Covid-19 : Business Support 27.03.20 – Update 11
Further to the government’s updates on the Self-employment Income Support Scheme (“SEISS”) and the Coronavirus Job Retention Scheme (“CJRS”) we have updated our guidance as follows:
Self-employment Income Support Scheme
The scheme will allow self-employed and members of a partnership claim a taxable grant worth 80% of their trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed. Some of the key features released to date include:
- How much will you get: You’ll get a taxable grant which will be 80% of the average profits from the tax years (where applicable) for the 2016/17, 2017/18 and 2018/19 tax years.
- How to apply: HMRC will contact you if you are eligible for the scheme and invite you to apply online. Individuals do not need to contact HMRC now and doing so will only delay the urgent work being undertaken to introduce the scheme.
- After you’ve applied: Once your claim has been accepted HMRC will pay the funds in one instalment to your bank accounts. If you claim tax credits you’ll need to include the grant in your claim as income.
- When will it be available: the first payments of the grant are anticipated in June
Individuals are eligible for the scheme they are a self-employed individual or a member of a partnership and:
- have submitted your Income Tax Self-Assessment tax return for the tax year 2018-19
- traded in the tax year 2019-20
- are trading when they 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
Also individuals self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment. This is determined by at least one of the following conditions being true:
- having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
- having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period.
NOTE: If you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, or any other earlier year, you must do this by 23 April 2020 in order to be eligible for the Self-employment Income Support Scheme.
Support measures: those that missed out
The announcements over the last week have been a huge relief to many faced with unforeseen cash flow issues due to the Coronavirus crisis. However there are those who will miss out as they are not eligible for support measures from either the SEISS or CJRS including:
- Employed and Self employed
Those who are employed but also run their own business for extra income will not receive any support from the SEISS if their self-employment income is less than their other job. As a result monthly earnings may be slashed to less than 50% of normal income.
- Directors on a salary and dividend model
Individuals who pay themselves salary and dividends through their own company may receive minimal support. As noted below, a proportion of these individuals salaries may be covered under the CJRS if they are operating PAYE schemes. However often the salary levels involved are minimal as the majority of their income is via dividends, which there is no support for. Unfortunately Treasury officials note that it is impossible to know whether the dividends came from the fruits of their work or from passive investments.
- Short-term freelance contractors
Individuals who work as short-term freelance contracts which were paid through a PAYE scheme, but now have no future work. They are, in effect, unemployed and will need to claim benefit.
- Self-employed individuals who earn more than £50,000 a year
Self-employed individuals who earn more than £50,000 a year over the last three years will not be eligible to claim from the SEISS, and therefore receive no salary support over the period.
- Self-employed individuals who began trading on or after 5th April 2019
Self-employed individuals will not be eligible for the SIESS unless they after submitted a tax return for the 2018/19 tax return, which seems to leave a blackhole for anyone who became self-employed within the last year.
Other points of note, for the future
A point to note from the Chancellors speech yesterday evening when he announced the SIESS, is his comments about the discrepancy between self-employed and employed taxation systems…indicating that there may be a levelling of the rates applicable to self-employment income in the future.
“I must be honest and point out that in devising this scheme – in response to many calls for support – it is now much harder to justify the inconsistent contributions between people of different employment statuses. If we all want to benefit equally from state support, we must all pay in equally in future.”.. “If we all want to benefit equally from state support, we must all pay in equally in future.”