So, the government has announced some details of a scheme it suggests will support those understandably worried self-employed workers who were left feeling they weren’t going to have the same safety net as provided by the Chancellor to employees. They are calling it the Self-employment Income Support Scheme. Here’s my explanation of it.
It will provide a grant of 80% of a self-employed person’s profits up to a maximum payment of £2,500 per month. This will initially be for a three-month period only, in the hope that we’ll be returning to some form of normality by then.
Clearly putting a scheme into place, from scratch is a massive undertaking and will take some time to create the machinery within Whitehall to roll this out, so they’ve suggested it will be available from the 1st June, with payments starting to be paid from the beginning of June.
There is no benefit in trying to contact HMRC now as they suggest that they will be using existing information on file to determine whether people are eligible for the scheme. If they believe they are then they will invite formal applications once the scheme is in place.
Looking at the criteria announced it appears that to qualify you must:
- Be self-employed or a member of partnership
- Have lost trading or partnership trading profits due to coronavirus/COVID-19 (there isn’t any clarity yet on what evidence is needed to show that profits were lost 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 the Government’s announcement to do so otherwise you will be excluded from the scheme
- 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 /21
- Have trading profits of less than £50,000 and derive more than half of your total income from self-employment. This can be with reference to either 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
As is always the case, especially when anything is designed so quickly, there are a few issues with it, meaning that not everyone who is “self-employed” will benefit, or if you:
- trade through a limited company, the scheme won’t apply to you at all as technically you are an employee, or
- if your profits have fallen due to the virus but your pre-virus profits were over £50,000 then you don’t qualify
- it’s unclear what happens if your profits are below £50,000, they are then reduced because of COVID-19 but by the end of the tax year your overall profits have returned to pre-virus levels, and
- those with less than one year’s trading won’t be eligible at all, so disqualifying anyone who started their self-employment in the current 2019/20 tax year
- no guidance on whether regular contributions or indeed habitually made annual contributions to a pension will be factored into the gross profit figure.
Detailed guidance will follow of course, so watch this space. In the meantime, if you’re concerned or confused I’m happy to discuss.