CALL 0808 231 6369 FREE 24 hours a day
Submit enquiry

Government Support For The Self-Employed Impacted By Coronavirus

Posted on 6th April 2020

Updated 6 April 2020

Over the last couple of weeks the Government has announced a number of packages to help support businesses and employees during these unprecedented times that we find ourselves in.

For employees/workers paid through PAYE the Government has launched the Coronavirus Job Retention Scheme. Please click here to see our separate guidance on this.

In response to mounting and more vocal concern, the Government has also introduced the Self-Employment Income Support Scheme, to assist millions of self-employed individuals in the UK.

The Government has released guidance on the scheme here. We still do not have all the details but we have answered some of the most frequently asked questions below:

  1. What is the Self-Employment Income Support Scheme and how do I access it?
  2. Am I eligible for support under the Self-Employment Income Support Scheme?
  3. I won’t receive any money under the scheme until June. What should I do in the meantime?
  4. What if I am not eligible for support under the scheme?

We are in unprecedented times and the Government’s guidance is constantly being updated so it is therefore crucial that you keep up to date with the latest updates.

1. What is the Self-Employment Income Support Scheme and how do I access it?

1.1 So what is the self-employment income support scheme?

This scheme aims to support those individuals who are self-employed, including those who are members of partnerships and whose income has been negatively impacted by the ongoing pandemic.

Those who are self-employed or are a part of a partnership will be provided with a grant, worth 80% of their monthly profits (80% of average monthly income), however, there is a cap to this grant of £2,500 per month.

Grants will be determined by HMRC. HMRC will use the average profits from tax returns submitted in the last three years: 2016-17, 2017-18 and 2018-19 to assist with calculating the size of the grant payable.

It should be noted that the individuals who will benefit from this scheme are those who derive the majority of their income from self-employment and where their profits are less than £50,000. The Government believes this scheme covers 95% of self-employed individuals.

The Government envisages that this scheme will be available for an initial three month period with individuals being able to make their first claim by the beginning of June 2020.

1.2 How can the self-employed access the scheme?

HMRC are responsible for delivering the scheme and are working to urgently deliver it effectively. It is expected that grants are to be paid by the beginning of June 2020.

The reason for this delay is to ensure that the scheme proposed by the Government is both fair and deliverable.

It should be noted that the self-employed can access this grant but also continue to carry on their business. This scheme is not the same as furlough leave for employees which requires employees not to work to be eligible.

Those self-employed individuals who are eligible to access this scheme will be able to apply directly to HMRC for the taxable grant, using a simple online form, with the grant being directly into individual’s bank accounts. Individuals should not make their applications now as HMRC will be contacting those eligible and invite applications.

2. Am I eligible for support under the Self-Employment Income Support Scheme?

2.1 Who is eligible to access the scheme?

To be entitled to this scheme, individuals must meet the following criteria:

    • Be self-employed or a member of a partnership;
    • Have lost trading or partnership trading due to COVID-19;
    • Filed a tax return for 2018-19 as self-employed or a member of a trading partnership. Those who have not yet filed for 2018-19 will have an additional 4 weeks to do so;
    • Have traded in 2019-20; be currently trading at the point of application or would be trading except for COVID-19 and intend to continue to trade in the tax year 2020 to 2021;
    • Have trading profits of less than £50,000 and more than half of total income coming from self-employment. This can be in reference to at least one of the following conditions:
      • Your trading profits and total income in 2018/19
      • Your average trading profits and total income across up to the three years between 2016-17, 2017-18 and 2018-19.
    • Those individuals who earn more than £50,000 in trading profits, will not be entitled to access this scheme.

The Government aim is to minimise the risk of fraud, so only those who meet the eligibility criteria set out above will be able to make a claim.

This scheme does not cover those who pay themselves a salary and dividends through a personal service company. However, they are covered by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

2.2 I only started working as self-employed in December 2019. Am I eligible for the scheme?

No. To be eligible for the scheme you must have filed a tax return for 2018/19. This means you must have been self-employed prior to 6 April 2019. If you were due to file a 2018/19 tax return but missed the deadline this year, you’ll have until Thursday 23 April to submit your tax return, after which you can access the scheme.

The government is also providing the following additional help for the self-employed (each subject to certain eligibility criteria):

    • deferral of Self-Assessment income tax payments due in July 2020 and VAT payments due from 20 March 2020 until 30 June 2020
    • grants for businesses that pay little or no business rates
    • increased amounts of Universal Credit
    • Business Interruption Loan Scheme

It is recommended that you speak to your accountant to obtain further advice on this.

2.3 I only started working as self-employed in December 2019. Am I eligible for the scheme?

No. To be eligible for the scheme you must have filed a tax return for 2018/19. This means you must have been self-employed prior to 6 April 2019. If you were due to file a 2018/19 tax return but missed the deadline this year, you’ll have until Thursday 23 April to submit your tax return, after which you can access the scheme.

The government is also providing the following additional help for the self-employed (each subject to certain eligibility criteria):

    • deferral of Self-Assessment income tax payments due in July 2020 and VAT payments due from 20 March 2020 until 30 June 2020
    • grants for businesses that pay little or no business rates
    • increased amounts of Universal Credit
    • Business Interruption Loan Scheme

It is recommended that you speak to your accountant to obtain further advice on this.

2.4 Over the past few years I have been employed part-time but I am also self-employed running my own business. Am I entitled to help under the Self-Employment Income Support Scheme?

Your entitlement to support under the Self-Employment Support Scheme will depend on how much of your total income comes from being self-employed.  This must have been the case for either your 2018/19 tax return or the average of your last three years’ tax returns: 2016/17, 2017/18 and 2018/19 tax returns (or both).

The government is also providing the following additional help for the self-employed (each subject to certain eligibility criteria:

    • deferral of Self-Assessment income tax payments due in July 2020 and VAT payments due from 20 March 2020 until 30 June 2020
    • grants for businesses that pay little or no business rates
    • increased amounts of Universal Credit
    • Business Interruption Loan Scheme

It is recommended that you speak to your accountant to obtain further advice on this.

2.5 Over the last 3 years, I have had one year where my profit was £50,000, but the two years before my profits were below this, am I eligible for the scheme?

To be eligible for support under the scheme your self-employed trading profits must be less than £50,000. This is determined by at least one of the following conditions being true:

    • having trading profits in 2018-19 of less than £50,000; or
    • having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000

If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.

So if your average profit for the past three years is less than £50,000 you should be eligible under the scheme (subject to satisfying the other eligibility criteria of course).

3. I won’t receive any money under the scheme until June. What should I do in the meantime?

3.1 I won’t get help from the government under the Self-Employment Income Support Scheme probably until June. What are my options in the meantime, where can I get help?

Unlike employees who are furloughed, the self-employed can continue to earn and this will not affect their ability to receive the grant under the Scheme. In June, you should receive three months’ worth of payments. However the Government is aware that this is not possible for everyone and many individuals will be experiencing cash flow issues in the meantime, so there are some other forms of support available including:

Loans/grants:

If you have a business and/or business bank account you may be eligible for support from the Coronavirus Business Interruption Loan Scheme (CBILS).

Universal credit:

The minimum income floor for Universal Credit has been removed and it has been increased by £1,000 per year, ensuring the self-employed will get this Universal Credit at the statutory sick pay level.

VAT:

If you are a UK VAT-registered businesses you can defer VAT payments due between 20 March 2020 and 30 June 2020 to the end of the year. This will happen automatically, there is no need to apply. You will be given until the end of the 2020/21 tax year to pay any liabilities that have accumulated during the deferral period.

Self-assessment:

The Government has also deferred the Income Tax Self-Assessment payments for the self-employed due on 31 July 2020 to 31 January 2021. Again this is an automatic offer, no need to apply. You can also speak to HMRC about a more flexible plan for repaying any outstanding tax liabilities.

Business rate relief:

The Government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBRR), rural rate relief (RRR) and tapered relief. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs. For more information, please click here.

Other forms of support:

ACAS and the government have also advised employers who utilise self-employed individuals to act leniently towards those individuals and provide them with a payment equivalent to SSP during these unique circumstances.

The Government has also postponed the implementation of the changes to IR35 until next year. However, on the basis that the self-employed are effectively now going to benefit from the same state support as employees, the Government has suggested that they should expect to contribute equally in future i.e. national insurance contributions (NICs) will be aligned so that employees and the self-employed pay the same. Watch this space!

3.2 Can i claim universal credit whilst i wait to apply for the 80% grant for self-employed people?

Yes. You are able to claim universal credit in the meantime. The Government has scrapped the minimum income requirement and has increased the standard allowance by £1,000 per year. The notional minimum earnings which was applied to self-employed individuals has been removed. Self-employed people are now treated the same as employed people within the universal credit system.

It must be noted that there are other rules and eligibility criteria for this benefit. Self-employed individuals should contact Universal Credit to obtain further guidance.

4. What If I Am Not Eligible For Support Under The Scheme? 

There are some other forms of support available including:

Loans/grants: If you have a business and/or business bank account you may be eligible for support from the Coronavirus Business Interruption Loan Scheme (CBILS).

Universal credit: The minimum income floor for Universal Credit has been removed and it has been increased by £1,000 per year, ensuring the self-employed will get this Universal Credit at the statutory sick pay level.

VAT: If you are a UK VAT-registered businesses you can defer VAT payments due between 20 March 2020 and 30 June 2020 to the end of the year. This will happen automatically, there is no need to apply. You will be given until the end of the 2020/21 tax year to pay any liabilities that have accumulated during the deferral period.

Self-assessment: The Government has also deferred the Income Tax Self-Assessment payments for the self-employed due on 31 July 2020 to 31 January 2021. Again this is an automatic offer, no need to apply. You can also speak to HMRC about a more flexible plan for repaying any outstanding tax liabilities.

Business rate relief: The Government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBRR), rural rate relief (RRR) and tapered relief. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.

ACAS and the government have also advised employers who utilise self-employed individuals to act leniently towards those individuals and provide them with a payment equivalent to SSP during these unique circumstances.

For more information, please click here.

 

 

Request a FREE callback

Fill out this form and one of the team will get back to you:


By ticking the following box I am giving Hodge Jones and Allen consent to process my personal data for the purpose of this enquiry.

Full details of our privacy policy is available here

Call us on:

Our offices are open from Monday to Friday from 9 am to 6 pm.

Phone:0808 231 6369
Fax:020 7388 2106
Address:Hodge Jones & Allen Solicitors
180 North Gower Street
London
NW1 2NB