What Self-employment Income Support is available due to Coronavirus?

Coronavirus Support

The Self-employment Income Support Scheme was announced by the government to assist businesses with financial support during the Coronavirus crisis.

The scheme was announced on Thursday 26th March 2020, with the aim to provide the self-employed with a similar support package as was announced for employees previously.

See how much you can claim by using our self-employed grant claim calculator.

Who is eligible for the Self-employment Income Support Scheme?


All self-employed individuals or members of a partnership can qualify if the following applies:

• A tax return for 2018/19 has been filed with HMRC
• The business has traded in the tax year 2019/20
• The intention is to trade in tax year 2020/21
• The business has lost trade due to coronavirus

There are some exceptions to the above, which are detailed below.

Who does not qualify for the Self-employment Income Support Scheme?


As well as the qualifying conditions stated above the following must also be true.

The trading profits must be less than £50k and more than half of your income must come from self-employment.

How much money will the scheme provide?


You will be entitled to receive a grant of 80% of your average profits up to a maximum of £2,500 per month.

The scheme will pay out for a maximum of 3 months.

Self-employment Income Support Scheme calculation


Add up the total trading profit for the last 3 tax years (2016/17, 2017/18 and 2018/19).

Divide this figure by 36 months to obtain a monthly average.

Multiply the monthly average by 80%.

This is the amount you will be entitled to up to a maximum of £2,500 per month.

What if my self-employment commenced after April 2016?


Self-employment which commenced after April 2016 may not have 3 tax years filed with HMRC. As a result the profit is averaged over the number of years available.

For example if you have only submitted a 2018/19 tax return your profits per this tax return are used to calculate the monthly average.

My Self-employment commenced after April 2019 do I qualify for this support?


No. Based on the current legislation only self-employed businesses which commenced prior to April 2019 will qualify for the Self-employment Income Support Scheme.

The business will fail the requirement that a 2018/19 tax return has been filed.

Will I still qualify for this support if I have not filed my 2018/19 tax return on time?


Yes. HMRC have confirmed that if you are late in filing your 2018/19 tax return that you can still qualify.

The tax return for 2018/19 must be filed by 23rd April 2020 to qualify for the scheme.

Can I file a 2019/20 tax return to show my higher profits and claim more support?


No. HMRC have confirmed that only tax return figures relating to tax years 2016/17, 2017/18 and 2018/19 will be used to calculate the grant.

Is the grant income taxable?


HMRC have confirmed that the grant provided will be treated as taxable income.

As a result, if this extra income pushes the self-employed profits over £50,000, HMRC would be claiming 40% of the grant back in taxes.

Any individuals in receipt of tax credit claims will need to account for the grant as income.

How do I apply for the Self-employed Income Support Scheme?


HMRC will contact all eligible businesses in due course. When available the application will be made online.

IMPORTANT – HMRC have stated that all applications will be made through the gov.uk website. If you are contacted by anyone to complete a claim form via phone, text or email then it will be a scam. Please be wary about these fraudsters. As soon as the link is available we will notify our clients and publish the gov.uk link on this website.

When will I receive the self-employment support grant?


HMRC have estimated that the grant payments will be paid towards the end of June.

The payment will be made as one instalment directly into your bank account.

Do I need to stop trading to claim the grant?


HMRC have stated that there is no requirement to cease working. Obviously this depends on the keyworker and social distancing rules, which are currently in place.

This is different to the Job Retention Scheme, which is applicable to employees. Under this scheme employees must do NO work whilst they are furloughed.

NOTE: The current HMRC guidance states that the self-employment must ‘have lost trading profits due to coronavirus’. We aren’t aware of how HMRC intend to test this requirement but it could be something which develops with further announcements.

Is there any other support available to the self-employed?


Businesses which are VAT registered can defer their next quarters VAT payments

Individuals can defer their July 2020 income tax payment on account

Grants available for those self-employed with business property

Universal Credit can be applied for.

Finally, if you are self-employed as a subcontractor and suffer CIS tax deductions, we recommend that you file your 2019/20 tax return in April 2020. Typically these individuals are due significant tax rebates, as a result filing in April will mean that your tax refund should be received in May 2020.

Conclusion of the Self-Employment Income Support Scheme

The government was under significant pressure to announce a package for the self-employed to match that previously offered to employees. It was therefore not a surprise that such a scheme was offered and is to be welcomed.

What was striking was that during the announcement, the chancellor made reference to the unfair tax system. Providing a matching bailout to the self-employed when they contribute less tax than employees was clearly an issue. We therefore anticipate in future budgets an increase in tax rates for the self-employed.

At Patterson Hall Chartered Accountants we aim to provide our clients with the most up to date advice in this ever changing landscape. As soon as any further announcements are made we will be sure to update these blogs and notify our clients.

For further information on the Self-employed Income Support Scheme see the HMRC guidance
https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

See below for other Coronavirus support available to small businesses:
Coronavirus Support Summary
What is the Job Retention Scheme?
Step by Step Guide on how to claim the Job Retention Scheme Grant
VAT Deferral Scheme
Income Tax Deferral
Business Support Grant & Rates Relief

DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer

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