trading; and
- they reasonably believe that there will be a significant reduction in their trading profits due to reduced business activity, capacity, demand or inability to trade due to Coronavirus.
Claims for the fourth grant can be made online from late April 2021 until 31 May 2021.
Fifth grant
The fifth and final grant will cover the period from May to September 2021. The amount of this grant depends on the extent by turnover has fallen as a result of the Covid-19 pandemic.
Traders who have suffered a reduction in turnover of at least 30% will be eligible for a grant worth 80% of three months’ average trading profits capped at £7,500. A smaller grant worth 30% of three months’ average trading profits capped at £2,850 will be available to traders who turnover has fallen as a result of coronavirus but where the reduction in turnover is less than 30%.
Newly self-employed When the SEISS was originally launched, only those traders who had filed their 2018/19 tax return by 23 April 2020 could claim. As the filing date for the 2019/20 tax return of 31 January 2021 has now passed, individuals who commenced trading in 2019/20 and who have been adversely affected by the Covid-19 pandemic can claim the fourth and fifth grants under the scheme provided that they had filed their 2019/20 self-assessment return by midnight on 2 March 2021. They will also need to meet the other eligibility conditions.
Grants are taxable
Grants received under the SEIS are taxable and must be taken into account in working out the taxable profits for the year in which the grant is received.
IR35 and off-payroll working – What to do from 6 April 2021 if you provide services through an intermediary

Prior to 6 April 2021, workers who provide their services to a private sector organisation through an intermediary, such as a personal service company, need to consider whether the IR35 rules apply to them. This will be the case if the nature of the engagement is such that if they provided their services directly to the client rather than through their personal service company, they would be an employee of the client.
Where an arrangement falls within the scope of the IR35 rules, the worker’s intermediary needs to determine the deemed employment payment on 5 April at the end of the tax year. The intermediary must account for tax and National Insurance (employee’s and employer’s) and pay it over to HMRC.
Since 6 April 2017, workers providing services to a public sector body through an intermediary have not needed to consider IR35. Instead, under the off-payroll working rules, responsibility for determining whether the worker would be an employee if the services were supplied directly falls on the public sector body. If the worker would be classed as an employee were this the case, tax and National Insurance must be deducted from payments to the worker’s intermediary, and paid over to HMRC, together with the associated employer’s National Insurance.
From 6 April 2021, the off-payroll working rules, as they apply where the end client is a public sector body, are being extended. From that date, they will also apply where the end client is a medium or large private sector organisation. The changes will affect workers providing their services through an intermediary.
When agreeing an engagement from 6 April 2021 onwards, the worker should check the size of the end client so that they know which set of rules are in point.
End client is a medium or large private sector organisation
Where the end client is a medium or large private sector client, from 6 April 2021, the worker no longer needs to consider the IR35 rules. Instead, under the extended off-payroll working rules, the end client must determine whether the worker would be an employee if they provided their services directly to the end client, rather than via an intermediary.
The end client must provide the worker with a copy of the determination (the status determination statement). The worker should check this. If they don’t agree with it, they should tell the end client. The client must then reassess the status determination and let the worker know within 45 days whether the original determination stands, or issue a new one.
If the nature of the engagement is such that the worker would be an employee if the services were provided directly, the fee payer will adjust the invoice from the worker’s intermediary to exclude VAT and the cost of any recharged materials to arrive at the deemed employment payment, and deduct tax and National Insurance from the payment to the worker’s intermediary. This will have a cash flow implication – the worker’s intermediary will no longer receive payments gross.
The worker will receive credit for the tax and National Insurance paid against that due on payments made by the worker’s intermediary to the worker.
End client is a small private sector organisation
The extended off-payroll working rules do not apply to small private sector organisations.
Consequently, the position is the same on or after 6 April 2021 as it is now. The worker’s intermediary must continue to consider whether the IR35 rules apply, and operate them if they do.
End client is a public sector organisation
There is also no change from 6 April 2021 where the end client is a public sector body. As now, the public sector body must assess whether the off-payroll working rules apply and issue a status determination to the worker. If the engagement falls within the rules, they must deduct tax and National Insurance from payments to the worker’s intermediary.
When to tell HMRC about your new business

Lockdown restrictions have forced many businesses to close temporarily. Selling goods or clothes on sites such as eBay and Depop offers the opportunity to raise some much needed cash in these difficult times.
What are the associated tax implications and do you need to tell HMRC about it?
Badges of trade
There is a difference between occasionally selling an unwanted item and running an online business. When selling items online, it is necessary to consider whether you are actually trading. The courts have looked to the ‘badges of trade’ to answer this question. These are indicators that taken together provide an overall impression as to whether a trade exists.
The badges of trade are as follows:
- profit-seeking motive — an intention to make a profit indicates trading;
- the number of transactions – systematic and repeated transactions indicate trading;
- the nature of the asset – an asset that it can only be turned to an advantage by sale suggest trading;
- existence of similar trading transactions or interests – transactions that are similar to those of an existing trade may themselves be trading;
- changes to the asset –repairing, modifying or improving the asset to make it more easily saleable or saleable at a greater profit indicates trading;
- the way the sale was carried out – selling the asset in a way typical of trading organisations suggests trading;
- source of finance – selling the asset to repay funds borrowed to purchase it may indicate trading;
- interval of time between purchase and sale – a short interval of time between purchase and sale may indicate trading;
- method of acquisition – assets acquired by inheritance or as a gift are less likely to suggest trading.
There is no single overriding factor that provides conclusive proof that a person is trading; rather it is a question of forming an overall impression by considering the badges of trade.
Trading allowance
Even if the sale of goods amounts to a trade, it not always necessary to tell HMRC about it, or pay tax on any profits.
The trading income allowance removes the need to tell HMRC about trading income where the gross annual income from one or more trades is £1,000 or less for the tax year. If you are self-employed and sell goods on eBay as a side line, it is not possible to use the trading allowance for the side line if income from your main trade is more than £1,000 – you must report both to HMRC.
What to tell HMRC
If your gross income from all trades that you carry out is more than £1,000, you must tell HMRC about your income and expenses on your self-assessment tax return (registering for self-assessment first if you are not already registered).
In working out your profit you can either deduct expenses wholly and exclusively incurred in connection with the trade or, if more beneficial, the £1,000 trading allowance. Deducting the allowance will generally be more beneficial if expenses are less than £1,000. However, as the deduction of the allowance cannot create a loss, if after deducting actual expenses there is a loss, it is better to deduct the actual expenses rather than the allowance so you can benefit from the associated loss relief.
If your profits are high enough, you may also need to pay Class 2 and Class 4 National Insurance contributions. For 2020/21, you will need to pay Class 2 National Insurance if you profits from self-employment are more than £6,475 and Class 4 if your profits are more than £9,500.