The measures to support the self-employed through the coronavirus crisis aim to bring parity with the Coronavirus Job Retention Scheme as outlined last week. The latest step will cover 95% of people who can be identified through the government systems as receiving the majority of their income from self-employment.
The key features of the support
- Self-employed taxpayers who have lost trading profits due to COVID-19 cannot apply for help under this scheme – HMRC will contact those eligible directly to complete a simple online form and then make a cash grant payment into their bank accounts: it is anticipated that the form will ask for evidence of lost profits so it will be worthwhile retaining notes of closure dates or emails cancelling work, etc.
- The scheme will be open to those with a trading profit of less than £50,000 in 2018/19 or an average trading profit of less than £50,000 from 2016/17, 2017/18 and 2018/19
- More than 50% of the individuals’ income in the specified periods must be from self-employment. They must still be self-employed in 2019/20, currently trading or would do so except for COVID-19 and are likely to continue to be so in 2020/21
- The sum will be calculated as 80% of their trading profits, up to a maximum of £2,500 per month
- Information and calculations will be by reference to submitted Tax Returns but where the entire period is not available to review, HMRC will use whatever detail they have e.g. one Tax Return only
- The payments will be for at least 3 months backdated to 1 March and will be paid in June. Cash flow maybe an issue but it is hoped that the deferral of VAT and payments on account in July will assist with this. Business support through the bank and also negotiations with suppliers and debtors will be key. See the links below
- Those who have recently started to trade and have not reported profits to HMRC will not qualify – to minimise fraud, only those who are already in self-employment and meet the criteria will be eligible. These people will need to look at the other options for business support and information.
- Partners earning less than £50,000 in partnerships will also qualify
- There is a four week period within which those who missed the 31 January Tax Return filing deadline can get their Tax Returns filed with HMRC
- The grants will be taxable, and will need to be declared on tax returns by January 2022
- Unlike the employee scheme, the self-employed can continue to work as they receive support.
There will be more detail issued by HMRC in due course and the Mercer & Hole team will be able to speak with our clients and clearly explain the further measures.
What other help is available?
It was also announced that the self-employed would have access to Universal Credit, including emergency payments available within days of application as well as access to Business Continuity Loans. The VAT deferral and six month delay for paying the 31 July 2020 tax instalment will also ease cash flow alongside the three month mortgage holidays available.
Other points to mention
In the 5pm briefing the Chancellor clarified that those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the coronavirus job retention scheme if they are operating PAYE schemes.
He also made the following statement:
“I must be honest and point out that in devising this scheme – in response to many calls for support – it is now much harder to justify the inconsistent contributions between people of different employment statuses. If we all want to benefit equally from state support, we must all pay in equally in future.”
This would indicate that we can expect further changes to the rules relating to tax and national insurance rules applying to the self-employed in the future.