New limited company owners warned over eligibility for SEISS grant

Owners of newly formed limited companies are being warned that it is unlikely they are eligible for the Self Employed Income Support Scheme (SEISS) grant, even if HMRC tries to contact them.

HMRC has been contacting people to invite them to check their eligibility and claim for the SEISS grant, although even if the eligibility checker says new limited company owners may qualify, the Low Incomes Tax Reform Group (LITRG) has warned they may still not qualify.

To qualify for the SEISS, individuals must be a self-employed individual or a member of a partnership. HMRC’s eligibility checker confirms that people may be eligible based on the information HMRC holds from tax returns for 2018/19 or earlier – but it does not check the other qualifying conditions. 

The LITRG stated that business owners who were self-employed but have recently turned into a limited company are not still self-employed and that as a result, they are unlikely to meet the additional conditions, even if they think of themselves as continuing to trade.

The tax campaign group has been contacted by people confused about the distinction, leading to the LITRG calling on HMRC to clarify what ‘self-employed’ means in their SEISS guidance. The group suggested that limited company owners, who are usually employees of their own limited companies, look to the Coronavirus Job Retention Scheme, instead, to the extent that they pay themselves a salary and meet the conditions of that scheme.

Head of LITRG, Victoria Todd, said: “We welcome that the Government has worked hard and fast to create a SEISS that should represent a lifeline for the 3.5 million self-employed people who are expected to qualify and that HMRC have delivered the scheme and payments faster than initially expected.

“We know that there is a lot of confusion about the set-up of limited companies and what this means for the Covid-19 support schemes. We also know that many limited company owners are only entitled to a small amount from the Coronavirus Job Retention Scheme because of the way they structure their pay. Some may be entitled to nothing if they are paid a salary annually at the end of March or have not set up a PAYE scheme correctly to process their salary through.

“People’s hopes may be pinned on the SEISS scheme but it is extremely important for limited company owners to understand that they are unlikely to meet eligibility because although they may consider themselves to be trading, they are not doing so on a self-employed basis.

“We understand that this is a difficult message, but we need to warn people, because claiming incorrectly exposes such people to possible penalties, in addition to having to repay the grant, if claims are audited later.”

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