On March 26th the Chancellor of the Exchequer Rishi Sunak announced further measures to the self-employed affected by Covid-19.
We have outlined the measures currently available to support Britain’s five million self-employed.
The Coronavirus Self-employment Income Support Scheme
The Coronavirus Self-employment Income Support Scheme was announced last night to support self-employed individuals and members of trading partnerships. In line with the support being given for ‘furloughed’ employees, the Chancellor proposes to provide the self-employed with a taxable grant based on 80% of their trading profits up to a maximum grant of £2,500 per month for the next three months, subject to an extension if required. Unlike the position for employees, the grant is not conditional on the self-employed person ceasing to work.
To calculate individual grants HM Revenue & Customs (HMRC) will use your trading profits in the 2016/17, 2017/18 and 2018/19 tax returns to determine average monthly earnings. Individuals who do not have three years of trading profits will have their average trading profits calculated using the information HM Revenue & Customs has available to them. The taxable grant will be 80% of the average monthly profits (subject to the £2,500 limit).
You are eligible if:
1. You have submitted a self-assessment tax return for the 2018/19 tax year.
2. You have been trading in the 2019/20 tax year
3. You are trading, or would be except for Covid-19 when you request the grant
4. Your intention is to continue to trade in the 2020/21 year
5. Your trade has suffered as a result of Covid-19
6. Your 2018/19 trading profits are less than £50,000, or your average trading profits over the previous three years are less than £50,000, and these profits make up more than half of your average taxable income in the same period.
If you have not yet filed your 2018/19 Income Tax Return, a four-week concessionary period has been announced. You must submit your return by 23 April 2020 to ensure you are eligible for this scheme.
HMRC will contact those individuals who are eligible for this grant and will invite them to apply. Once you have applied for the grant HMRC will contact you to tell you how much you will get and the details of how you will receive the grant.
It is likely that these grants won’t be received until early June, the grant payment will be in one instalment and will cover the previous months March – May 2020.
The above will be a great relief to most self-employed, however, self-employed individuals who started trading in the 2019/20 tax year, those with average trading profits in excess of £50,000 or those whose self-employment earnings constitute less than 50% of their total income will not be eligible for this grant.
It is likely that even if you are eligible for the grant you are going to experience a significant cash flow problem. To aid in this we have outlined some further measures which you may benefit from:
1. Suspension of the minimum income floor for the self-employed: Self-employed people can now access Universal Credit at a rate equivalent to Statutory Sick Pay for employees.
2. Employment and Support Allowance will be available to those with the lowest incomes.
3. Taxes – the next self-assessment payments due to be paid on 31 July 2020 are deferred to January 2021 for the self-employed.
4. The introduction of the Coronavirus Job Retention Scheme - should you employ a member of staff the scheme will cover up to 80% of monthly wage costs to a maximum of £2,500 per employee. More information on the scheme can be found here.
5. Coronavirus Business Interruption Loan Scheme, these loans are available from your commercial bank now. The government has pledged to cover the lender levied fees and interest on the loan for 12 months. It is important to note as the borrower you will remain liable for 100% of the debt.
6. Deferral of VAT payments, should you be registered for VAT any payments that are due to be made between 20 March and 30 June 2020 are automatically deferred until 31 March 2021. If you are in a VAT repayment position these will be repaid to you as normal.
7. HMRC Time to Pay service, this service is designed to help those who are unable to pay their Income Tax, PAYE, or CIS tax bill. If you require support you can call 0800 024 1222. Arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
8. A cash grant of £10,000 to eligible businesses in England that pay little or no business rates due to small business rate relief. A grant of up to £25,000 per property is available to businesses operating in the retail, hospitality and leisure business sector together with a business rates holiday for businesses within this and the nursery (childcare), bingo, estate and letting agent sectors.
In addition to the announced measures there are further actions as individuals that you can take:
1. Talk to your bank about finance options that are available to you. Banks have been asked to provide a ‘presumptive yes’ when a viable small business approaches them experiencing COVID-19 related stress.
2. Speak with your customers to call in outstanding debts where possible, you should also immediately issue invoices for work done.
3. Talk to your local authority about grants and hardship funds. £500m has been allocated for local authorities to help vulnerable people. Details of this are not yet available, but we hope this will include help for the self-employed.
4. Talk to landlords about a rent holiday, those occupying business premises should speak with their landlord to negotiate a rent holiday if possible. The government has announced that commercial tenants who cannot pay their rent in the next three months because of COVID-19 will be protected from eviction.
Most importantly look after your own mental health. COVID-19 is likely to be causing immense stress and worry for your self-employed individuals, it is more important than ever to ensure you are supporting your own mental health.
By Chartered Accountant, Sean Bolter