Waive the January 2021 tax bill for those who have been excluded from the SEISS

The Government have seemed unwilling to revisit the criteria of the SEISS. According to their own statistics 1.6 million people have received nothing since March 2020. Those people have struggled, unaided, to survive and are now being faced with a bill from the Government. Waive this bill for them.

The Government's own statistics also state that only 11% of the 1.6 million were excluded due to making over £50,000 so the vast majority of people excluded are in the basic tax rate. Waiving this tax bill will, for most, amount to less than 20% of their trading profits. Their colleagues have received 80% of trading profits. It is the least the Government can do to offer these people 1/4 of the help afforded to others.

In designing and delivering the SEISS, the Government prioritised delivering a scheme to support the self-employed, while protecting against fraud or abuse. This involved making difficult decisions to introduce eligibility criteria that were vital in ensuring the scheme worked for the vast majority of the self-employed. As the National Audit Office acknowledged, however, the Government was right to introduce the SEISS, which has been successful in helping to support millions of people.

The design of the SEISS means it is targeted at individuals with low income and those who are most reliant on their self-employment income. This provides value for money to the taxpayer whilst reaching as many people as possible.

During the design stage of the scheme, the Government engaged with a range of industry groups. These were supportive of a higher threshold that required at least 60 per cent of income to come from self-employment: significantly less generous than the 50 per cent threshold that the Government ultimately used. Waiving the tax bills of anyone ineligible for the SEISS would not provide value for money by targeting support at those who need it most.

The Government understands that many self-employed people are facing considerable pressures. To support them, this year HMRC gave individual taxpayers an extra month to file their tax returns without incurring late filing penalties. Late filing penalties were subsequently not issued for online tax returns received by 28 February.

Building on support offered by the Self-Assessment tax deferral in July, the Government provided further support to the self-employed by giving those who need it more time to pay taxes due in January, through HMRC’s enhanced Time to Pay (TTP) ‘self-service’ facility.

Taxpayers with up to £30,000 of Self-Assessment liabilities due can use the ‘self-service’ Time to Pay facility to secure a plan to pay this over an additional 12 months. This means that in some cases, Self-Assessment liabilities that were due in July 2020 will not need to paid in full until January 2022. Any Self-Assessment taxpayer who is not able to pay their tax bill on time can continue to use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan. Normally, a 5 per cent late payment penalty is also charged on any unpaid tax that is still outstanding on 3 March. But this year, because of the pandemic, HMRC are giving taxpayers more time to pay or set up a payment plan.

Throughout the crisis, the Government’s priority has been to protect lives and livelihoods, providing a wide-ranging economic response that is one of the most substantial globally and taking unprecedented steps to support families, businesses and the most vulnerable. This includes support for the self-employed through the SEISS, which received claims from 2.7 million individuals across the first three grants, totalling over £19.7 billion.

The Government announced at Budget 2021 that the SEISS will continue until September, with a fourth and a final fifth grant. The Government also announced a major improvement in access to the SEISS. As the deadline for 2019-20 tax returns has now passed, HMRC will use these tax returns for the fourth and fifth grants, provided they were submitted by 2 March. This means more than 600,000 people may now be able to claim the fourth and fifth grants, bringing the total number of people who could be eligible to 3.7 million.

The fourth SEISS grant, available to claim from late April, will be paid out in a single instalment covering 80 per cent of three months’ worth of average annual profits, and capped at £7,500. The fifth grant, covering May to September, will include a turnover test to ensure that the most generous support is targeted at those who need it the most. This will determine whether individuals can continue to receive a grant worth 80 per cent of three months’ average trading profits, capped at £7,500 or a 30 per cent grant, capped at £2,850. The final grant can be claimed from late July.

Those ineligible for the SEISS may still be eligible for other elements of the support available. The temporary £20 per week increase to the Universal Credit standard allowance has been extended for six months, and the Government has decided to extend the suspension of the Minimum Income Floor to the end of July 2021, so that where self-employed claimants' earnings have fallen significantly, their Universal Credit award will have increased to reflect their lower earnings. In addition to this, they may also be able to access other elements, including Restart Grants, the Recovery Loan scheme, business rates relief, and other business support schemes.

HM Treasury This is a revised response. The Petitions Committee requested a response which more directly addressed the request of the petition. You can find the original response towards the bottom of the petition page (https://petition.parliament.uk/petitions/565074)