Whilst keeping ourselves and our loved ones safe during this crisis is our top priority, many are also understandably concerned about their financial future. Although many individuals are facing significant challenges at work, concerns are arguably most prevalent amongst the self-employed, with their incomes often the hardest hit.
Whilst at an early stage the Government unveiled a package of support to help employees through these difficult times, it took them a little while longer to devise a scheme they considered suitable for the self-employed.
On 26 March 2020, the ‘Self Employment Income Support Scheme (‘SEISS’) was announced with the intention of helping the self-employed. Whilst this has attempted to mirror the scheme set up for employees, it also contains a fair few gaps which may leave some self-employed individuals unable to claim much needed support.
The SEISS provides self-employed individuals, or members of partnerships who have lost trading or partnership trading profits as a result of coronavirus with taxable grants (non-repayable) of up to 80% of average trading profits capped at £2,500 per month. This is available to those whose average profits over the last 3 tax years have been less than £50,000 and where more than half of their income comes from self-employment.
In calculating this, HMRC will use tax returns submitted in the 2016/17, 2017/18 and 2018/19 tax years. If the individual has only been trading for part of this period, it will take into account only those years available. The HMRC has extended the time for individuals to submit their tax returns for 2018/19 to 23 April 2020.
The HMRC will be contacting those who are able to claim in due course, but it is not anticipated that any payments will be made under this scheme until June at the earliest, although they will be backdated until 1 March 2020 and paid in one lump sum. The scheme is currently set to run until 31 May 2020, with the possibility of being extended.
Gaps in the scheme
Currently the scheme does not cover those who started trading after 6th April 2019. In addition, those who had only been trading for part of the year in 2018/19 will find their income will be based on this reduced total income for the year and not pro-rated when calculating the monthly profits.
Also, the £50,000 average profit is a hard cut off point. If you are just over this you will not be eligible, but if you are just under you will.
In addition, those Director/Owners of private limited companies who pay themselves a (usually low) salary and take a greater share in dividends, will be ineligible to claim on the dividend element of their income. However, they may ‘furlough’ themselves in relation to the lower salary element.
Even if individuals are eligible under this scheme, it is clear there will be delays in receiving funds from the HMRC and it is quite possible that this will cause cash flow issues for many. Whilst there are various lobbying groups seeking to address the above issues, the Government may choose not to amend the scheme.
For those that either fall outside of the SEISS or are likely to struggle with cash flow issues until a grant is made, there are other types of assistance that can be sought. For cash flow issues, it is possible for the self-employed to defer their July tax payment for six months, although this will still eventually need to be paid. Other than this, the Government has announced further assistance through business interruption loans and greater accessibility to the Universal Credit scheme.
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Philip Luff – Employment Solicitor
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