SEISS Update and Eat Out to Help Out VAT Implications

Self-Employment Income Support Scheme (SEISS) Version 2

The second grant under SEISS opened for eligible applicants on 17 August 2020 and will close on 19 October 2020. The second grant applies for taxpayers who were adversely affected by coronavirus after 13 July 2020. It is possible to apply for the second grant without having qualified for or applied for the first grant.

The eligibility criteria remains the same as for the first grant, however the value of the grant is reduced. The first grant was based on 80% of 3 months trading profits up to a maximum of £7,500. The second grant is based on 70% of 3 months trading profits up to a maximum of £6,570.

The application portal reopened for applications for the second grant on 17 August, on a staged basis. As with the first grant, you will need your Government Gateway ID to apply. The claim portal can be accessed via the following link: https://bit.ly/2CCHyej

One of the criteria is that your business has been adversely affected by coronavirus. HMRC have now provided some examples of how businesses could be adversely affected by coronavirus. It is essential that taxpayers keep evidence of the impact on their trade, such as management accounts showing a reduction in turnover or dates the business had to close due to restrictions.

You can expect HMRC to write to those eligible for the second grant.

Overclaimed SEISS Grants

If a taxpayer has claimed a SEISS grant in error, HMRC must be notified by no later of 90 days after receiving the grantor 20 October 2020. Failure to do so may result in penalties. A common example of this is an unincorporated business that incorporated during 2019/20. HMRC have set up the below portal for disclosing overclaimed SEISS grants: https://bit.ly/3iQ9uKZ

Eat Out to Help Out Scheme – VAT Implications

The “Eat Out to Help Out” Scheme has now completed its second week of operation. To recap, for the month of August only:

• The Government are offering individuals 50% off their food and non-alcoholic drinks bill up to a maximum of £10 per person in restaurants, pubs and cafes selling food to eat on the premises.

• The cap will apply to children as well.

• The offer will run every Monday, Tuesday and Wednesday and can be used an unlimited number of times.

• Participating businesses will need to register with HMRC to claim the money back and can expect the refunds to be paid within 5 working days.

The discount should be applied on the gross value of the meal, so inclusive of VAT. For example, if a diner spends £18 on a meal and non-alcoholic drinks, a discount of £9 will be applied. Of the remaining £9, VAT will be due at the reduced rate of 5% (applying a VAT fraction of 5/105).

Where alcohol is included in the total bill for the meal, the Scheme will not apply to this element and 20% VAT will apply to the alcoholic drink in full.

Some establishments are offering their own discounts as an extension to the Eat Out to Help Out Scheme. In this scenario, the own establishment’s discount should be applied first. The balance will then be subject to the same VAT treatment as the examples above.

Any service charge is not included within the Eat Out to Help Out Scheme. If the service charge is optional, it is outside the scope of VAT.

Detailed HMRC guidance can be found here: https://bit.ly/325kZrl

To assist food and drink businesses in understanding the recent VAT changes, we have a recorded webinar available below:

• Hospitality and Tourism Industry – Temporary VAT Reduction

In addition, we have recorded practical guidance on applying the rate changes to your software:

• Xero – Daily Takings

• QuickBooks Online – Hospitality Reduced VAT

If you would like to stay up to date on the latest information, please signup to our e-newsletter here.