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COVID-19 Information Hub

Coronavirus Self-Employed Income Support Scheme

On 26 March 2020, the Chancellor announced a further package of support for individuals affected by the Coronavirus (Covid-19) whose main source of income is through self-employment or as a partner in a partnership. This is in addition to other measures put in place to help individuals struggling to cope financially. This scheme is only open to people classed as ‘self-employed’ - it will not apply to individuals trading through a limited company (please see our commentary below). Other exclusions also apply.

Applications for this initial grant remain open until 13 July 2020, but a second and final grant, announced by the Chancellor on 29 May 2020, will then open in August 2020.

Please read on for a summary of advice issued by the government and our own supplementary commentary, analysis and guidance.

Updated 01/06/20

Government guidance:

HMRC are now contacting individuals that they believe may be eligible to apply for the scheme. The claims service opened on 13 May, with the first grant window due to close on 13 July 2020. Payments are expected to be in early June, and to be backdated to the start of March with a lump sum payment. The claims service will be opened on 13 May. Payments are expected to be made to taxpayer bank accounts by 25 May 2020, or within 6 days of completing the claim if later, and will be backdated to the start of March with a lump sum payment. The scheme will pay the lower of 80% of a person’s average monthly profit, or £2,500 per month and will run for three months initially, with the potential to be extended for longer. This means that the maximum grant that may be paid over the three month period to May 2020 is £7,500.

The second grant will also cover three months (so June, July & August) but will be for a reduced amount of 70% of average monthly trading profits, capped to a maximum of £6,570 in a single instalment payment. The eligibility criteria remain the same as for the first grant, so will include anyone whose business was not initially adversely affected by the Coronavirus (so was unable to claim the first time around), but who has subsequently seen a downturn in their business as a result of the virus.

To access the claim, you will need to have to hand your Unique Tax Reference (UTR) number and National Insurance number, Government Gateway user ID and password, and your bank details.

The UTR number should be shown on your last tax return or on the latest ‘Notice to File a Tax Return’ sent to you by HMRC on or after 6 April 2020. You will also need to ensure that your personal details are complete and correct on your Government Gateway account with HMRC.

If you have not yet registered for a Government Gateway account, you should do so.

HMRC have provided some details of the things you need to put in place in order to be ready to make the application. Please click here for more information.

Additionally, HMRC has created an online checking tool to help you to determine whether or not you will qualify for the grant. Click here 

You should be aware that you will be required to make the application – it is not something that we, as an agent can undertake for you. This is because HMRC has had to rush through the set-up of the scheme and to allow third-party agents access would have meant a delay to the release of the application portal.

Once the application portal is open, taxpayers will be invited to apply from a specific date and time. This is to ensure that the website does not get overwhelmed by applications and crash.

If during the application process, your claim is rejected because HMRC say you do not meet the eligibility criteria, but you believe that you are eligible, you can ask HMRC to review your application. There will be a link within the application pages to request this review.

Eligibility

You will be eligible where all of the following apply:

  • You have been trading in 2019-20, and are trading when you apply, or would be were it not for Covid-19.
  • You intend to continue to trade in the 2020-21 tax year.
  • You have lost trading/partnership trading profits due to Covid-19.
  • You have filed a self-assessment tax return for the 2018-19 tax year in which self-employment profits are included. The deadline for meeting this requirement was 23 April 2020. If your 2018-19 tax return is still unfiled, you will not qualify for the grant.
  • Your trading profits were below £50,000 in 2018-19, or your average trading profits over 2016-17, 2017-18 & 2018-19 were below £50,000. (or over 2017-18 & 2018-19 if you were not trading in 2016-17).
  • More than half of your total taxable income on average came from your self-employment business over these tax years.

How to access the scheme 

You will need to:

  • Wait for HMRC to contact you. They will identify eligible taxpayers and invite you to apply via the Gov.uk website.

Who is excluded?

  • Anyone who’s self-employed profits exceeded £50,000 on average over 2016-17, 2017-18 & 2018-19, or if trading only in 2018-19, where profits exceeded £50,000 in that tax year.
  • Anyone who’s self-employed profits made up less than 50% of their total taxable income from all sources during these tax years.
  • The newly self-employed who commenced trading after 6 April 2019. That said, mixed messages on this have been coming out on various interviews so the government may reconsider this point in due course.
  • The newly self-employed who commenced trading after 6 April 2019.
  • Owner-directors of limited companies.

More guidance can be found here.

Details of how HMRC calculate the grant are available here.

Kirk Rice commentary:

This is welcome news, indeed! The self-employed are now being recognised for their contribution to the economy of this country, and that they will not have large cash reserves to see them through what will be a very lean and painful period indeed.

What was slightly concerning was the Chancellor’s allusion to the need to look more closely in the future at disparities between the way employed and self-employed individuals are taxed. Still, he was keen to state that this would be for the future and would not form policy at present.

Newly self-employed individuals who started trading after 6 April 2019 will also not benefit, for now. If the Coronavirus continues to impact upon the ability to do business well into 2020-21, it will be interesting to see if the government will allow the newly self-employed to participate once their 2019-20 self-assessment tax returns have been filed with HMRC. Time will tell, but that may well provide an incentive to get your tax return filed early.

HMRC in their early guidance, has confirmed that any grant paid out under the Self-Employed Income Support Scheme will affect any claims to tax credits and any grant awarded under the scheme will also be treated as taxable income in the hands of the recipient. The grant will be subject to both income tax and National Insurance Contributions.

One of the qualifying criteria is that you have lost trading/partnership profits due to Covid-19. We are not sure yet how this aspect will be measured, but advise that it would be prudent to keep a record of lost clients, or client jobs/contracts that have been cancelled or postponed as a direct result of the virus. Where you have had to reduce your fees, then keep a record of those as well.

Finally, it should be noted that HMRC will make initial contact with eligible taxpayers and invite them to apply. They have asked that people do not contact them as it will slow the whole process down and delay the urgent work being undertaken to put this scheme in place. One concern raised is the ability for scammers to make the most of the opportunity to con people into providing their bank details in the expectation of receiving a payment. Until HMRC decide how this scheme will operate, you should not reply to any requests for personal information purportedly originating from HMRC. Please check with us if you are in any doubt.

Trading via a Limited Company

The announcement does dash the hopes of owner directors of limited companies as they are not included in the measures. This all comes down to the distinction between someone who operates their business in their own name under a self-employed trade, and someone who runs a company through which they are either paid a salary or extract profits via dividends (or both). It is only the self-employed traders who will benefit.

Private company owners who operate on their own, perhaps via a Personal Service Company, and who have no employees, can now be included in the Job Retention Scheme (see here) under the furloughing provisions provided they have been paying themselves a salary via a PAYE scheme. Any such furloughed directors may only complete their statutory duties, and must not undertake any other work during the period of furlough. Where a company owner has only been paying themselves via dividends, they will not be included in the scheme.

There is also help via the Business Interruption Loan Scheme (see here), the Business Bounce Back Loan Scheme (see here) and the VAT Deferral Scheme (see here) which may be of help, and access to state benefits such as Universal Credit (see here).

We will be updating this page for the answers as and when they become available, so please, do check back regularly for further information.

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