We added a blog earlier this week to provide details of three of the key Government support packages for businesses facing difficulties caused by the Covid-19 coronavirus. This outlined the support arrangements for those employees who employed via PAYE and what employers needs to do to claim the 80% Government wages grant. A lot of questions have been asked about the Self Employed and what support they will be able to access. There was initially little on offer when the initial support measures were announced. However, the Government has now announced further measures for the Self Employed and this blog post will outline what support is available and what this means for those who are Self Employed.
The details on all of the Government support measures may still evolve as the finer details are worked through. HMRC are still in the process of implementing systems and processes to facilitate all of these measures.
Who qualifies for this support?
HMRC have indicated that those individuals who are Self Employed or a Member of a Partnership will be able to access this support scheme.
In addition to the above the following criteria will apply:
1. You must have filed a personal Self-Assessment Tax Return for the tax year 2018/19.
2. You must have traded during the 2019/20 tax year.
3. You must be trading when you apply for this Government support or would be trading had it not been for Covid-19.
4. You must intend to trade during the tax year 2020/21.
5. You must have actually lost trading profits due to Covid-19.
There is a final test that must also be satisfied.
Your trading profits from your Self-Employment business activities must be less than £50,000.
More than half of your total income must also be from your Self-Employment business activities.
HMRC will apply this final test to:
– The 2018/19 tax year alone.
– The average trading profits for the tax years 2016/17, 2017/18 and 2018/19.
The average here will simply be the total income for the three tax years divided by 3.
If you started trading between 2016 and 2019 then only the tax years where a self-assessment tax return was submitted to HMRC with Self-Employment trading activity will be used in the above calculation.
How much money will I receive?
HMRC will pay a taxable grant of 80% of the average profits from the following three tax years (where applicable):
HMRC will simply take the self-employed trading profit for each of the three years, total these, and then divide by three.
2016/2017 self-employed trading profit = £5,000
2017/18 self-employed trading profit = £10,000
2018/19 self-employed trading profit = £15,000
Total of the above = £30,000.
Average = £10,000
The above yearly average will then be used to calculate a monthly value. We are assuming that this is likely to be simply 1/12 of the average annual trading profit (the initial HMRC guidance isn’t clear on this).
Assuming this is correct the Government Grant payable (for three-month period) in the example above would be £10,000 x 3/12 = £2,500 x 80% = £2,000.
This will then be automatically paid to the individual by HMRC at the start of June at the earliest. One payment will be made for the three months in question.
You must note that this is capped at a maximum grant payment of £2,500 per month for a period of three months.
How do I apply for this grant?
HMRC have indicated that they will review the data that they hold for all Self-Employed individuals and they will decide if an individual is eligible for the scheme and then write to the individual inviting them to apply for the Government grant online.
HMRC have stated that Self-Employed individuals do not need to call HMRC. They have commented that this will simply slow them down further and delay them from completing the urgent work needed to implement the above grant scheme.
Once the application has been competed HMRC will contact you to inform you of how much cash you will receive and when this will be paid.
We do hope that all clients remain well and healthy during these testing times. We are always here to help and support all clients in any way we can.