26.03.2020: Coronavirus financial support measures - Help for Self-Employed
Dear Valued Client,
Further to the chancellor's announcement this evening, we can provide an update for those who are classed as Self-Employed for tax purposes. We have also received some addition guidance on the Job Retention Scheme.
Am I employed or self-employed?If you trade through a Ltd company and receive a monthly payslip then you are an employee. If you complete a self-assessment tax return once a year, detailing your income and expenses for the whole tax year then you are self-employed.
Self-Employed Income Support Scheme
The Chancellor announced that the government will support Self Employed workers with a taxable grant of 80% of average earnings, up to a cap of £2,500 per month similar to the help provided for employees.
The conditions of the grant are as follows -
have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
traded in the tax year 2019-20
are trading when you apply, or would be except for COVID-19
intend to continue to trade in the tax year 2020-21
have lost trading/partnership trading profits due to COVID-19
Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment. This is determined by at least one of the following conditions being true:
having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period
If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return. You cannot apply for the scheme yet, HMRC will contact you if you are eligible and invite you to apply online when the facility to do so is available. (The Chancellor stated 1st June in his speech) Other Support for Self-Employed
Deferred tax payments
Deferred VAT payments
Business Interruption Loans as announced previously are open to the Self-Employed, although the criteria to obtain one of these is down to the individual lender so we would advise you speak to your bankers or search the database of alternative lenders here - https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/current-accredited-lenders-and-partners/
Job Retention Scheme - further guidance
For employers to apply for this scheme they must furlough their affected workers, this is subject to normal employment law rules but with the alternative being redundancy, we expect employees will agree easily. It is important to note that employees cannot work for the employer whilst they are in furlough status, they should however remain available to come back to work when required.
It is available to employees that were on payroll as at 28th February 2020, it will not cover employees taken on after this date.
It is the government's hope that employers will continue to pay employee's (even furloughed one's) wages, either fully or at 80% if applicable and then the employer will claim back the grant from HMRC when they are able to do so. Employer's are being asked to seek finance from the other support measures announced to fund this as necessary if they are able. The scheme is expected to be in place by the end of April.
The 80% grant is worked out on gross salary, plus employers NI and pensions, up to a cap of £2,500 per month. This is still taxable as normal and will be required to be submitted through RTI software as normal.
Directors are covered under the scheme but the same conditions above apply, therefore you will have to temporarily cease trading whilst you are in furlough, either through mandatory closure or lack of projects or work being offered.
Should you require any further clarification then please do call.
As ever, stay safe and healthy.