Taxpayers could be prevented from making further SEISS claims and may face an enquiry if they don’t respond to HMRC’s email by 22 March.
The HMRC sent an email directly to established self-employed traders on 26 February 2021, asking them to prove that they are still trading, before they can claim the next two SEISS grants.
It is important that the taxpayer reacts quickly, as if HMRC does not receive a response by Monday 22 March, the trader will be blocked from receiving further SEISS grants. HMRC has also threatened to open a formal compliance check (a tax enquiry) into the taxpayer’s tax affairs where no response is received to this single email.
Conditions for SEISS
To be eligible for any of the SEISS grants the self-employed taxpayer must have traded in all of the tax years: 2018/19 to 2020/21. If the trade commenced after 5 April 2019, and the taxpayer submitted their tax return, including profits from that trade, by midnight on 2 March 2021, they are potentially eligible for the fourth SEISS grant.
However, in all cases the taxpayer must have continued to trade up to the point they applied for the SEISS grant, or that have been temporarily prevented from trading due to the coronavirus restrictions. The taxpayer must be intending to continue to trade as a self-employed individual once the Covid-19 restrictions are lifted.
Tax return trigger
HMRC has checked the self-assessment tax returns for 2018/19 and 2019/20 for indications that a trade has ceased. Where a box has been ticked on the tax return to that effect, and the trader has also claimed an SEISS grant, they will have received the email from HMRC on 26 February 2021.
Reasons for ceasing
The “trade has ceased” box may be been checked on the tax return for several reasons, including:
- a partner left the business, changing the business structure from a partnership to a sole trader – the remaining business owner should continue to qualify for the SEISS.
- one trade has ceased but the taxpayer started a new business in 2018/19 or 2019/20 – the taxpayer should qualify for the SEISS grant even if there was a period of no trading between the two businesses.
- the business was incorporated – the taxpayer will not qualify for SEISS as that scheme is not open to companies.
As long the taxpayer traded as a self-employed business for at least part of both 2018/19 and 2019/20, even in two separate businesses, they are potentially eligible for the SEISS grants, where the other conditions are met.
How should taxpayers respond?
The taxpayer is asked to respond to HMRC by email to: [email protected], using their business email account if they have one. The taxpayer should include the reference numbers for the SEISS grants they have claimed and the periods those SEISS grants covered.
HMRC doesn’t say that a tax agent can respond on behalf of the taxpayer, but that should be acceptable. If you have questions about how to supply the information requested, contact HMRC on: 0300 322 9430.
What evidence to provide
HMRC needs to see evidence that the trade has continued or there is an intention to continue to trade. This can be provided by a number of different means and HMRC suggest that one or more of the following would fit this requirement:
- advertising by the business.
- business receipts or sales invoices.
- contracts to provide goods or services.
- payments made through a business bank account.
The taxpayer doesn’t have to provide evidence of any sales completed in the periods the SEISS grants cover, but they do need to show there is a clear intention to carry on trading.
Trade has ceased
Where the trade has ceased after the last SEISS claim was submitted, that does not mean that earlier SEISS grants have to be repaid.
As long as the taxpayer had an intention to continue to trade at the time they applied for the SEISS grant, then that ‘continuing to trade’ condition will have been met. HMRC accept that circumstances for many traders have changed since the last SEISS grant applications opened on 30 November 2020, such that it is no longer possible to continue to trade.