How to calculate your turnover reduction for the fifth SEISS grant

July 30, 2021|In KRW Insight|By Keith Witchell

As set out in our Tax News article, the fifth SEISS grant opens at the end of this month, but this time there are two levels of grant dependent on your reduction in turnover as a result of COVID-19.

This new test runs alongside the main SEISS grant criteria (see the Tax News article for further details) and is referred to as the Financial Impact Declaration (FID).

So, how do you calculate your reduction in turnover for the purposes of this FID test? To calculate this you need to compare your turnover in the pandemic period to your turnover for a reference period. These terms in italics are further explained below.

Turnover includes all sales, takings, fees, and money earned by the business, excluding VAT and using either the accruals basis or cash basis (whichever you use when completing your tax returns). You do not include any COVID-19 related grants such as SEISS grants or rates payments etc. This will be the turnover you usually include on box 9 of your self-employment short supplementary pages, or box 15 of your self-employment full supplementary pages of your Self Assessment tax return.

It is recommended to keep a note of your workings to support your SEISS claims, in case HMRC ever question the basis for your calculations.

Pandemic period is the period of a full year commencing 1 or 6 April 2020. If you haven’t completed your 2020/21 tax return yet, then you may need our help in calculating this figure.

Reference period is either the 2019/20 tax year, or the 2018/19 if you reasonably believe that the 2018/19 tax year more accurately reflects the usual turnover of the business. So, for example, if you were on maternity leave for part of 2019/20 then 2018/19 would be a fairer reflection of your usual pre-pandemic turnover.

For partners in partnerships or LLP’s you should use the turnover of the partnership/LLP rather than your share of that turnover.

If you have multiple sole trades then you must include your turnover from all of these businesses in both periods to carry out the comparison.

However, if you are a sole trader and a partner in a partnership or LLP, then in that case you should only include your share of the partnership turnover, together with the turnover of the sole trade business(es). This differs to the situation if you are only a partner (see above).

What if you started self-employment (or became a partner in a partnership or LLP) during 2019/20? In this case, providing you weren’t self-employed or in partnership in any of the tax years 2016/17 through to 2018/19 then you won’t have to complete the FID test, and your grant will be the full 80% of profits amount, providing all other conditions to claim are met.

The following example illustrates how the FID test works in practice.

Terry is a self-employed plumber and has been a sole trader for many years. He draws accounts up to 31 March each year. He hasn’t completed his 2020/21 tax return yet, but he’s worked out his turnover for the year ended 31 March 2021, excluding SEISS grants and other COVID-support income, to be £47,520. He was affected by reduced sales as a result of COVID-19, and continues to be affected during the period 1 May 2021 to 30 September 2021. His turnover for the year ended 31 March 2020 (which fell into the 2019/20 tax year) was £45,690. However, he took 3 months off in that year to visit his brother in Australia so feels that the previous year ended 31 March 2019 (2018/19 tax year) more accurately reflects his usual business turnover. In that year his turnover was £61,340. He therefore calculates the FID test as follows:

Reference period turnover (year ended 31 March 2019)£61,340 [A]
Pandemic period turnover (year ended 31 March 2021)£47,520 [B]
Reduction in turnover is therefore [B-A]£13,820 [C]
Percentage reduction in turnover [C/A x 100]22.53%

Terry’s turnover has reduced by less than 30%. He is therefore entitled to make a fifth SEISS claim equal to 30% of 3 months of his average profits over the tax years 2016/17 through to 2019/20. This is equal to 30/80ths of the amount he received for the fourth SEISS grant.

For more information on how to calculate the turnover reduction, or for the figures from previous tax returns to use in the FID test, then please contact you Client Manager.

Key Facts

  • 5th SEISS grant includes new test to establish reduction in turnover as a result of COVID-19
  • You need to compare your turnover for 2020/21 to your turnover in 2019/20
  • You can compare to 2018/19 instead if that more accurately reflects normal turnover
  • If you need assistance calculating the FID test, please contact your Client Manager

For further advice on this matter, please contact me.

Keith Witchell