COVID-19 Self-Employment Financial Support

As you know, the global economy is facing its toughest time yet with Covid-19 bringing about great uncertainty for all businesses and those who are self-employed. Various emergency measures have been and continue to be announced for the UK. We have put together a short guide to help with this situation. This will be updated regularly.

Self-employment Income Support Scheme

The government has set up a scheme for self-employed people whose incomes are being hurt by the coronavirus outbreak. It is called the Self-Employed Income Support Scheme.

The scheme isn’t open yet but HMRC aim to contact you by mid May 2020 and look to make payments in early June 2020.

The scheme will give grants to self-employed people to cover 80% of their usual profits up to a maximum of £2,500 per month over three months but may be extended. The grant will be subject to Income Tax and National Insurance contributions but does not need to be repaid.

Those eligible for the scheme will have to have submitted a self-assessment tax return for the April 2018-April 2019 financial year.

If you were already self-employed but haven’t submitted your self-assessment tax return yet, you have until 23 April to do so. If we can be of any help with submitting this for you or if you require any advice, please contact us.

Who can claim?

You can claim if you’re a self-employed individual or a member of a partnership and you:

• have submitted your Self-Assessment tax return for the tax year 2018 to 2019

• traded in the tax year 2019 to 2020

• are trading when you apply, or would be if not for coronavirus

• intend to continue to trade in the tax year 2020 to 2021

• have lost trading profits due to coronavirus

You will need to confirm to HMRC that your business has been adversely affected by coronavirus. HMRC will, as usual, use a risk-based approach to compliance.

Your trading profits must also be no more than £50,000 and more than half of your total income for either:

• the tax year 2018 to 2019

• the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019

You can make a claim for Universal Credit while you wait for the grant, but any grant received will be treated as part of your self-employment income and may affect the amount of Universal Credit you get. Any Universal Credit claims for earlier periods will not be affected.

If you receive the grant you can continue to work or take on other employment including voluntary work.

Self-Employed who can’t claim.

Unfortunately, not all self-employed will be covered by the scheme.

If you became self-employed after April 2019 or have profits over £50,000 you won’t be eligible for help from this scheme.

You might be able to get a government-backed loan to help your business get through this period. There were some news reports that banks were making these hard to access. However, the government has now insisted that banks change their practices to make it possible for people to access these.

If you were due to pay tax on account in July 2020, you can push this back to January 2021.

If you were due to pay VAT for March, April or May, you can defer this payment.

Directors of limited companies who pay themselves through a mixture of Pay As You Earn (PAYE) earnings and dividends are only covered for the PAYE element of their earnings.

You can access the government’s job retention scheme for help with the money you usually pay yourself through PAYE. The government will cover up to 80% of what you usually pay yourself through PAYE.

Directors of Limited companies find themselves unable to claim much as they are not eligible for the Self-Employed Income Support scheme. However, after a virtual meeting with the Minister for Small Business, Paul Scully MP on Wednesday 15th April 2020, he has stated that the government are looking into this but all schemes have to be streamlined and they are trying to find a solution to identify directors of small Ltd Companies whose only source of Income is Dividends. I will update as and when I have any further information.

You can make a claim for Universal Credit Any Universal Credit claims for earlier periods will not be affected.

Some other measures for businesses and employers is as follows:

• Income Tax – next self-assessment payments deferred to Jan 2021 for the self-employed.

• A job retention scheme has been introduced which will cover 80% of wage costs up to a cap of £2,500 a month which will available for a period of three months, backdated to 1 March 2020. This scheme is only designed for employees who are unable to work due to COVID-19, but are kept on the payroll rather than being laid off.

• Support for businesses who are paying sick pay to employees has been announced which will allow small-and-medium size businesses and employers to reclaim statutory sick pay (SSP) paid for absence due to Covid-19. The refund will cover up to 2 weeks SSP per eligible employee and will only be applicable to employers with fewer than 250 employees.

• The next quarterly payment of VAT will be deferred to the end of March 2021. The return is still required to be submitted; payment is not required though. You should cancel your direct debit to ensure that money is not taken if you can't afford to pay it.

• Cash grants will be available for retail, hospitality and leisure businesses of up to £25,000 per property where businesses have a rateable value of between £15,000 and £51,000. Businesses in these sectors with a rateable value under £15,000 will receive a grant of £10,000.

• Small-and-medium size businesses who are experiencing lost or deferred revenues, leading to disruptions in their cash flow may be eligible for the Coronavirus Business Interruption Loan Scheme (CBILS). The scheme will support access to working capital (including loans, overdrafts, invoice finance and asset finance) of up to £5 million for up to 6 years. The scheme will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders confidence in continuing lending to SME’s.

• For larger businesses that meet certain eligibility conditions, the Bank of England has announced a new short-term lending facility for companies affected by a short-term funding squeeze.

• Business rates in England will be scrapped this year for all companies in the retail, hospitality, leisure and nursery sectors. Small businesses already eligible for business rates reliefs will receive a grant of up to £10,000 to help with business costs. Any further queries on this need to be directed to the local authority who charge the rates.

• You can defer PAYE/NIC payments until 30/6/2020 if you are struggling or think you might struggle to make payments due to COVID-19. All you need to do is call the dedicated helpline and request this.

There is some government guidance for employers of the key measures at the following link. COVID-19 Support for businesses

If you are having difficulty making any payments, you can call HMRC’s dedicated helpline on 0800 0159 559 to make bespoke time to pay arrangements. The government have also set up a business support helpline for any other queries 0300 456 3565.

Electronically Connected Bookkeepers – 15th April 2020