The Government has announced details of the support package being implemented to soften the impact COVID-19 will have on the income of the 4.8 million self-employed individuals living in the United Kingdom. The package has been designed following extensive engagement with a number of stakeholders including the TUC, the Federation of Small Businesses and IPSE (The Association of Independent Professionals and the Self-Employed).
On the face of it the scheme (Self-Employed Income Support Scheme (“SEISS”)) is similar to the Coronavirus Job Retention Scheme (‘CJRS’) that has been announced, and offers self-employed people a taxable grant worth 80% of their average monthly income subject to a cap of £2,500 per month. The average monthly income is calculated by taking the average income from the last three years.
The scheme will only be open to individuals with a trading profit of £50,000 or less in tax years 2018-19, or an average trading profit of £50,000 or less calculated from tax years 2016-17, 2017-18 and 2018-19 combined. The Government believes this will encompass 95% of self-employed workers with higher earners not eligible.
In order to be eligible individuals must earn over 50% of their income from self-employment. It will also not apply to individuals who pay themselves a salary and dividends through their own company, as they will instead be covered by the CJRS.
In an attempt to minimise fraudulent claims, it is only open to individuals who have submitted a tax return for 2019. The Government has allowed another four weeks for individuals who missed the 31 January 2020 deadline to submit tax returns, allowing them until the 23 April to submit their return. HMRC will make contact with those individuals that are eligible and pay them directly by way of a single lump sum installment covering the three months from March to May, which they aim to pay at the beginning of June. The scheme may be extended if necessary.
A key difference from the CJRS is that self-employed workers can continue working whilst claiming the grant if it is possible for them to safely do so during the pandemic. The SEISS is also likely to take longer to get up and running and as mentioned above, payments are expected to be paid at the beginning of June. Individuals may therefore have to seek alternative routes if they are experiencing immediate cash flow issues. Until the scheme is in place, self-employed individuals will be able to benefit from other support already announced such as the business continuity loans and a more generous but still very low in support universal credit scheme. The other down side is that those who have not traded in tax year 2018-19 and have set up a business within the last 12 months (and therefore not submitted a tax return in that 2018-19 tax year) and not traded in tax year 2019-20 will lose out on this scheme, unfortunately.