Government Support - Self-employment Income Support Scheme

 

HMRC will use the average profits from tax returns in 2016-17, 2017-18 and 2018-19 to calculate the size of the grant. The scheme will be open to those where the majority of their income comes from self-employment and who have profits of less than £50,000. The scheme will be open for an initial three months with people able to make their first claim by the beginning of June. 

 

To be eligible for the scheme you must meet all the criteria below: 

• Be self-employed or a member of partnership; 

• Have lost trading/partnership trading profits due to COVID-19; 

• File 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 from this announcement to do so; 

• Have traded in 2019-20; be currently trading at the point of application (or would be 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 your total income come from self-employment. This can be with 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. 

 

Individuals should not contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational. HMRC will then pay the grant directly to eligible claimants’ bank account. HMRC is urgently working to deliver the scheme; grants are expected to start to be paid out by beginning of June 2020. For eligible individuals who have not submitted their returns for 2018-19, they will have 4 weeks’ notice from the date of the announcement to file their returns and therefore become eligible for this scheme. 

 

HMRC state they are urgently working to deliver the scheme; grants are expected to start to be paid by the beginning of June 2020. This time is necessary to ensure that the scheme is both deliverable and fair. In the interim the self-employed will still able eligible for other government support including more generous universal credit and business continuity loans. 

 

 

The government can only act on the most recently available data. This is from the 2018/19 tax year. To try to provide the most accurate possible estimate of self-employed income, they can look at average profits over 16/17, 17/18 and 18/19. 

 

The scheme is for those who have filed a tax return to report income from self-employment in the tax year 2018-19. For eligible individuals who have not submitted their returns for 2018-19, they will have 4 weeks’ notice from the announcement to file their returns, until 23 April 2020, and therefore become eligible for this scheme. 

 

Yes – individuals will pay Income Tax and National Insurance on any payments received through this scheme as they are replacement for income in line with normal practice for benefits or grants that replace income. The grant is recognised as income for the purposes of Universal Credit and Tax Credits and may impact the amount claimants are entitled to. 

 

In the interim, self-employed individuals may be eligible for universal credit. The government has provided over £6.5bn of additional support through the welfare system for those affected by Covid-19. Further information on how to access this support can be found here. 

 

Why is this scheme limited to those who with trading profits below £50,000?  

For many, higher incomes might mean higher losses at this time. In order to target support at those most in need, the government has chosen to cap this scheme. For all those with trading profits of £50,000 and over, the mean self-employment income is £186,000 and the mean total income is £217,000. Those with higher average incomes are more likely to have access to savings and other resources. They may also still be able to access support through the temporary Coronavirus Business Interruption Loan Scheme. 

 

Self-employed individuals who are owner-managers and pay themselves a salary through PAYE will be eligible for support through the Coronavirus Job Retention Scheme. Further details can be found here. SMEs can also access support through the temporary Coronavirus Business Interruption Loan Scheme. This supports SMEs with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years. This new Self-Employment Income Support Scheme is open to anyone who reports trading profits through Income Tax Self-Assessment. Self-employed individuals who work through a company do not report their trading profits in this way. 

 

Government say they have announced measures that can be quickly and effectively operationalised. DWP and HMRC are experiencing high demand and the government has to prioritise the safety and stability of the benefits system and tax system overall. The Self-Employed Income Support Scheme will be treated as earnings in UC in the same way as the Coronavirus Job Retention Scheme. Universal Credit is designed to adjust the amount of benefits you receive in response to changes in your income. Unemployed people will benefit from the package of welfare measures announced by the Chancellor. These include increasing the Universal Credit standard allowance by £1,000 a year for the next 12 months, and nearly £1bn of additional support for private renters through increases in the generosity of housing benefit and Universal Credit. 

 

Source: CAI E-Connect 8th April 2020