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The Eligibility & Tax Implications of the Self Employment Income Support Scheme (SEISS)

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Jamie Bligh
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The eligibility rules for each SEISS grant have varied throughout the pandemic and each grant is treated differently for these purposes as the pandemic unfolded.

As preparation of the 2021 tax returns begins to gather pace, it is important to note the tax treatment of each SEISS grant as well as ensuring that you were eligible for each payment and that you have the supporting evidence to back your position.

Before we look at the eligibility of each payment, here is a quick reminder of each grant that was made available by HM Revenue & Customs:

Period from Period to Claims opened Claim closed Taxable year
SEISS 1 March 2020 13 July 2020 13 May 2020 13 July 2020 2020/21
SEISS 2 14 July 2020 October 2020 17 August 2020 19 October 2020 2020/21
SEISS 3 November 2020 January 2020 30 November 2020 29 January 2021 2020/21
SEISS 4 February 2021 April 2021 Late April 2021 1 June 2021 2021/22
SEISS 5 May 2021 September 2021 Late July 2021 TBC 2021/22


Every SEISS grant that has been received will be taxable as if it was trading income in the tax year that it was received. Whilst being treated as turnover however, the SEISS grants need to be reported separately from the trade’s turnover figure on the tax return on the self-employed or partnership pages as appropriate.

Being treated as trading income for tax purposes, the grants will attract both Income Tax and Class 4 National Insurance.

Eligibility to claim SEISS 1 & 2

In order to be eligible to claim the SEISS grants 1 & 2 , a qualifying business must have been adversely affected during the periods the grants covered, i.e. March 2020 to 13 July 2020, and 14 July 2020 to October 2020 respectively.

What constituted as adversely affected was not defined by a specific monetary threshold and there was no requirement for turnover or profits for the periods in question to have fallen by a specific amount. HMRC instead defined ‘adversely affected by Coronavirus’ for these grants as:

You were unable to work as a result of:

- Shielding obligations
- Periods of self-isolation
- Sick leave related to Coronavirus
- Caring responsibilities because of Coronavirus

You had to scale down the business, temporarily stop trading and/or incurred additional costs as a result of:

- Your supply chain being interrupted
- Fewer or no customers
- Staff were unable to come into work
- One or more of your contracts being cancelled
- The requirement to buy protective equipment (PPE) so you could adhere to social distancing rule whilst trading

It is imperative that evidence is kept, showing how the business was adversely affect in order to defend the eligibility of any claims being made.

The recovery of a business after these claims were made will not affect the eligibility of the grants paid.

Eligibility to claim SEISS 3 & 4

The eligibility criteria for SEISS 3 & 4 is built on the criteria for SEISS 1 & 2, introducing a stricter analysis of the adversely affected condition. Specifically, the grants required that the business suffered from “reduced activity, capacity or demand”. For SEISS 3 & 4, increased costs alone do not meet the qualify criteria.

Along with this condition, the business also had to have a reasonable belief that the reduced demand or temporary inability to trade would result in a significant reduction in trading profits during the accounting period of the business (i.e. the accounting year end). HMRC have not defined what a reasonable belief means but have indicated that an honest application of this term is to be applied.

HMRC have also indicated that SEISS 3 & 4 would be available under the following examples:

Reduced demand

- The business has fewer customers than could be expected under normal circumstances due to social distancing or other government restrictions
- One or more contracts being cancelled
- Less work was carried out due to disruptions in the supply chain

Temporary inability to trade

- The business had to close as a result of government restrictions
- Individuals in the business were instructed to shield or self-isolate & are unable work from home during these periods
- You tested positive for Coronavirus
- You were unable to work due to having parental caring responsibilities


Further guidance will be issued in due course in relation to SEISS 5.


Records to evidence eligibility

First and foremost the business should keep records of the amount claimed and the claim reference number.

In addition to this, for SEISS 1 & 2 the following evidence should be kept as appropriate to the business:

- Business accounts showing a reduction in turnover
- Dates the business had to close as a result of lockdown restrictions
- Dates that staff were unable to work due to Coronavirus symptoms, shielding or caring responsibilities due to school closures, or
- Details of any coronavirus-related business loans received

For SEISS 3 & 4, further evidence should be kept to show the business was affected by reduced activity, capacity or demand. This could include:

- Business accounts showing a reduction in activity in comparison to previous years
- Records of cancelled or reduced contracts
- Records of dates where demand or capacity was affected due to government restrictions or dates the business was required to close
- NHS Test & Trace communications
- A letter or email from the NHS instructing the individual to shield
- Positive Coronavirus tests, or
- Correspondence with schools if you were unable to trade as a result of caring responsibilities.

We will of course continue to bring you further updates and clarification as and when it becomes available. If you have any questions concerning the above, or any other tax matters, please do get in touch with your usual Rickard Luckin contact.

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