The Chancellor has finally announced support for those who are self-employed affected by losses in income due to Covid-19. Further to the latest announcements for the self-employed, I am writing to you in order to keep you informed with regards to the Self-Employment Income Support Scheme.
For those eligible, the scheme provides a direct cash grant of 80% of profits, up to £2,500 per month.
You have to have been self-employed per your 2018/19 return to qualify and HMRC will contact you to complete a form in order to apply for the grant.
No help will be given to those who have only recently entered the self-employed market, so will not help those who entered from 6 April 2019.
According to the government this should cover 95% of people who receive the majority of their income through self-employment.
Individuals are being advised by HMRC not to contact them yet as the income support scheme remains in the design phase. Ultimately, once the scheme is operational, the self-employed who are eligible will be able to apply online for the taxable grant. However, the three month grant will not be paid until June 2020. Therefore, all self-employed individuals need to consider the cashflow impact for the next 12 months.
Eligibility:
You can apply for the scheme if you’re a self-employed individual or a member of a partnership and you:
· 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 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
Your 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
For those that pay themselves a salary and dividends through your own company please refer to the Coronavirus Job Retention Scheme if you are operating PAYE schemes. You are directors of limited companies- not self-employed.
How much you can get
You will get a taxable grant which will be80% of the average profits from the tax years (where applicable):
· 2016to 2017
· 2017to 2018
· 2018to 2019
To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount.
If you have less than three years they will use a case by case basis, and likely to derive an average over say 2 years if only 2 years is available.
It will be up to a maximum of £2,500 per month for 3 months.
HMRC will pay the grant directly into your bank account, in one instalment.
What our clients need to do at the moment
HMRC will use existing information to check potential eligibility and invite applications after the scheme is in operation. In the meantime, we will keep you updated as and when we receive clarity with regards to time frames.
You cannot apply for this scheme yet. HMRC will contact relevant individuals.
HMRC dedicated Covid-19 helpline 0800 015 9559 is currently available to help self-employed individuals in financial distress and with outstanding tax liabilities.
The Chancellor has recognised the delay there will be to the payment being made and has indicated that as an interim measure the self-employed can access the business interruption loan scheme, universal credit and are able to defer payments due for VAT and the upcoming July payment on account for self-assessment.
After you have Applied
Once HMRC has received your claim and you are eligible for the grant, they will contact you to tell you how much you will get and the payment details.
If you claim tax credits you will need to include the grant in your claim as income.
For the Self-employed who are not eligible for the Self-Employed Income Support Scheme: UNIVERSAL CREDIT IS YOUR OPTION
For those who cannot claim the above due to not falling into the eligibility criteria, access to Universal Credit (or the Employment and Support Allowances in the event of an individual falling sick)is your key route in obtaining assistance with living costs, whilst not having access to the other Government Support measures currently announced. This is the case for directors who do not qualify as ‘furloughed’ staff also.
Furthermore, in terms of commercial tenants, the Government has announced that commercial tenants who cannot pay their rent because of Coronavirus will be protected from eviction.
How to apply for Universal Credit
Individuals can apply for Universal Credit online: https://www.gov.uk/apply-universal-credit, or by contacting the Universal Credit helpline on 0800 328 5644.
For those in the unfortunate position of having a disability or health condition that affects how much you can work, then you might be entitled to claim Employment and Support Allowance, potentially in addition to Universal Credit.
While there are eligibility conditions to be met (such as a restriction on level of savings and investments held), these Government benefits should hopefully provide vital assistance to many in addition to the newly announced measures for businesses.
