What are my ‘trading profits’?
HMRC Guidance indicates that, in calculating trading profits, they will deduct:
- Allowable business expenses (e.g. deductible costs of travel, premises, staff stock etc.).
- The £1,000 trading allowance (where claimed instead of actual expenses)
- Capital allowances
- Flat rate expenses
How will HMRC calculate my ‘average trading profits’?
To work out the average trading profits, HMRC will add together all profits and losses for all tax years in which you’ve had a continuous trade. This means that exactly how average trading profits are calculated will depend upon which of the tax years 2016-17, 2017-18 and 2018-19 you traded in:
A taxpayer traded in all three tax years 2016-17, 2017-18 and 2018-19 and had the following profits and losses:
- 2016-17: £60,000 in profit
- 2017-18: £60,000 in profit
- 2018-19: £30,000 in loss
Their average profit = (£60,000 + £60,000 – £30,000)/3 years = £30,000/12 months = £2500 per month x 3 month profit= £7,500 x .80% = £6,000 one time payment for SEISS Grant.
A taxpayer did not trade in 2016-17, but traded in 2017-18 and 2018-19 and had the following profits and losses:
- 2016-17: Did not trade
- 2017-18: £25,000 in profit
- 2018-19: £45,000 in profit
Their average profit = (£25,000 + £45,000)/2 = £35,000/12 = £2916.66 x 3 months = £8,749.98 x 80% = £6,999.98 one time payment for SEISS Grant
I am a company director – am I eligible?
We have received a number of queries about company directors – particularly those running family businesses and those with personal service companies (PSCs) – and asking if they can claim under the scheme.
These individuals often receive a modest salary and take the rest of their income as dividends. While some may consider themselves effectively self-employed, they are not actually self-employed from a legal perspective and are not eligible for the self-employed scheme.
Can non-resident and non-domiciled individuals claim under the scheme?
The scheme is open to non-residents, and those claiming the remittance basis. However, they will be required to certify that their trading profits are at least equal to their other worldwide income (including overseas income) for any relevant tax years.
How does the scheme work for partnerships?
If you are a member of a partnership, eligibility will be worked out based on your share of the partnership’s trading profits.
Can my tax agent help me claim?
Agents can use HMRC’s online eligibility checker to see if their clients are eligible for the scheme.
However, the actual claim cannot be made by an agent – the taxpayer has to make the claim personally. Tax agents may, however, help or support the taxpayer in doing so. HMRC is encouraging tax agents to support their clients by helping them to determine whether or not they are eligible for the scheme.
What happens when I’ve submitted a claim?
You should be told straight away if your claim is approved, and payment should then follow within six working days. Payment will be by way of a single instalment directly into your bank account. You must keep a record of the amount claimed your claim reference number and evidence that your business has been adversely affected by a coronavirus.
Can I keep working if I make a claim?
If you receive a grant under the scheme you can continue to work in your existing trade, start a new trade, take on employment (including voluntary work)
How do I account for any payments received?
The grant will be paid directly into your bank account in one instalment. The amount received will be subject to income tax and National Insurance contributions but does not have to be repaid. You will need to report the grant on your self-assessment tax return.