Last week we told you about the six steps new traders need to take in order to reach the point where they can apply for the fourth SEISS grant. Now HMRC are asking certain established traders to prove that they are still trading, before they can claim the next SEISS grant.
To be eligible for any of the SEISS grants the trader must have traded in the tax years 2018/19 to 2020/21, or in 2019/20 and 2020/21, if the business commenced after 5 April 2019. A pause in trading is acceptable, but the trader must be intending to continue to trade once the covid-19 restrictions are lifted.
HMRC has checked the SA tax returns for 2018/19 and 2019/20, and has emailed taxpayers who have indicated that their trade has ceased in either period, but who have also claimed an SEISS grant. You won’t have received a copy of this email as the tax agent.
Clients may also have missed this email as HMRC are not in the habit of sending emails directly to taxpayers. However, it is important that clients reacts quickly, as if HMRC do not receive a response by Monday 22 March, the trader will be blocked from receiving further SEISS grants and may also be subject to a tax enquiry.
The “trade has ceased” box may be been checked on the tax return if one of the partners left the business, changing the business structure from a partnership to a sole trader. An individual may also have ceased one trade, or started a new business in those tax years. As long as they traded for at least part of both 2018/19 and 2019/20, even in two separate trades, they will qualify for the SEISS grants.
In that case the taxpayer needs to prove the trade has continued, and HMRC suggest that evidence could be provided in the form of:
- advertising by the business
- business receipts or sales invoices
- contracts to provide goods or services
- payments made out of a business bank account
It seems that the taxpayer doesn’t have to show evidence of sales completed, but it does need to show there is an intention to carry on trading.
Written by the Tax Advice Network