Self-employment Income Support Scheme

During April you should be contacted by HMRC to let you know that you are eligible for the fourth instalment of the SEISS grant covering the period from 1 February to 30 April 2021. Eligibility criteria for this is different from the first three tranches but the amount due is similar.

To be eligible you must be self-employed or a member of a partnership and have traded in both 2019/20 and 2020/21. Your 2019/20 tax return must have been submitted by 2 March 2021. You may currently be trading but your demand has been reduced due to coronavirus or you may be temporarily closed due to coronavirus. You must declare that you intend to continue trading and your trading profits will be significantly reduced.

To be eligible for the grant your trading profits must be less than £50,000 and at least equal to your non-trading income. HMRC will look at the figures on the latest return but will also consider previous years if necessary to assess eligibility.

The grant will be calculated at 80% of 3 months' average trading profits, capped at £7,500 in total. HMRC will use up to 4 years of submitted tax returns to calculate average trading profits.

As with the previous grants you will need to make the claim yourself through the appropriate portal. Guidance is provided on the gov.uk website if you are in doubt. If you are not contacted by HMRC in the coming weeks but think you should be eligible please get in touch with our office.

Capital Allowances - "Super Deduction"

In an effort to boost corporate capital expenditure in the coming months, the Chancellor announced a new "super deduction" for certain types of asset acquisitions. Expenditure on new assets incurred between 1 April 2021 and 31 March 2023 which would usually qualify for the writing-down allowance of 18% (up to 100% if under the Annual Investment Allowance) will be eligible for a first-year allowance of 130%. Certain types of assets are excluded from the allowance, including cars, but expenditure on computers, office furniture, commercial vehicles, and machinery will qualify. Unlike the AIA there is no limit to the amount of expenditure which can be claimed. Contrary to some initial reports, the allowance appears to only be available to companies subject to corporation tax not to unincorporated businesses.

The effect of the allowance is to provide tax relief at a rate of 24.7% which perhaps provides us with a clue as to why the allowance has been introduced and why it only applies to companies. The rate of corporation tax for larger companies rises to 25% on 1 April 2023 and, without this allowance, it might have been in the interests of such organisations to delay capital expenditure until they could obtain a 25% tax deduction rather than 19% - or am I a cynic?

There are complex rules for accounting periods which straddle 1 April 2023 and special provisions for balancing charges on assets which benefit from the allowance and are then sold before 1 April 2023 or during a period which straddles that date. Careful thought and expert advice are needed.

In conjunction with the super allowance a new 50% first-year allowance has been introduced, for the same period, applying to assets which would normally be eligible for the special allowance rate of 6%. This applies to items such as long-life assets, thermal insulation, and integral fixtures. This also looks generous but it may be more attractive to use the AIA of 100% where this is available.