In this blog, we outline the key details of the Government’s “self-employed income support scheme” which was launched to help those in self-employment whose businesses have been affected by the coronavirus outbreak.
The scheme is available to self-employed individuals and members of partnerships where:
– An income tax self-assessment tax return for 2018-19 has been submitted *
– Have traded in the tax year 2019-20
– Are trading when you apply, or would be except for COVID-19
– Intend to continue to trade in the tax year 2020-21
– Have lost trading/partnership trading profits due to COVID-19
– Trading profits must either
>Be less than £50,000 in 2018-19 or;
>Be less than £50,000 on average over 2016-17, 2017-18 and 2018-19
– More than half of your total income in the above periods must come from self-employment
* any changes in amended returns submitted after 26 March 2020 will not be taken into account when considering eligibility or amount
As per the Government’s announcement on 29 May, there are now two phases to the scheme, offering eligible individuals the opportunity to receive two separate grants.
The first phase of the scheme covers the three months to May 2020 and has been open for application since 13 May (see our recent blog which covers how to claim in more detail). This grant is taxable and paid in a single lump sum instalment covering all three months.
The taxable grant to be paid will be the lower of:
– 80% of monthly average profits based on trading profits for the last 3 years*
– £2,500 per month
* To work out the average, HMRC will add together the total trading profits and losses for the 3 tax years then divide by 3 and use this to calculate a monthly amount. Where an individual has not been self-employed throughout the 3 year period the average will be based on periods of “continuous” employment meaning 2016/17 will be ignored if no self-employment in 2017/18 and grants based on 2018/19 only.
Eligible businesses should be reminded that claims for the first grant must be made no later than 13 July 2020.
As part of the Government’s ‘second phase’, self-employed individuals will also be able to claim a second and final grant from 17 August 2020 when the online service becomes available.
Like the first grant, this will be taxable but worth 70% of average monthly trading profits, paid out in a single instalment covering a further 3 months’ worth of profits, and capped at £6,570 in total.
The eligibility for this second grant will be the same as the first (outlined above). If you make a claim for the second grant you will have to confirm your business has been adversely affected on or after 14 July 2020. Self-employed individuals should be aware that you do not need to have claimed for the first grant to claim for the second.
The Government has published a helpful factsheet covering the amendments to the scheme and the addition of the second grant, please click here to view this.
It has been confirmed that the scheme is being extended until 19 October 2020.
KEY DETAILS OF THE SCHEME
– Unlike the employee furlough scheme, the self-employed can continue to work as they receive support
– Company owners who pay themselves a dividend are not covered – Self-employed individuals must have submitted their 18/19 return by 23 April 2020 to be eligible for this scheme
– Individuals who have recently become self-employed will not be eligible to access this scheme
– HMRC have identified eligible taxpayers and contacted them directly with guidance on how to apply online
– If you claim tax credits, you’ll need to include the grant in your claim as income
I AM SELF-EMPLOYED WITH TRADING PROFITS EXCEEDING £50,000, WHAT DOES THIS MEAN FOR ME?
If your trading profits exceed £50,000 on average over the 16/17, 17/18 or 18/19 tax years, you will not be eligible for this scheme.
I’VE RECENTLY BECOME SELF EMPLOYED DURING THE 19/20 TAX YEAR, AM I ELIGIBLE?
No, only those who are already in self-employment and meet the above conditions in the eligibility section can apply.
I’M SELF-EMPLOYED AND NOT ELIGIBLE FOR THE SCHEME, WHAT ARE MY OPTIONS?
Options include applying for alternate support such as universal credit or a coronavirus business interruption loan.
I ONLY HAVE 1 YEARS’ WORTH OF RECORDS, AM I STILL ELIGIBLE?
Yes, the Chancellor stated that HMRC will use their database and look at whatever records they hold to determine your grant.
MY BUSINESS HAS STOPPED TRADING AND I HAVE NO INCOME, WHAT CAN I CLAIM IN THE MEANTIME?
There are several credits and benefits available such as universal credit and employment and support allowance (ESA).
MY TRADING PROFITS DURING 17/18 WERE LOW DUE TO CAPITAL ALLOWANCES, WHAT DOES THIS MEAN FOR ME?
Unfortunately, the Government have not issued any further guidance on what they intend to consider as “trading profits”. This could mean “tax adjusted trading profit before capital allowances” however further details clarifying this will likely be given once HMRC write to you.
I CLAIM FARMERS’ AVERAGING RELIEF, HOW WILL MY PROFITS BE CALCULATED?
The guidance states that HMRC will use the amounts before averaging to work out both eligibility and amounts – please refer to HMRC’s guidance for further details.
FURTHER UPDATE ON ELIGIBILITY AND THE APPLICATION PORTAL
From 4 May 2020, HMRC has confirmed it would be contacting self-employed individuals it believes are entitled to claim for a grant under the scheme. HMRC has also provided an eligibility checker which is available to anyone, including agents and those who have not been contacted by HMRC. You can log on and check your eligibility now at this link.
The SEISS application portal is now open for the first grant meaning that individuals can log in to their government gateway account to complete the application process. Note that HMRC calculates the grant from its records and at no stage do you have to provide any information about your income.
Please note that to guard against fraud, the emails and SMS messages from HMRC do not include active links. If you receive an email or SMS purporting to come from HMRC which includes an active link, that email or SMS is a scam.
If you do not already have a government gateway account, you will need to create one at the first stage of the application process. There is an alternative telephone-based service for those not able to apply online 0800 024 1222.
HMRC will check the claim and aims to make payments within six working days. Agents will not be able to claim on behalf of clients as giving agents access would have caused delays to the service, however they can request a review for those that the checker says are not eligible.
For further advice on any of the above matters, please contact your usual PM+M representative or email Wendy Anderson using the button below.
This information is correct as of 7 July 2020. This blog is for general guidance only. Recipients should not act upon any of the information provided without seeking specific professional advice tailored to your circumstances, requirements or needs. Please contact PM+M before making any decisions based on any matters relating to this blog.