Initiatives and measures to help the Self-Employed
Originally published on Fri, 27th March 2020
Following the Chancellor’s announcement we have summarised the latest update in respect of the initiatives and measures to be put in place for self employed individuals.
A common question we are being asked is “Am I self employed if I am a Director of my own Limited Company?”. As a Director you are technically an employee or officer of the Company and are not regarded as self employed, which unfortunately means that the measures set out last night will not be available to you. If the Company has a PAYE scheme and you receive a salary it is possible that the Coronavirus Job Retention Scheme may be available to you, but we await further detailed guidance from HMRC on this scheme. We appreciate that this uncertainty may be very frustrating but again we will advise you as soon as we hear anything further.
If you are self employed, then we set out the measures announced last night in detail below.
The Self Employed Income Support Scheme
This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed. This latest initiative aims to deliver parity for the self employed with the Coronavirus Job Retention Scheme for employees announced by the Chancellor last week
We must stress that further details and guidance regarding the operation of the scheme and its practical application have still to be released so please be patient – like you we want to know and will update you as soon as we do.
At this time we have summarised below the announced plans as they currently stand.
You will qualify if you are a self-employed individual or a membership 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 trading profits or partnership trading profits in 2018-19 were less than £50,000 and these profits constitute more than half of your total taxable income for the year.
- You have averaged trading profits for 2016-17, 2017-18 and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income on the same period.
Unlike the employee scheme, the self-employed can continue to work whilst receiving support from the scheme.
What if I commenced trading after 2016-17?
If you started trading at any point between 2016-19, HMRC will only use those years for which you filed a Self Assessment tax return to determine your average profits. So if you weren’t self employed in 2016-17 don’t worry, if you have submitted either a 2017-18 and / or a 2018-19 tax return you will be covered by the scheme.
What if I haven't filed my 2018-19 tax return yet?
If you have not filed your 2018-19 tax return yet you must do so by 23 April 2020. HMRC will use data on the 2018-19 tax returns already submitted to identify those eligible and will risk assess any late returns filed by the 23 April deadline in the usual way.
How much will I receive?
A taxable government grant will be payable to the individual based on 80% of their average profits for the tax years 2016-17, 2017-18 and 2018-19.
To work out the average, HMRC will add together the trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable) and use this to calculate a monthly amount - up to a maximum total grant of £2,500 per month for 3 months. The percentage and maximum sum payable is the same under the employed scheme, dependent on earnings.
What do I need to do?
- You cannot apply for this scheme yet.
- HMRC will contact you if you are eligible for the scheme and invite you to apply online. You will have to wait to hear from them until you can make a claim.
- Once you have made the claim and HMRC have received it they will contact you to tell you how much you will get and the payment details.
- HMRC will pay the grant directly into your bank account, in one instalment.
So far as we understand at this stage if you have and are claiming tax credits you will need to include these in your application as income.
When will I receive the grant?
HMRC are working around the clock to to put the scheme in place and have stated that they hope to have the Self Employment Income Support Scheme up and running by the beginning of June. We will all have to wait until we hear further. We will of course update you as soon as we hear and appreciate for many of you the thought of having to wait until the beginning of June is not what you wanted to hear.
We await further details on this as there has been very little guidance issued.
Other help available
Just a quick reminder of the other help currently available to the self employed that we have previously advised:
- Before the grants above are put in place self-employed individuals can still access Universal Credit ( similar to statutory sick pay for employees).
- Business Continuity Loans are available if you have a business bank account and we refer you to our email of 23rd March regarding the ‘Business bank’ on how to apply.
- If you are VAT Registered please do not forget you can defer your VAT payment that would be due in the period 20 March 2020 to 30 June 2020. If you pay your VAT by direct debit please remember to cancel this in sufficient time to prevent the payment automatically being taken. We advised you of this in our email of 16th March 2020.
- As advised in our email of 23rd March 2020 any income tax payments due on 31 July 2020 under the Self-Assessment system may be deferred until 31 January 2021. You do not need to be self-employed to be eligible for the deferment and you do not need to apply for this relief as it will be automatic with no interest or penalties being charge provided any tax deferred is paid by 31 January 2021.
The content of this information has been collated from the statement given by the Chancellor on Thursday evening – you can read the full statement here https://www.gov.uk/government/speeches/chancellor-outlines-new-coronavirus-support-measures-for-the-self-employed
For further guidance on COVID-19: support for businesses click here https://www.businesssupport.gov.uk/
We fully appreciate the delay in operation of the scheme until the beginning of June is more than frustrating but at least help is coming. If there are any developments which will speed things up we will let you know but in the interim we can use these next 2 months to get ready.
As always please contact us if you have any queries and we will do our best to help you.