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Self-Employed Income Support Scheme

27 March 2020

COVID-19

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The Chancellor has announced a new scheme to help just under 4 million self-employed individuals affected by the coronavirus outbreak. The financial help will be up to £2,500 a month in the form of a government grant, initially over a three month period, although the Treasury estimate the average monthly pay-out across all the applicable self-employed will be £940.

  • Applicable self-employed individuals will receive a grant worth 80% of their average monthly profits over the last three years – but the maximum pay-out will be £2,500 per month.   For those who have been trading for less than three years the averaging is undertaken over the period of trading.  If applicable, the grant will be back dated to 1 March 2020 and will be paid in a lump sum when made available, hopefully, in June 2020.
  • To be eligible for the scheme an individual has to be self-employed and have submitted a tax return for the 2018/19 tax year.  This means that if someone only started trading during the current tax year you do not qualify for the relief. The Chancellor has granted a concession for those who missed the 2018/19 tax return deadline of 31 January 2020 by allowing them a further four weeks from 26th of March 2020 to submit their return in order to show their eligibility.  
  • No grants are available for the self-employed whose trading profits exceed £50,000 p.a. or for those who do not earn the majority of their income from self-employment. Neither is it available to small traders who operate their business through a small company and pay themselves in dividends.
  • HMRC are currently putting an online platform in place for the submission of applicable claims, with an expectation that this will be made available no later than the beginning of June 2020.  HMRC intend to contact those applicable directly,  with a link to complete an online form, upon receipt of which grants will be paid directly into a claimant’s bank accounts. As part of this process it is expected that the individual will have to declare that they have lost money because of Covid-19, however what form this will take and what proof will be required is unclear. It would also appear that, unlike the similar furloughing scheme for the employed,  grants can be claimed while simultaneously continuing to trade.
  • The grants will be taxable so recipients will need to declare it on their 2020-2021 tax return.
  • To address hardship issues before June 2020 the Chancellor issued reminders of various other support measures available including the Coronavirus Business Interruption Loan Scheme,  the deferral of self-assessment tax payments from July 2020 to January 2021 and access to Universal Credit.
 

Income Tax

  • For Income Tax Self-Assessment, payments on account due on the 31 July 2020 will be deferred until the 31 January 2021.
  • This will be automatic and no deferral application is required. No penalties or interest for late payment will be charged during the deferral period.
  • The scaled up Time to Pay Arrangements are also potentially available Income Tax.

 I am a company director in receipt of dividends – does the deferral apply?

  • At this stage the deferral of payments on account only extends to the self-employed and therefore this will not apply to company directors who remunerate themselves via dividends. Nevertheless, a claim to reduce payments on account may still be appropriate and a Time to Pay Arrangement could be considered. 

I am a landlord in receipt of property rental income – does the deferral apply?

  • At this stage the deferral of payments on account does not extend to individuals who received rental income. Nevertheless, a claim to reduce payments on account may still be appropriate and a Time to Pay Arrangement could be considered.