Coronavirus support for the self-employed

Published by Emma Beynon on 5 November 2020

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Last updated 5 November 2020

Government increases self-employed support to 80% of average profits – up to £7,500 until January 2021.

We have come a long way as a nation since the Chancellor announced his plan of support for self-employed individuals at the end of March 2020. The Coronavirus Job Retention Scheme (“CJRS”) started to pay out to employers who furloughed their staff at the end of April and May saw the Self Employment Income Support Scheme (“SEISS”) rolled out.

On 24 September 2020, the Chancellor confirmed that the SEISS will be extended for a further six months, another two grants, from November 2020 to April 2021, to give more security to individuals whose livelihoods have been adversely affected by Coronavirus. The updates to the SEISS scheme announced on 22 October 2020, 31 October 2020 and 5 November 2020 have been reflected below.

In headline terms, a self-employed person can claim two further grants. The third grant covering November until the end of January, now worth 80% of average monthly profits will now be capped at £7,500 in total.

It was previously due to be capped at 20%, then 40%, then 55% of average monthly profits, however with the November lockdown, Rishi Sunak announced changes to better support the self-employed during the three month grant period, a welcome extension alongside the changes to the Job Support Scheme.

The fourth grant will cover the three-month period from February until the end of April. The Government will review the level of the second grant in due course.

The second grant, worth 70% of their average monthly trading profits and capped at £6,570, closed on 19 October 2020.

Who can apply?

Self-employed individuals or members of a partnership can apply if you:

  • have submitted your Income Tax Self Assessment tax return for 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
  • have self-employed trading profits of less than £50,000, and more than half of your income comes from self-employment (HMRC decide this based on your tax returns filed for the three years to 2018/19).

You are still eligible if you meet the criteria above but did not claim the previous grants.

How much will you get?

  • You are now unable to apply for the first or second SEISS grants, as the deadlines have passed. A single payment for each grant will have been paid directly into your bank account if eligible and approved.
  • The first grant was for 80% of the average profits from the previous 3 tax years (or the average of 1 or 2 years if you do not have 3 years), up to a maximum of £2,500 per month for 3 months (backdated to 1 March).
  • The second grant was for 70% of the average profits, up to a maximum of £6,570 and applications closed on 19 October 2020.
  • The third grant which is still open will cover 80% of the average profits, up to a maximum of £7,500.
  • Details for the fourth grant have not yet been released.
  • This is not tax-free income. The payments will form part of your trading profit for the year and be taxed along with the rest of your trading profits through your Self-Assessment Tax Returns.

SEISS is effectively a three step plan:

  1. Eligibility decided by HMRC
  2. Application by taxpayer
  3. Payment of successful claims

What can I do now?

Step 1 – Eligibility

  • HMRC have released an eligibility checker which will tell you if HMRC think you are eligible based on your tax return data. You or your agent can use this checker with your personal tax reference and NI number. The eligibility criteria is the same for both grants.
  • HMRC are contacting taxpayers now via email, SMS or post (depending on the data they hold). You will only be contacted in one way so if you have not been contacted you can use the eligibility checker to check why not and request HMRC to review your position.

Step 2 – Application

  • When you are contacted by HMRC you will need to log into your Government Gateway account. In the first rush of applications HMRC will be allocating a particular day for each taxpayer to apply.
  • If you don’t have a Government Gateway account, you will be able to set one up as part of the application process. This should be preferable to applying for an account now which can be delayed while a code comes in the post
  • Within the SEISS portal, taxpayers will see the detailed HMRC calculation showing their potential claim amount and will be asked to:
  • confirm eligibility criteria;
  • complete declarations, including that the business has been adversely affected by coronavirus. Adversely affected examples are available here; and
  • supply the bank account details for the grant to be paid into.
  • Only the taxpayer can make this application; not your agent and not by giving your agent your access details. HMRC’s anti-fraud measures require that it is only the taxpayer who applies and, if there are flags raised in the application, the SEISS payment could be delayed.

Step 3 – Payment

  • Subject to a successful application, the first payments will have been made from 25 May and HMRC are aiming to process claims from application to payment in 6 working days.

What is missing or still requiring clarification?

  • If you have started trading on or after 6 April 2019 you will not be covered by these measures. For new self-employed businesses there is scope to claim support through benefits. We would like to see scope to claim relief once 2019/20 Tax Returns are submitted for newly self-employed individuals who otherwise meet the criteria for SEISS.
  • Is there a clawback of the grant? You will be required to apply for the grant and this includes self-certification that you have lost trading profits as a result of Coronavirus. HMRC have made clear they will be seeking out any fraudulent claims made and they could recover the full amount and charge penalties.

HMRC has certainly shown a welcome turn of speed in implementing the applications and payments for the CJRS and now SEISS and bringing more of their services online.  For an organisation that has been a byword for slowness to respond and imperviousness to taxpayers concerns we can all hope this marks the start for a “new normal” way of working for HMRC too.

Further advice from the government website can be found here.

If you would like any further information, please speak with your usual Kreston Reeves contact or contact me here.

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