On Thursday 26th March, the chancellor announced measures to help self-employed workers during the coronavirus epidemic.
The following has been taken directly from the government business support website.
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.
HMRC will use the average profits from tax returns in 2016-17, 2017-18 and 2018-19 to calculate the size of the grant. The scheme will be open to those where the majority of their income comes from self-employment and who have profits of less than £50,000. The scheme will be open for an initial three months with people able to make their first claim by the beginning of June.
Am I eligible?
To be eligible for the scheme you must meet all the criteria below:
- Be self-employed or a member of a partnership;
- Have lost trading/partnership trading profits due to COVID-19; (we do not yet know what proof HMRC will require to demonstrate this)
- File 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 an additional 4 weeks from this announcement 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 your total income come from self-employment. This can be with reference to at least one of the following conditions:
- Your trading profits and total income in 2018/19
- Your average trading profits and total income across up to the three years between 2016-17, 2017-18, and 2018-19.
How do I access it?
Individuals should not contact HMRC now. 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 the beginning of June 2020. For eligible individuals who have not submitted their returns for 2018-19, they will have 4 weeks’ notice from the date of the announcement to file their returns and therefore become eligible for this scheme.
How much you’ll get
If you qualify, 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.
Can I continue to work?
When he spoke to announce the scheme, the chancellor made it clear that claimaints under this Self-employment Income Support Scheme Grant may continue to work. However the HMRC website says claimants are only entitled to the grant if they have lost trading/partnership trading profits due to COVID-19.
We await further guidance.
Tax status of the grant
The grant is taxable and must be included in your 2020/21 personal tax return.
What we don’t know yet
There are many questions which are unanswered. For example,
- we don’t know how losses will be treated;
- we don ‘t know if the 50% self employment income threshold has been breached in only some of the previous three tax years, will the taxpayer still be eligible for the grant? (for example if the taxpayer went from employment to self-employment in say 2018-19, and the majority of income that year was employment, but it is expected that in 2019-20, the majority of income will come from self-employment);
- and we don’t know how if breaching the £50,000 earnings threshold in prior years permantly disbars from claiming under this scheme, even i f 2019-20 earnings are likley to be less than £50,000.
We will keep this website updated as new details are issued.
When can I access the grant?
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. In the interim the self-employed will still able eligible for other government support including more generous universal credit and business continuity loans.
I am a sole director of a small limited company, can I claim a grant under this scheme?
Directors whose earnings derive from PAYE income and dividends are not covered by this scheme
Jack Ross advice for clients
For all of our clients, we will calculate whether you qualify for the scheme, and if so, how much you are entitled to claim (based on the current HMRC guidance, which is subject to change). If you have not received your guidance letter by 10th April, please email your usual contact at Jack Ross.