Yesterday the Chancellor announced a much needed support package for the self-employed.  

As part of our continued and proactive support in assisting all our clients, whatever their status, LBW are now undertaking an exercise to identify (from within our client base) who may be eligible for the scheme.  Once those clients are identified LBW will calculate what their entitlement may be. 

Over the coming days the team at LBW will contact those clients directly to discuss the amount of self-employment income support that may be available to them.

The following sources of income on a self-assessment tax return (that has been filed for the last three tax years) will or will not qualify under this scheme, based on the information released so far:

Self-employed (sole trader or partnership)
Land and Property Rental
Investment Income (Dividends and Savings)
Employment

 

The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) whose income has been negatively impacted by COVID-19. The scheme will provide a grant to self-employed individuals or partnerships, worth 80% of their profits up to a cap of £2,500 per month.

To be eligible for the scheme you must meet all the criteria below:

• Be self-employed or a member of partnership;
• Have lost trading/partnership trading profits due to COVID-19;
• Filed a tax return with HMRC for 2018-19 as self-employed or a member of a trading partnership. 
• Have traded in 2019-20; be currently trading at the point of application (or would be except for COVID 19) and intend to continue to trade in the tax year 2020 to 2021

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

If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.

If you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, you must do this by 23 April 2020.  

If you need assistance with bringing your tax affairs up to date and indeed filing any late self-assessment tax returns please contact us.

HMRC will use data on 2018-19 returns already submitted to identify those eligible and will risk assess any late returns filed before the 23 April 2020 deadline in the usual way.

The concern for directors is they will often take a low/basic Directors salary or no salary from a Limited Company. Instead they will often utilise dividends to top up their income, as and when they have the profits to do so. 

As dividends are not subject to PAYE, the dividend amounts are unlikely to form part of the Coronavirus Job Retention Scheme calculation for the director. Directors in this position are likely to find that should they qualify for a Coronavirus Job Retention Scheme grant, the amount paid would likely be 80% of their salary element of income only.

A further concern is that a director must be non-active to be furloughed, but given they will continue to need to manage the business in some way, they are unlikely to be completely in-active and therefore may fail the Coronavirus Job Retention Scheme requirements.

If you have filed a self-assessment tax return for any of the tax years ended 2016-17, 2017-18, and 2018-19 as a result of having rental income it would appear that you would not qualify for the scheme under the legislation if this is the sole reason for filing a tax return.  The scheme appears to only be eligible for individuals who have a self-employed trade.

You’ll get a taxable grant which will be 80% of the average profits from the tax years (where applicable):

• 2016 to 2017
• 2017 to 2018
• 2018 to 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.

• 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.

It is important to note that you cannot apply for this scheme yet.  HMRC have said that individuals should not contact them now and have actually said doing so will only delay the urgent work being undertaken to introduce the scheme. 

• HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational. 
• HMRC will then pay the grant directly to eligible claimants’ bank account. 
• HMRC is urgently working to deliver the scheme; grants are expected to start to be paid out by beginning of June 2020. 
• HMRC will contact you if you are eligible for the scheme and invite you to apply online.

The Government believe the time frame allocated is necessary to ensure that the scheme is both deliverable and fair. The Government has reiterated their message that in the interim the self-employed will still able eligible for other Government support including more generous universal credit and business continuity loans.

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’ll need to include the grant in your claim as income.

The scheme will be accessible only through GOV.UK website. It is important to watch out for scams and fraud so if someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, IT IS A SCAM.

For the source of information and to keep up to date of further announcements on the schemes please see the links below: 

https://www.businesssupport.gov.uk/self-employment-income-support-scheme/

https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme 

Last modified on Friday, 27 March 2020