Covid-19 (Coronavirus) – Self-Employed Income Support Scheme

Last week, the Chancellor set out the steps he would take to “boost the safety-net” for self-employed people across the country who have been affected by the on-going Coronavirus pandemic. In a speech on 26 March 2020, he set out the government’s Self-Employed Income Support Scheme.

The Scheme will allow self-employed people to claim a taxable grant worth 80% of their trading profits up to a maximum of £2500 per month for, at least, the next three months.

In some respects it is similar to (although separate from) the Coronavirus Job Retention Scheme which the government set up to support employees. It does, however, come with a rather stringent set of eligibility rules and detailed assessments for the calculation of the value of the grant.

To be eligible for the grant people must:

1. Have submitted their Income Tax Self Assessment tax return for the tax year 2018 – 2019; and
2. Traded in the tax year 2019 – 2020; and
3. Be trading when they apply (or would be trading were it not for Covid-19); and
4. Intend to continue to trade in the tax year 2020 – 2021; and
5. Have lost trading/partnership trading profits due to Covid-19; and
6. Have trading profits less than £50,000; and
7. Have more than half of their income come from self-employment (directors who also receive a salary may therefore not be eligible for the self-employed scheme but may be eligible for the Job Retention Scheme where the government have said they will cover 80% of monthly wages for employees).

The value of the individual taxable grant will be based on average profits from the tax years (where applicable) 2016 to 2017, 2017 to 2018 and 2018 to 2019. HMRC will add together the total trading profit for the three tax years and divide this by three (where applicable). This will then be used to generate a monthly amount up to a maximum of £2500 per month which will be paid directly into the relevant bank accounts in one instalment in June 2020.

The Chancellor also announced that for those who were late in filing their January tax return and missed the 31 January deadline, they will now have four weeks in which to submit a return with a final deadline of Thursday 23 April 2020.

The government have said that HMRC will contact those individuals who are eligible and invite them to apply through an online portal, where they will then have to prove their eligibility.

As yet, the scheme is not up and running and as set out above payments will not be received until June 2020. This arguably leaves self-employed people in a vulnerable position for the next three months, particularly where business has already started to dry up.

The scheme will also not help those who have set up in business since April 2019 as they will not yet have filed a tax return.

The government refer those self-employed people who need urgent assistance or who will not be eligible for the Income Support Scheme to apply for universal credit, seek a business interruption loan (where appropriate) or defer their Self Assessment income tax and VAT payments.

More details can be found here.

This was written on 27th March 2020, and is based on information available at the time.

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