COVID -19: Chancellor announces assistance for the self employed
The Chancellor has announced the government’s plans for supporting the self-employed affected by the COVID-19 epidemic.
The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships). The scheme will provide a taxable grant to self-employed individuals or members of partnerships, worth 80% of their average profits, up to a cap of £2,500 per month.
The scheme will be open to those with a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19 – and where more than half their income comes from self-employment. The scheme, which is being designed from scratch by HMRC, will cover the three months to May. Grants will be paid in a single lump sum instalment covering all 3 months. The scheme may be extended if necessary.
To be eligible for the scheme, the relevant person must meet all these criteria:
- Be self-employed or a member of a partnership;
- Have lost trading/partnership trading profits due to COVID-19;
- Have filed a tax return for 2018-19 as self-employed or a member of a trading partnership. Those who have not yet filed for 2018-19 will have until 23 April to do so;
- 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;
- Have trading profits of less than £50,000 and more than half of their total income comes 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 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 average taxable income in the same period.
Note that where a business started trading between 2016 and 2019, HMRC will only use those years for which the business filed a self-assessment tax return.
It is important to note that no action is required yet to obtain the SEISS grant. HMRC has said that contacting them now 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.
Everyone also needs to be careful not to fall victim to fraudsters seeking to exploit the announcement of the scheme. It will only be accessible through GOV.UK and HMRC has warned that: “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.”
HMRC will pay the grant directly to eligible claimants’ bank accounts. Payment of the grants is expected to start by the beginning of June 2020.
Note, however, that the government announcement said: ‘Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.’
The Chancellor also indicated that there are likely to be changes for the self employed, after the crisis, observing that “it is now much harder to justify the inconsistent contributions between people of different employment statuses. If we all want to benefit equally from state support, we must all pay in equally in future.” Presumably, this could be the start of a move to narrow (or remove) the gap between the NIC contributions paid by the self employed and the higher contributions paid by employees.
For further information on the scheme see here.
