The Chancellor has set out the support that self-employed individuals will receive for the COVID-19 crisis. The scheme will be helpful to a great many people, but there will be winners and losers.
- Where certain criteria are met, self-employed individuals will be eligible to receive a grant from HMRC of up to 80% of their trading profits to a maximum of £2,500 per month for March, April and May.
- The grant will be paid in one instalment and the first such payments are expected to be made in the beginning of June.
To qualify, individuals must:
- make more than half of their income from self-employment either in the 2018-19 tax year or based on their average income in the 2016-17, 2017-18 and 2018-19 tax years;
- be trading when they apply or would be were it not for COVID-19;
- have self-employed trading profits of less than £50,000 (trading profits being the amount that income tax would usually be paid on) either in the 2018-19 tax year or on average in the 2016-17, 2017-18 and 2018-19 tax years;
- have lost profits because of COVID-19; and
- have filed an Income Tax Self Assessment for the 2018-19 tax year.
- Where individuals have filed Self Assessments for tax years 2016-17, 2017-18 and 2018-19, the amount of any grant will be calculated by reference to average profits in those years. If Self Assessments have not been filed for those years, the grant amount will be based on the average profits listed on Assessment(s) that have been filed.
- If an individual has not been trading long enough to file a tax return for the 2018-19 tax year, they will not be eligible for a grant under this scheme.
- The scheme is not open to applications. Instead, HMRC will identify individuals who may be eligible for a grant and will contact them directly explaining how to apply. This is to reduce the prospect of fraud and may change in time.
- The scheme is open to partnerships.
- The scheme will not be open to those who trade through limited service companies and pay themselves a salary and dividends. Such individuals may be able to use the government’s Job Retention Scheme in respect of the payroll salary part of their income though – provided they meet the requirements of that scheme and furlough themselves.
- Those that have not yet filed their 2018-19 Self Assessments can make use of the scheme provided these are filed before 23 April 2020 – subject to HMRC risk assessment.
- Grants paid will be taxable income for those that receive them.
The scheme will no doubt be invaluable for those who receive grants. The government believes that 95% of those who make most of their income through self-employment will be eligible. However, those who are more recently self employed will lose out along with many of those who trade as consultants through limited companies.
A very significant number of professional services consultants and tradespeople will have trading income of £50,000 or more. They will have to do without government assistance under this scheme.
You can read more about this guidance here.
Further guidance on the scheme is expected soon.