David Ansdell – Personal Tax Specialist
DD: +44 (0) 1483 758 944
The Chancellor of the Exchequer has issued a financial package targeted at those who derive the majority of their income from self-employment who are facing hardship due to the Covid-19 pandemic, called the Self Employed Income Support Scheme (SEISS). The self-employed includes partners in a partnership.
Over the last few weeks, more guidance has been provided by HMRC about how the scheme will function and be rolled out.
The amount of grant available under the SEISS has a ceiling of up to £2,500 per month for 3 months, but the scheme will be reviewed and may well be extended.
Any grant paid will be subject to income tax as well as National Insurance, and will need to be reported on a future tax return.
To qualify, the individual must have been self-employed for the 2018/19 tax year, still trading in the current tax year, and anticipate trading in the 2020/21 tax year. If you were not self-employed in 2018/19, you will not qualify under the rules as they stand and as announced.
One of two tests must be passed:
Taxable trading profits for the individual in 2018/19 of less than £50,000 and these profits constitute more than half of the total taxable income; OR
Average taxable trading profits for the individual in 2016/17, 2017/18, and 2018/19 of less than £50,000 and these profits constitute more than half the average taxable income in the same period.
Where the individual has not been trading for the previous 3 years, HMRC will only use those years for which tax returns have been filed.
Finally, HMRC have confirmed that you can only claim if your trade has been adversely affected by Covid-19. Examples have been provided, and include instances where:
- You are shielding, self-isolating, on sick leave because of coronavirus, have caring responsibilities because of coronavirus; or
- You had to scale down or temporarily stop trading because:
- your supply chain has been interrupted
- you have fewer or no customers or clients
- your staff are unable to come in to work
How to submit your SEISS Claim
HMRC have now updated their guidance so that individuals can log in and check if they are eligible for the self-employment income support scheme grant. HMRC’s system will also provide a time and date from which individuals can apply for the grant, if they are deemed eligible. We have created a supporting guide which you can follow to check your eligibility and also ensure you are prepared when the time comes to make your online claim.
How will the grant process work?
HMRC will contact taxpayers directly by the middle of May, as they should have the information readily available from previous tax returns filed to calculate the quantum of any grant.
It will only be possible to claim using the GOV.UK online service. If you have not set up a Government Gateway Account, please contact us at the earliest opportunity and we can provide a help sheet to walk you through the process.
If you receive texts, calls or emails claiming to be from HMRC, offering financial help or a tax refund and requesting you to click on a link or to give personal information, we suspect it will be a scam.
Once the taxpayer has lodged a claim with HMRC, the SEISS grant will be paid within 6 working days. It is anticipated that the first payments will be made by HMRC on 25 May 2020.
The amount of grant will be calculated as 80% of average profits for the relevant tax years, and a monthly average paid. There will be a ceiling of £2,500 per month, which will be released directly to a nominated bank account.
Are there any barriers?
There are not any barriers for a self-employed individual to continue trading during the period, which differentiates this from the Coronavirus Employee Retention Scheme.
However, the Chancellor has inferred that when Covid-19 is a distant memory, he does plan to overhaul self-employed taxation and put them on the same footing as the employed, who are paid under PAYE. This could well mean increases in National Insurance but we will have to wait and see.