Rishi Sunak yesterday announced ‘the next step in the economic fight in the coronavirus pandemic’ – a financial support package for the self-employed:
- Self-employed individuals and partners in partnerships will be eligible for a taxable grant if they have been adversely affected by the Coronavirus.
- Broadly the scheme will provide a similar level of support as the Coronavirus job retention scheme does to employees, in that the grant will be based on 80% of the average monthly trading profits of the last three years, up to a maximum of £2,500 a month
- Again, like the Coronavirus job retention scheme it will initially be open for three months, with the possibility of an extension if required.
- However, it is not expected for the scheme to be up and running until at least the start of June, meaning that people will receive a 3-month lump sum at this point.
- Anyone who has still not filed their 2019 tax return (which was due at the end of January 2020) will now have a 4-week window in which to file their return so that they are eligible for this scheme. These individuals need to file their tax returns by the 23 April 2020. This is cited as one of the reasons for the delay in getting the scheme of the ground.
- The scheme will offer targeted support, and will be open to self-employed individuals and partners in partnership who:
o Have trading profits of up to £50,000 – you must be below this limit for the 3 tax years in question
o Make the majority of their income from self-employment – i.e. more than 50%
o Have filed their tax return for 2018/19
o Have traded in the tax year 2019/20
o Are still trading, or would be except for Covid-19
o Have seen a reduction in profits due to Covid-19
o And intend to trade in 2020/21
- For individuals who do not have three years of accounts for self-employment the grant will be based on an average of the years that the individual has been trading.
- HMRC will use the data submitted on peoples 2018/19 tax return to identify those who are eligible for the scheme. Those eligible will be contacted directly by HMRC to complete a simple online form, once approved HMRC will make contact to confirm the amount and the payment details. Payments will be made directly into individuals bank accounts.
- One of the final points that the Chancellor made was, that in devising this scheme, it is now much harder to justify the different contributions that are paid by people with different employment status. Though he did say that this was an observation rather than anything specific right now, it is certain we can expect changes in the near future.
- Unfortunately, those self-employed individuals who have only recently started to trade will not be able to access this scheme. The Chancellor stated that it was operationally impossible to set up a scheme that would support these people, as well as the fraud risk that it would potentially create. These individuals, who the chancellor believes will be in the minority, will need to look for support from the welfare system, as well as the Coronavirus Business Interruption Loan Scheme, options for deferral of income tax and VAT payments and various grants for those businesses that pay rates.
The recently released HMRC guidance in relation to the above scheme has clarified that individuals who are directors of their own companies and paid through PAYE MAY be able to get support through the previously announced Coronavirus Job Retention Scheme.
If you have any questions about this newly announced support, or other support measures that the government have announced in response to the Coronavirus outbreak please do not hesitate to contact us.