HMRC has introduced a self-employment income support scheme which is available to self-employed individuals as well as members of a partnership. Following the announcement of the self-employment income support scheme (SEISS) in March, applications for March to May are now open and will be payable under a single grant claim. Individuals can continue to apply for the first SEISS grant until 13 July and those eligible have the money paid into their bank account within six working days of completing a claim.
The Chancellor has now also announced a second and final grant will be made available and payable in August. To be eligible for this grant you will have to confirm that your business has been 'adversely affected' by the Coronavirus outbreak on or after 14 July 2020. Originally it was announced that this would apply to the period of June to August 2020, however, this has since been updated to only apply where there is an impact to your business after 14 July. It will be possible to make a claim for the second grant even if you have not made a claim for the first grant.
Am I eligible to claim?
HMRC will cover up to 80% of average monthly trading profits (based on the previous three tax years) and capped at £2,500 per month for the first grant, reducing to 70% under the second grant capped at £2,250 per month. This equates to a total maximum claim of £14,250 under the scheme. There are some caveats to this including:
- The scheme is only available where the individual has trading profits of less than £50,000 from self-employment. Trading profits can be determined by reference to either trading profits assessed on the individual's 2018/19 tax return or average trading profits over the past three years (i.e. 2016/17, 2017/18 and 2018/19).
- The individual’s self-employed income must make up the majority of their total income. This could impact those who have significant other income such as rental income or dividends.
- The scheme is only available to those who have filed a tax return for the 2018/19 tax year. Therefore, those who have entered self-employment post 6 April 2019 will not be able to benefit.
- The individual must have traded during 2019/20, be trading at the point of application (or would be had it not been for COVID-19), intend to continue to trade in the tax year 2020/21 and your business has been ‘adversely affected’ have lost trading or partnership trading profits as a result of the coronavirus pandemic. It is not yet clear what evidence will be required to support some of these requirements, for example, where the intention was to continue trading, however, this was not subsequently possible for some reason.
Examples given by the Government of when a trade may be adversely affected by coronavirus which would make you eligible to claim include where you are unable to work because you have been shielding, are self-isolating, or where you are are on sick leave or have caring responsibilities because of COVID-19. You may also be eligible where you have had to scale down or stop trading altogether due to supply chain interruption, reduced or no customers/clients or where your staff are unable to come to work.
HMRC has released further guidance as to how trading profits and total income should be calculated which can be accessed here. You can also check if you are eligible to make a claim and when you can claim from here. You will need your unique tax reference number and national insurance number.
What if HMRC says I am not eligible?
In some circumstances, taxpayers may wish to have their eligibility reviewed; for example, where they disagree with the decision on their eligibility or where they dispute the amount they are entitled to calculated by HMRC.
A review can be requested via an online form here. Alternatively, we can do this for you, so please get in touch if you would like to discuss further.
How much can I claim?
The grant will be based on your average trading profit over the last three tax years. Average trading profit will take into account any losses.
Example
Mr Smith had trading profits/losses as follows in the previous three tax years:
- £55,000 2016/17
- £12,000 (loss) 2017/18
- £29,000 2018/19
His average trading profits for the three-year period would therefore be £24,000. A claim under the scheme could be made for £1,600 per month (i.e. 80% of £24,000 divided by 12 months) for the first grant and £1,400 per month under the second claim..
Where there has been a gap in self-employment (i.e. you did not have any self-employment income in 2017/18), or, if you were not self-employed until the 2018/19 tax year, only trading profits for that tax year will be taken into account. It also appears that the way in which the grant will be calculated will treat the self-employment income as earned over the entire tax period rather than an annualised amount.
Example
Mr White became self-employed on 6 October 2018. Over the six months to 5 April 2019 his trading profits were £18,000. He will be eligible to make a claim for £1,200 per month (i.e. 80% of £18,000 divided by 12 months) for the first claim and £1,050 for the second claim.
We await further guidance from HMRC to determine whether Mr White would be able to apply for an enhanced grant on the basis that his profits were realised over six months. If so, this would effectively double his monthly entitlement.
For farmers using averaging relief, HMRC have confirmed that they will use trading profit prior to the relief to calculate both eligibility for the grant and the amount to be claimed,
How to claim
Taxpayers can now request payment of the first grant via their online personal or business account on gov.uk. If you do not have this set up, you will need to do so. Please let us know if you would like help with this. Once processed, the grant will then be paid directly into the individual’s bank account with the first payments from 25 May 2020 and thereafter within six working days from submission.
The grant will be backdated until March 2020 and, as mentioned above, has now been extended for a second and final period which will be payable in August and backdated until June 2020.
We are aware of scams where taxpayers are receiving a text or email and being asked to click on a link and populate bank details to receive the grant. Please be aware that HMRC will never contact you by text or email requesting bank details for a refund or payment of a grant.