Following on from our previous updates, this update concentrates on the “Self Employed Income Support Scheme” which was announced some weeks ago and is now due to go live imminently. This is designed to be an equivalent of the furlough scheme for the self-employed, but with the important distinction that you can claim a grant under this scheme whilst still working, whereas furloughed employees can do no work for their employer.
Importantly, HMRC has advised that agents like Chapman, Robinson and Moore will not be able to make this claim on behalf of self-employed clients and that instead, these claims must be made by individual taxpayers.
You may already have been contacted by HMRC by e-mail, text message or phone to advise you as to whether they consider that you are, or are not eligible for the Self Employed Income Support Scheme (SEISS”). If not, you should expect to hear from HMRC in the near future if you are self-employed.
This comes with two health warnings:
- We understand that fraudsters have been quick to take advantage of this situation and have been sending out so-called “phishing” e-mails, seeking to obtain your personal details. Please be vigilant and cautious. Please only use the link below.
- HMRC may send you an application though you are not eligible, or may wrongly state you are ineligible. Please read this guide to help to ascertain whether you agree or not with HMRC’s assessment (remember they may not have all the relevant facts – please see below)
HMRC have provided an online eligibility checker tool here.
You will need your ten-digit Unique Tax reference (“UTR”) which you will find on the front of your tax return and other HMRC correspondence. It is also the number which is your payment reference for your July and January tax payments (just remove the “K” suffix) and also your National Insurance number.
As mentioned above, just because you are told here that you do qualify, this may not be the case, as you may have breached some of the criteria which HMRC are not aware of. The criteria are:
- You must be self-employed as of 5th April 2019
- You must have submitted all tax returns up to and including 2018/19
- You must still have been self-employed for 2019/20
- You must still be intending to trade into 2020/21
- You must meet the “profits condition” (see later)
- Your business must have been adversely affected by the current Coronavirus pandemic (clearly not all businesses have been).
What is the profits condition?
You must meet one of the following criteria:
- “Trading profits” (see below) were greater than 0, but not more than £50,000 for 2018/19 and equal to or more than “relevant income”; or
- The average of “trading profits” for 2016/17, 2017/18 and 2018/19 was between £0 and £50,000 and the sum of those profits is equal to or greater than “relevant income” and the person carried on a trade during all of those three years; or
- The average of “trading profits” 2017/18 and 2018/19 was between £0 and £50,000 and the sum of those profits is equal to or greater than “relevant income” and the person carried on a trade during both of years but not 2016/17
“Trading profits” is defined as trading profit per your tax return (i.e. after all allowable expenses and capital allowances) less any trading loss in that year. For example, if you have two trades and one makes a profit of £40,000 and the other makes a loss of £10,000, then your “trading profits” are £30,000. You ignore the effects of the personal allowance and losses brought forwards.
“Relevant income” Is defined as total income (per tax return) plus any overseas income not declared (e.g. due to a non-domiciled individual claiming remittance basis, or being non-resident for the year) less “trading income”. In other words, it is all of your other income if any (e.g. rental income, dividend and interest income, employment income etc)
Effectively, this means you can choose whether to work out your eligibility by just 2018/19 income, or an average of the last two or three years, depending on how long you have been trading. If you have traded for all three years, you cannot opt to use just the last two
Who is not eligible?
- Individuals who started trading on or after 6th April 2019
- Individuals who didn’t file 2018/19 and earlier tax returns by 23 April 2020
- Directors of limited companies (unless also self-employed, and meet all other criteria)
- Trustees carrying on a trade
- Furnished holiday lettings businesses
I think I qualify, so how much should I get?
The payment will be the lower of £7,500 and 80% of 3 months “trading profit”, or written formulaically: 3/12 x (TP x 80%)
TP in this section is the first of these to apply:
- Average trading profits for 2016/17, 2017/18 and 2018/19
- Average trading profits for 2017/18 and 2018/19
- Trading profits of 2018/19
Note there is no pro-rating required if you started trading in one of these years.
Bob has been a self-employed plumber for many years. He also has some rental income. For the relevant tax years, his income has been as follows:
Average trading profits are £50,000, so just qualifies
Sum of trading profits is £150,000
Sum of non-trading income is £50,000: Sum of trading profits is greater, so Bob will qualify.
His payment will be the lower of £7,500 and 3/12x(50,000×80%) £10,000, so Bob will receive £7,500.
How does the process work practically speaking?
The process works as follows:
- Check eligibility, as per above. As part of this process, you will be asked to confirm your personal details by logging into your existing government gateway account if you have one, or by setting one up from the link on that screen if you do not. Please note that many people will not have set up a Government Gateway account if we complete your tax return on your behalf, unless you set one up when you first became self-employed, or for some other reason such as making PAYE declarations. Please do not set up a new login from any other source other than this screen, as otherwise, you will fail to benefit from a new streamlined process.
- Access the claim portal, which goes live from 13th However, not everyone will have access at this date – you will be advised of a date between 13th and 18th May as part of your eligibility check-in step one above. Remember, we are not allowed to do this claim for you, since you are obliged to make legal declarations as part of this process, such as confirming that your business has been adversely affected by coronavirus. Note that the detrimental effect need not equate to the amount of the grant provided, nor must it have stopped operations entirely, but it is simply a negative effect of some degree.
- You should print off, or screengrab, a copy of the grant calculation made by HMRC. Please also retain a note of your claim reference.
- You should receive your payment in six working days.
It is important to remember that the grant payment is treated as part of your taxable self-employed income for the relevant year.
Detailed HMRC guidance is available here.
We would also like to take this opportunity to provide a reminder of some other measures of particular relevance to self-employed individuals
Coronavirus Bounce Back Loan
Many businesses have had difficulty applying for a Coronavirus Business Interruption Loan. In response, the Government has introduced the Coronavirus Bounce Back Loan, targeted at small businesses.
This scheme provides loans with a 100% Government guarantee from £2,000 to 25% of turnover, subject to a maximum loan of £50,000. There are no fees or interest for 12 months, and thereafter the interest rate will be 2.5% per year. For full details, please see here.
Self-assessment July deferment
Remember that you are not required to pay your July payment on account, and if you prefer can defer this until January 2021. This is done without application and will be free of interest and penalties. If you would prefer to pay this anyway to avoid debt building up, simply pay as normal.
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