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March 27th 2020, by Charys Harvey

The government have finally announced their initial guidance on the support package for self employed workers.

Again, we've peeled through this and tried to answer as many questions as we can at this stage.

We would say though, compared to the Job Retention Scheme, which we now have much more full details on, this guidance for the self employed is still likley to develop. Accordingly, we'll keep this page updated as soon as more info is released.

Background

The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) who have lost income due to coronavirus (COVID-19).

This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. Three months is the initial period for this support but it may be extended if required.

Am I eligible?

You can apply if you are a self-employed individual or a member of a partnership and you:

  • have submitted your Income Tax Self-Assessment tax return for the tax year 2018-19
  • traded in the tax year 2019-20
  • are trading when you apply, or would be except for COVID-19
  • intend to continue to trade in the tax year 2020-21
  • have lost trading/partnership trading profits due to COVID-19

I heard there's a cap on income. How might that affect me?

Your self-employed trading profits must also be less than £50,000, and more than half of your income must come 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 your 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 your average taxable income in the same period

I have only recently started as self-employed, will I qualify?

Unfortunately, if you have not filed a self-assessment tax return for 2018-19 as you were not trading in that period, you will not be eligible for this support. But there are other schemes available to support you.

I've made a loss in the last 3 years. Will I qualify?

No. If your business consistently made a loss, then unfortunately you will not be eligible for this grant as it is based on having average monthly profits.

How much will i get?

You will 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

It will be up to a maximum of £2,500 per month for 3 months, i.e. a maximum pay-out of £7,500.

How do I apply?

This scheme is not yet open for applications. HMRC will contact you directly if you are eligible to apply for this scheme and invite you to apply online.

Once the claim has been processed, HMRC will pay the grant directly into your bank account, in one instalment.

I claim tax credits. Will this affect them?

Yes. If you claim tax credits you will need to include the grant in your claim as income.

I work part-time and I'm also self-employed. Do I qualify?

You will qualify if your self-employment profits are less than £50,000 and this makes up more than half of your total income. These figures are based on tax year 2018-19 or on average figures for the last 3 tax years.

If the majority of your earnings come from your part-time work then you will not be covered by the SEISS.

If I go back to work in the next 3 months do I still qualify for this support?

Yes, at present it appears that if you go back to work during the three month period, but have suffered a loss along the way, you will still receive this support.

Of course, this must be considered in line with other government guidance in regards to which businesses may continue operating.

My trading profits for 2018-19 was more than £50,000, do I receive nothing?

Not necessarily. This support will be based on either:

  • Your trading profits for 2018-19 being below £50k
  • Your average trading profits for 2016-17, 2017-18 and 2018-19 being below £50k

So therefore if your average trading profits for the previous three years were below £50,000 then you will be eligible.

For example:

Year

Trading Profits

2016-17

£52,000

2017-18

£28,000

2018-19

£65,000

Average

£48,333

In this example you would be eligible, if in each year your trading profits make up at least half of your total income

I am late filing my 2018-19 self-assessment, do I still qualify?

2018-19 self-assessments filed in the next 4 weeks, up to 23rd April 2020 will be accepted. So be quick if you are late with your filing!

How do I prove my business has been affected by COVID-19?

If you are eligible, HMRC will contact you to complete a simple online form. Any level of loss of business caused by the pandemic will make you eligible for the 80% grant.

How do losses affect me when calculating average profits?

There is currently no guidance on whether a loss in the last three years will be deducted from profit when calculating the average profit for the period, or if it will just be included as £nil profits for that year.

We will keep up-to-date with any new information provided and publish this as soon as we are made aware of it.

I pay myself a salary and dividends out of my own company, am I eligible for this scheme?

You will not be eligible for this scheme but you will be covered for your salary under the Coronavirus Job Retention Scheme if you are operating a PAYE scheme and meet the other conditions.

We'll be sure to keep you all posted as more details on this emerge!

For any other questions meantime, please don't hesitate to contact us.

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