The Conditions for the Third Self-Employed Grant have toughened. The virtual claim doors open from 30-Nov-20.

The impact of COVID 19 on your business and your trading profits is key.

Unfortunately, the guidance is not expressed in terms of awful, crap, rubbish or fine. In this podcast, I share with you what HMRC mean by reduced demand & trading conditions. Crap, average or fine feels like better words.

There's a new language that's been introduced. Consequently, we look at coronavirus affecting demand causing a significant drop in your trading profits.

Dates

Firstly, the grant looks at your applies self-employed business between the 1st of November and the 29th of January 2021.

Secondly, the portal opens for making claims. On the 30th of November 2020. And you've got until the 29th of January 2021. When should you claim? As soon as, or is best to wait?

Listen to find out more

Heads up, doing a cash flow is important, link to previous podcasts and resources to help

Eligibility conditions

Some haven't changed for the Third Self Employed Grant. For example

• Being self-employed in 2018-19
• Traded in the tax years 2018-19 and 2019-20
• Profit levels
• Basically, meeting the conditions for the first two grants

Listen to find out more

Terms and language

Some key terms and key adjectives HMRC have introduced honest belief, significant reduction, in your trading profits, due to coronavirus. And by demand, we can take that to be the level of sales - the number of customers that you have. So, coronavirus has got to be linked to less trade coming through the door, whether that's virtually or otherwise.

• What is meant by self-employed
• HMRC expectation for your behaviour and attitudes when making your claims.
• Intend to continue to trade, and
• 'Reasonably believe'
• Significant reduction in your trading profits due to Coronavirus.
• Honest assessment
• Self-employed – it’s not what we mean in normal conversation

Examples

I'll share some practical examples and dig deeper to explain and see what is meant by all this official speak. Lots shared in this podcast episode of the exiting and changed eligibility conditions. For instance self-employed, demand, honest belief, significant reduction, trading profits. Also, I share tips on evidence to support your claim – just in case HMRC ever come knocking!

What does this mean, listen to find out more?

What Next

In short, the third self-employed grant has tougher conditions. Above all don’t be put by applying because you think you may not be eligible. If you’re eligible, make the claim, that will be a vital bit of cash.  Make yourself comfortable. Sit back and listen

Even better subscribe so you do not miss an episode.

 In This Episode

• Understanding the key conditions when making a claim for the Self Employed Grant
• Appreciating the language and keywords used in the Self Employed Grant conditions
• Hearing examples and explanations
• Developing your own Numbers confidence and decisions
• Take more control of your numbers to help make you money, survive and thrive

Links

https://podcasts.apple.com/podcast/proactiveresolutionss-podcast/id1500471288

https://play.google.com/music/m/I3pvpztpjvjw6yrw2kctmtyckam?t=I_Hate_Numbers

https://open.spotify.com/show/5lKjqgbYaxnIAoTeK0zins

https://www.stitcher.com/podcast/proactiveresolutionss-podcast

https://tunein.com/podcasts/Business–Economics-Podcasts/I-Hate-Numbers-p1298505/

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Business is not easy, and with Coronavirus that's affected the UK and the rest of the world, business has been even more challenging. Since the earlier beginning of this year, the government in the UK and governments around the world has stepped in to provide financial support to businesses of various shapes.

In this weekly episode of I Hate Numbers, I'm going to be focusing on the self-employed grant to which the virtual doors opened on the 30th of November, 2020, and to focus on the revised and new conditions that have been placed upon eligibility for the grant. Hi, folks. My name is Mahmood. Welcome to this episode of I Hate Numbers, the show that has a mission to strengthen and improve your money mindset, help you make more profits, navigate the world on numbers, save more tax, and enjoy the business that you've set up.

We'll come back to focus in this broadcast on new conditions that have been placed on the Coronavirus, or more specifically, the self-employed income-support grant, and there's a new lexicon, a new language that's been introduced in terms of the impact of Coronavirus on your business. In this episode of I Hate Numbers,

I'm going to be looking at dates. They're really quite important. I'm going to be looking at eligibility conditions. I'm going to remind us about what we need to do to actually make that claim, and I'll share the numbers, the value of the grant, plus also giving some examples of what guidance by HMRC and Treasury have published in respect of the third grant.

Now, a reminder of the eligibility conditions that haven't changed for grant number three, and it's grant number three, which the virtual doors open on the 30th of November, 2020, and self-employed individuals have got until the 29th of January, 2021 to make a claim. Key thing here is we are looking at the impact of Coronavirus on your business.

more specifically, your self-employed business between the 1st of November, 2020 and the 29th of January, 2021. Now, immediately, what this brings into fore is that depending on when you make that claim, you will have to sit down and do some forecasting. You'll need to have an understanding about how you think Coronavirus will impact your business

(has impacted your business). That impact will be measured in money terms, and it'll be more specifically measured in the impact of your trading profits. There are some extra words introduced by HMRC and the government that underpin how they expect self-employed individuals to behave and the attitudes they bring to when they're actually making those claims.

Now, eligibility conditions I referred to earlier on. First of all, this is applicable, this grant, and the maximum payout is seven and a half thousand. It's applicable to self-employed individuals. Now, lots of businesses that are limited companies will describe themselves, quite rightly so, as self-employed, but specifically, we're referring to those businesses

that complete the section on the personal tax return, the self-employed pages. We may call them sole traders. We may also refer to them as freelancers, but fundamentally we're talking about individuals, not limited companies. You will not be eligible to claim this particular grant. If you haven't claimed the earlier two grants

for which the window is now closed to make those claims, you are still eligible to claim this third grant. And the key headlines are, which are what I call normal conditions are, you have got to have been registered for self-employment in the tax year 2018/19. You've got to have traded in the tax year 2019/20.

There's some numerical conditions. So, you've got to have trading profits below 50,000 pounds, and in total terms, your self-employed income must be at least 50% of your total income. Now, if you're sitting at home listening to this thinking, that's bizarre, well, an individual could have income from a variety of sources, they could have that income from renting out property, maybe a part-time job as well.

And the total basket of that, the self-employed, has to be at least 50% of that overall total. Additional conditions have been placed on this grant here that you must be currently trading. Doesn't talk in terms of the extent of that trading activity, but Coronavirus has impacted on the demand in your business and by demand

we can take that to be the level of sales that you're making (the number of customers that you have). So, Coronavirus has got to be linked to less trade coming through the door, whether that's virtually or otherwise. You could also be in a situation where you have been trading in the 2021 tax year, but Coronavirus has meant that you are unable for the time being to continue to trade.

Later on in this podcast episode, I'll give you some practical examples, what we mean by impacted, by reduced demand, and effectively unable to do so. Let's explore those two to begin with. Now, to help us here, I'm going to go through some examples that HMRC themselves have published, and I'm going to make, pass some commentary on those same examples.

So, if your business is one of a hairdresser, and you've got a presence, you've got a shop, you rent a chair, uh, or issue your own salon, your own shop, and government restrictions says that you have to lock that business down, that's obviously going to affect the demand in your business. And if you believe that the government lockdown, the government restrictions in terms of movements of individuals

means that your profits will be significantly reduced, then you are eligible to claim the third grant. If you work in the construction industry, if you're a builder, a plasterer, and you've been asked to stay at home because NHS has identified you as vulnerable, you are unable to work from home, understandably, and you believe reasonably that there's going to be a significant reduction in your profit, then you are eligible to claim that third grant.

What's interesting to know in the third grant is that HMRC are now reinforcing that the actions of the individual business owner have an impact on the eligibility of that grant. So, let's assume that the same builder who self-isolates for a number of days, gets a negative days, unable to work, but in that time they've been at home, they've spoken to their clients, they've spoken to the people they work for, and they managed to rearrange those contracts.

Now, those contracts that are being rearranged, if the belief of the builder is that that's not going to affect their trading profits significantly, there's no reduction because they've rearranged their contracts, then they will not be eligible to claim that third grant. Key phraseology to take on board here is: Coronavirus has affected the demand in your business, which has led to a significant reduction in trading profits.

We can look at another example. Uh, perhaps you might be an electrician. You've got additional costs that you've had to invest in for like PPE, cleaning supplies, face masks. You still have the similar level of demand that's not been affected, but you've just got to spend more money. Unfortunately, you will not be eligible to claim the grant because all that's happened is Coronavirus has impacted the cost base of your business, but it's not affected the demand in your business, so you will not be eligible.

Somebody who decides they are running down their time, they're looking for an exit in their business, so they're working less, their profits are reduced, not because of Coronavirus, but because of their exit plans in their business, then they will not be able to claim the grant. Somebody who's had a contract canceled, they use the example of a dog walker.

The contract is canceled and you make a conscious decision not to replace that work in your business, then you will not be eligible for the grant because the reduction in your trading profits is not Coronavirus. It's because you choose not to replace that contract or find work for it. Now, if you contrast that with a situation where you try actively to replace the lost business, but you are unable to do so, then you will be eligible to claim the grant.

Before we explore some more examples, I think it's worth pointing out some key terms, some key adjectives HMRC have introduced into the legislation and what they say is, you must have an honest belief that there is going to be a significant reduction in your trading profits due to Coronavirus. Now, what this means is if you sit down

and you look at where you are at the moment, you look forward, and because of Coronavirus, you know that you are not going to replace that trade, you know that you've lost contracts, you know you've had a restricted ability to apply your trade, and that's what you honestly believe, then you will be eligible to make that claim and you'll be protected by any subsequent clawback by HMRC.

What I would recommend, a tip that I would share is that when you come to this conclusion, like most things in business, look for evidence. Now, that evidence could be emails that you've received from customers. It could be that if you are a retailer, you may not necessarily identify individual customers, but you've got a tracking of what you did last year.

Your record has shown that you've got a sales decline there. Again, that's evidence. Make a note of it, keep it logged, and that will support your claim. Let's throw in a few more examples of this idea of reduced demand and reasonable belief. So, you might be in the hospitality business, a café owner, a restaurant owner,

and because of the restrictions on household mixing, the number of people that you can have in the restaurant, you've got reduced capacity, fewer customers, and what that means is, typically, there'll be a reduction of your trading profits. Now, if you have reason to believe this will significantly reduce them, then you are eligible to claim. In most cases, for a site-based business like a cafe or a restaurant, you'll have a level of costs which are fixed and static, like the rent that you pay, the insurance.

So, if you do have a decline in trade, that will feed through to a reduction of trading profits. If you work in the building industry and you find it difficult or impossible to get materials because of supply-chain issues, and that's because of Coronavirus, then that means you can complete less work.

That means your profits will be significantly reduced. You will be eligible to make that claim. Now, we also know that gyms have also been in another area of business that have been closed. If you happen to be a personal trainer, working in that environment, and the closure of the gym means that you've got less work, less business activity, then obviously one can reasonably assume this is going to have a significant reduction on your trading profits.

You'll be eligible for the third grant. I want to contrast that with a reduced demand, but there is no reasonable belief that your profits will be significantly reduced. In that same scenario, the café owner, if that's your business, you got less customers coming in because of government restrictions.

Takings will be down and you decide to take some positive action. You decide to increase your prices. Well, even though you've got reduced demand, you've compensated for that drop in sales by increasing the prices. If that means that your trading profits stay at a similar level, they're not going to be reduced, and they may even benefit,

you will not be eligible to claim the third grant. Reminding ourselves here, it’s the impact of Coronavirus on the demand, capacity, or activity of your business, which has led to a significant reduction in your trading profits. So, that's not just less sales, less customers, it's the follow on through to the impact on your trading profits. In the situation that we mentioned earlier on

about your business being in the construction industry. Supply-chain issues because of Coronavirus means you cannot lay your hands on materials, but you find a new supplier, well, that will mean that your trading profits will not be affected. Costs may be higher, but that's not the issue. Now, reduced demand. Typically this will be social things like social distancing, regulations, contracts being canceled, less work,

then that's fine. You are eligible to make that claim. Now, as a roundup, and let's throw some dates into here. We are looking at the situation for your self-employed business between the 1st of November and the 29th of January, 2021. When we get to January 21, the government will announce the eligibility criteria for grant number four, so there's a fourth grant in the offer.

We don't know the details of that as of yet. Number two, the portal opens for making claims on the 30th of November, 2020, and you've got until the 29th of January, 2021. So, subject to your cash flow, you may decide to claim straight away, or you may decide to claim much later when you've got a better idea when Christmas is out the way about where you are in your business.

If you want to refer to previous podcasts here where we talk about cash flows, then there's some good stuff in there, guys, to help you put together a cash flow. And a cash flow is critical whatever stage your business is actually in. Number two, remember, this is all about honest beliefs, honest assessments. You'll have to sit down and think where you're likely to be by the end of the tax year,

and the tax year finishes on the 5th of April. And if you honestly believe that Coronavirus has impacted your demand and that follows through to a significant reduction in your trading profits, then you are fine to make that claim. In terms of payouts, it will look at the average monthly profits you've made prior to 2019/20.

You get 80% of those average monthly trading profits, and it covers a three month period as per grant number one and grant number two. So, if your trading profits average out at 2,000 pounds a month, 80% of that is 1,600 pounds, and your grant will be three-months worth - 4,800 pounds. It's still taxable, it's still subject to NIC, but it's a financial grant, which means as long as you meet the eligibility conditions,

you don't have to pay it back to the government. Okay, folks, I hope you found that useful. Check out the show notes at the end for links to some additional support material. Until then, if you are self-employed, if you are suffering from Covid, stay sanguine, stay positive, and I'll see you guys next week.

We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.