COVID 19: Government support for the self-employed

On Thursday 26 March 2020, the chancellor responded to much public pressure to announce support for the self-employed during the COVID-19 pandemic, after support schemes were introduced recently for businesses and employees.

How does it work?

The Self-Employed Income Support Scheme (SEISS) will provide taxable grants worth 80% of average monthly profits over the past 3 years, up to a maximum of £2,500 per month.

The scheme applies to those treated as self-employed for tax purposes, i.e. sole traders or partners in partnerships. It will initially be available for 3 months from 1 March 2020, with the payment being made in one lump sum in June 2020.

Eligibility

The government has sighted difficulty in determining exactly who is “self-employed”. Unlike employees, they do not have the luxury of monthly payroll submissions and so need to rely on tax returns submitted by the individual.

Those who have started self-employment recently and so may not be on HMRC’s radar will not be eligible for the scheme. It is open to those who were trading in 2018/19, still trading now and plan to continue trading and who have:

  • Trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from the last three years.
  • More than half of their income from self-employment in 2018/19.

Unlike the employee job retention scheme, there is no requirement for the individual to cease work and any earnings will not impact on their eligibility to the grants.

HMRC will contact those eligible directly based on the information it holds. Individuals will then need to complete an online form to receive the grant. The payments will, however, be taxable, declarable on their 2020/21 tax returns. There is no need to contact HMRC direct.

Those late in filing their 2018/19 tax returns will have four weeks from 26 March 2020 to file their return to be included in the scheme.

But what about now?

Payments will not be made until June 2020 to allow time for late filers to submit their returns. In the meantime, self-employed have the following available to them:

  • Deferral of July 2020 payments on account to January 2021.
  • Business continuity loans.
  • Universal Credit.

Company Directors

The government has now introduced schemes to help the employed and self-employed but it seems company directors have somewhat fallen through the net.

Neither scheme applies to those that pay themselves dividends. The employee job retention scheme will, in theory, be available to directors, although many have small salaries for tax efficiency so the 80% would be by reference to this. It would, however, require the director to stop working completely, which, for many directors will not be feasible.

How We Can Help

If you would like to discuss further, please contact your usual partner or Matthew Spencer at matthewspencer@lubbockfine.co.uk

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