The Chancellor announced on Thursday 26 March 2020 the hotly anticipated grant scheme available to the self-employed and members of partnerships that will lose income due to coronavirus.
Broadly the Self-employment Income Support Scheme (SEISS) will allow self-employed taxpayers to claim a taxable grant worth 80% of trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.
What are the aims of the scheme?
The government intention is to support workers not paid via PAYE whose income is affected by the current crisis. It is based on the previous tax return’s figures for “trading profits” and is a cash grant paid by HMRC.
This may include sole traders (plus members of a partnership) such as contractors, tradespeople and consulting professionals.
Note: scheme does not apply to company directors.
Directors may wish to claim support using the Coronavirus Job Support Scheme. Directors are currently only able to get a grant to cover 80% of their PAYE salary if furloughed.
I’m afraid it is not possible to calculate anything based on dividends because it is impossible to clarify the source of such payments from a tax return and the decision was taken not to do so. They could be from someone’s own firm or from a portfolio. […]Chris Grayling MP, in correspondence shared with Davis Grant
There are many people asking them to reconsider […] But I don’t want to raise your expectations of a likely change to this situation.
Am I eligible?
The scheme is available to self-employed individuals and members of a partnership who satisfy all of the following conditions:
- Income Tax Self-Assessment tax return for the tax year 2018/19 submitted (due January 2020).
- Traded in the tax year 2019/20 (ending 5th April 2020).
- Are trading when they apply, or would be except for COVID-19
- They intend to continue to trade in the tax year 2020/21
- They have lost trading/partnership trading profits due to COVID-19
Thus someone who commenced self-employment in 2019/20 would not be eligible for a grant under the proposed rules. Unlike the job retention scheme the grant is not dependant on the worker stopping all work under a ‘furloughed’ status.
Self-employed trading profits must be less than £50,000 and more than half of your income…
- In tax year 2018/19.
(tax year April 5th 2019, tax return submitted by 31st January 2020).
- Average trading profits in 2016/17, 2017/18, and 2018/19.
(ie. the total trading profits of these years divided by three).
If trading commenced between 6 April 2016 and 5 April 2019, HMRC will only use those years for which a Self-Assessment tax return has been filed.
‘Self-employed profits’ have not been defined but we assume that this refers to the net profit as shown on the self-assessment tax return for the year in question.
It is assumed that ‘income’ refers to total income before deducting the taxpayer’s personal allowance and would include all sources of taxable income including employment income, pensions and property income.
For those who have not submitted their Income Tax Self-Assessment tax return for the tax year 2018/19, they must do so by 23 April 2020 to qualify.
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.
How much can I get?
The taxable grant will be 80% of the average profits from the tax years 2016/17, 2017/18, 2018/19. It will be up to a maximum of £2,500 per month for 3 months.
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. Where the trade commenced in that period it is assumed that the average will be computed on a pro-rata basis. Also therefore if you made no profits you will receive no grant.
The grant will be paid directly into your bank account, in one instalment. You will need to include the grant in your income for tax purposes.
How to apply
You cannot apply for this scheme yet. HMRC will contact you directly if you are eligible for the scheme and invite you to apply online.
HMRC is urgently working to deliver the scheme; grants are expected to start to be paid by the beginning of June 2020. This time is necessary to ensure that the scheme is both deliverable and fair.businesssupport.gov.uk
Once HMRC has received the claim and determined you are eligible for the grant, they will contact you to tell you how much you will get and confirm the payment details.
Other help for the self-employed
The government is also providing:
- Deferral of income tax payment on account due on 31 July 2020
- Deferral of VAT payments due between 20 March 2020 and 30 June 2020
- Delay of the introduction of rules on off-payroll working (IR35).
- Grants to businesses that pay little or no business rates.
- Increased amounts of Universal credit
- Business Interruption Loan Scheme
Self-employment Income Support Scheme (businesssupport.gov.uk)