Coronavirus Q&A - Part one

What happens if my sole trade made a loss in the 18/19 tax year will I still get access to the Self-employment Income Support Scheme (SEISS) grant?

The amount of grant that HMRC will pay to those claiming the SEISS is based on the average yearly trading profit in the 16/17, 17/18 and 18/19 tax years. The amount received will be 80% of the monthly average of the above up to a maximum of £2500 per month.

A loss making year will be treated as a year of negative profits rather than a year of zero profits for the purposes of the SEISS. This means the loss must be deducted from your profits in the period rather than treated as zero profits as it is until the losses are used.

Neither a brought forward loss nor the personal allowance will be deducted from the profits.

Please see the example below:

A sole trader has the following profits and losses for the 3 years and more than 50% of their income stems from self-employment.

  • £45,000 profit in tax year 2016/2017

  • £60,000 profit in tax year 2017/2018

  • £20,000 loss in tax year 2018/2019

First, add £45,000 and £60,000 then deduct £20,000 loss. This gives us a total of £85,000 and dividing this by 3 this gives us an average of £28,333. 80% of this would be £22,666.

The grant will be the LOWER of 80% of the average trading profit (here £1,889 which is £22,666/12) or £2,500 per month. Here the grant would be £1,889 per month as it is lower than £2,500 per month.

If the trade only commenced in the 17/18 or 18/19 years the average profits would be divided by the number of years of trading rather than by 3 years.

To be eligible for the SEISS grant, the self-employed profits must be no more than £50,000 but more than 50% of total taxable income for either:

  • The tax year 2018/19, or

  • The average of the tax years 2016/17, 2017/18 and 2018/19.

When applying the averaging test, trade losses are taken into account and the other personal income is also averaged.

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