What is ‘reduced demand’ for SEISS #4 grant

We’ve explained what is going to happen during March and April 2021 if you have recently started in business and had a self employed tax return submitted for a new business you started since the previous qualifying period for the Self Employed Income Support Scheme (SEISS), which was an April 2019 cut off. So if your business submitted a self employed return for the period April 2019 to April 2020, and your business has been impacted by coronavirus since then – ie right now specifically – April – June 2021, here are the criteria you need to consider before you apply for the fourth (which could be your first) SEISS grant.

If you’ve not seen that blog post, please read that first HERE

 

Impacted by reduced demand

This applies to your business if it has been impacted by reduced activity, capacity or demand due to coronavirus.

For example, you:

• have fewer customers or clients than you’d normally expect, resulting in reduced activity due to social distancing or government restrictions
• have one or more contracts that have been cancelled and not replaced
• carried out less work due to supply chain disruptions

You must not claim if the only impact on your business is increased costs. For example, if you have had to purchase face masks and cleaning supplies. This would not be considered as reduced activity, capacity or demand.

 

Yes. You must keep any evidence that your business has had reduced activity, capacity or demand due to coronavirus at the time you made your claim, such as:

• Business accounts showing reduction in activity compared to previous years.
• Records of reduced or cancelled contracts or appointments.
• Fewer invoices.
• A record of dates where you had reduced demand or capacity due to Government restrictions.

You must keep evidence if your business has been unable to trade due to coronavirus, such as:

• A record of dates where you had to close due to Government restrictions.
• NHS Test and Trace communications – if you’ve been instructed to self-isolate in line with NHS guidelines and are unable to work from home (if you’ve been abroad and have to self-isolate, this does not count).
• A letter or email from the NHS asking you to shield.
• Test results if you’ve been diagnosed with coronavirus.
• Letters or emails from your child’s school.

 

 

Examples of reduced activity, capacity or demand or unable to trade

These are examples of people who have been impacted by coronavirus between 1 November 2020 and 29 January 2021.

Reduced activity, capacity or demand and reasonable belief

A cafe owner has fewer customers due to government restrictions on households mixing, which reduces her takings. She reasonably believes this will significantly reduce her trading profits. She is eligible to claim

 

A plasterer cannot get materials due to supply chain issues due to coronavirus. This has reduced the amount of work he can complete and be paid for. He reasonably believes this will significantly reduce his trading profits. He is eligible to claim the grant

 

A part-time personal trainer works in a gym that has closed due to government restrictions. This reduces her business activity on the days that she works. She reasonably believes this will have a significant reduction on her trading profits. She is eligible for grant.

Reduced activity, capacity or demand and no reasonable belief

A cafe owner has fewer customers due to government restrictions on households mixing, which initially reduces her takings. She increases her prices and believes her trading profits will not reduce significantly, so she is not eligible to claim the grant.

A plasterer cannot get materials due to supply chain issues due to coronavirus. This has reduced the amount of work he can complete and be paid for, but he manages to quickly find a new supplier. He does not believe that the reduced demand will cause a significant reduction in his trading profits. He is not eligible to claim the grant.

Unable to trade and reasonable belief

A hairdresser has had to shut his shop due to government restrictions. He will not have any income due to the closure and reasonably believes the reduction in his trading profits will be significant. He is eligible to claim the third grant.

 

A builder has received a letter from the NHS identifying him as clinically extremely vulnerable and it asks him to stay at home. As he is unable to work from home he has a reasonable belief that there will be a significant reduction in his trading profits. He is eligible to claim the third grant.

Unable to trade and no reasonable belief

A hairdresser was unable to work for 2 days as his hair salon closed to be deep-cleaned due to a positive coronavirus case. He does not believe this will significantly reduce his trading profits. He is not eligible to claim the grant.

 

A builder has developed coronavirus symptoms and self isolates for 5 days before receiving a negative test result. During those 5 days he was unable to work from home but was able to rearrange his contracts. He does not believe there will be a significant reduction in his trading profits. He is not eligible to claim the grant.

Other examples

An electrician is still trading but has had increased costs due to buying masks, cleaning supplies and screens. She is not eligible for the grant because increased costs were the only impact on her business and she has not lost customers.

 

A dentist returns from a holiday abroad and has to self-isolate for 14 days due to quarantine rules. As this is the only impact on her business, she is not eligible to claim the grant. This is because reduced demand due to self-isolation after foreign travel is not included in the eligibility criteria.

 

An accountant reduces his business activity because he wants to partially retire. He reasonably believes this will have a significant reduction on his trading profits. He is not eligible for grant because the reduced business activity was not caused by coronavirus.

 

The client of a dog walker cancels a contract due to coronavirus. The dog walker could but chooses not to look for additional work to replace the contract. This means her business activity and her trading profits are reduced because she chooses not to replace the contract and not because of coronavirus. She is not eligible.

 

An IT consultant has other income from renting property. He has made losses on renting due to renovation costs. This is not related to his trading profits from his IT consultancy service. As his consultancy business has not been affected due to coronavirus, he is not eligible.

Here’s the official line from HMRC for reference

If you need to discuss this with us, please email David@theaccountancypractice.com or phone us on 01763 257882