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Markel Tax

09 Apr 2020

Help for the self employed

On Thursday 26 March the Chancellor of the Exchequer announced a new Self-Employment Income Support Scheme to support self-employed people who were not eligible to benefit from the Coronavirus Job Retention Scheme which had been announced earlier that week.

There is very little Information on this scheme and most of it was within the Chancellor’s announcement.  As with the Job Retention Scheme, the enabling regulations are not yet available and there is nothing directly related to this scheme in the Coronavirus Act 2020.

The scheme will provide a grant of 80% of average monthly trading profits for 2016/17 to 2018/19 capped at £2,500 per month.  Initially this will be payable for a period of three months although this may be extended.  HMRC will check the initial eligibility and will contact those who meet the claim criteria. 

The scheme will be open to the self-employed and members of a partnership.  Although it is not specifically stated, it would seem sensible if this were to include LLP members who are paid on a self-employed basis.

To be eligible for the scheme, the self-employed person or partner must have:
  • submitted their Income Tax Self-Assessment tax return for the tax year 2018-19
  • traded in the tax year 2019-20
  • been trading when they apply, or would be trading but for COVID-19
  • intended to continue to trade in the tax year 2020-21; and
  • lost trading/partnership trading profits due to COVID-19
The financial criteria are that:
  • the applicant’s self-employed trading profits must be less than £50,000 and
  • more than half of their income comes from self-employment.
One of the following conditions must also be met:
  • the applicant must have trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits must constitute more than half of the applicant’s total taxable income (probably tested by reviewing tax return details); and/or
  • the applicant must have average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits must constitute more than half of their average taxable income in the same period
If trading started between 2016 and 2019, HMRC will only use those years covered by a Self-Assessment tax return.  It appears that where trading started part way through a tax year, income for purposes of the grant will be calculated based on the actual period of trading.

Presumably, the purpose of these tests is to target genuine trading businesses and people who derive their livings from them, rather than subsidising individuals’ side-businesses and hobbies.

The key points are that self-employed individuals do not need to apply for this grant.  HMRC will contact all individuals who may be eligible but that may not be until June.  To assist in ensuring HMRC have all the details required to assess eligibility they have extended the deadline for submitting tax returns covering 2018/19 until 23 April 2020. 

This scheme is not applicable to company directors so contractors operating via a personal service company may need to apply for a grant under the Coronavirus Job Retention Scheme.

We have created these helpful flowcharts so you and your clients can easily determine where they may be able to claim. You can see our self-employed income support flowchart here and our job retention scheme support flowchart here.

For further information, please contact us on 0333 920 5708 and ask for David Harmer.
Tagged Employment taxes and share scheme COVID-19
Next article in series

09 Apr 2020

Loan Charge: HMRC forced to repay voluntary contractor loan settlements