Financial support for the self-employed
The Government’s support scheme for the self-employed, SEISS (Self-Employment Income Support Scheme) opened on 13th May. The scheme allows eligible taxpayers to claim a taxable grant of 80% of their average trading profits, subject to an overall cap of £2,500 per month, for three months.
This guide outlines the scheme and incorporates the most recent guidance from HMRC on how it will work in practice.
In order to be eligible for an SEISS grant, you must be self-employed or a member of a trading partnership and meet the following conditions: -
- You traded during the 2018/2019 tax year and submitted your tax return for that year no later than 23rd April 2020
- Your trading profit must not have been more than £50,000 for either the 2018/19 tax year alone, or, on average over the three tax years 2016/2017 to 2018/2019
- (iii) Your trading profit must have been at least 50% of your total income for either the 2018/19 tax year alone, or, on average over the three tax years 2016/2017 to 2018/2019
- You traded during the 2019/2020 tax year
- You intend to continue trading in the current (2020/2021) tax year
- Your business has been adversely affected by COVID-19. HMRC consider that your business will have been adversely affected by COVID-19 if: -
- You were unable to work because you were: -
- On sick leave due to COVID-19
- Had caring responsibilities because of COVID-19
- You had to reduce or stop trading because: -
- Your supply chain was been interrupted
- You have fewer or no customers
- Your staff were unable to work
HMRC have now made available an online tool to allow you to check your eligibility. In order to use this you will need your Self Assessment Unique Taxpayer Reference (UTR) and your National Insurance number. You should then follow the link below and answer the on-screen questions to get their assessment: -
If you do not know your UTR, please note that it is a 10-digit number that you will find on the first page of your Self Assessment tax return.
Making a claim
It is not yet possible to make a claim; HMRC expect the online claim facility to be available from 13th May 2020. If you are eligible, HMRC will notify you of the date when you may be able to make your claim. Agents will not be permitted to make the claim on behalf of clients and you are therefore expected to submit it yourself.
In order to make your claim you will need to have the following information to hand: -
- Your Self Assessment UTR
- Your National Insurance number
- The account number and sort code for the bank account into which you want the grant to be paid
- The address associated with your bank account
- Your Government Gateway user ID and password
Note that if you do not already have a Government Gateway ID, you will need to create this. Even though it is not yet possible to submit your claim, we would recommend that you create your Government Gateway User ID as soon as possible in case you encounter technical difficulties in doing so. In order to do so, you should follow the link below and click on ‘Continue to your account’ at the bottom of the page, before then selecting ‘Create sign in details’ and following the on-screen instructions.
Calculating the amount of the grant
The grant will be based on your average monthly trading profits, as declared on your Self Assessment tax returns, over the three tax years 2016/2017 to 2018/2019. The amount you receive will be equal to 80% of those average monthly profits or, if lower, £2,500 per month. This amount will then be payable for three months, i.e. a maximum of £7,500.
For this calculation, your profits will be taken after deducting all allowable expenses (including capital allowances). If you are subject to either the farming or artists’ averaging schemes, you will use the profit before the averaging adjustment. The effect of any losses brought forward from before 2016/2017 will be ignored but, if you incurred losses in any of the three tax years 2016/2017 to 2018/2019, these will be treated as negative amounts in the calculation of your average monthly profits, regardless of whether you received tax relief for them during that period.
When you submit your claim, the online service will calculate the grant amount for you and explain how the resulting total has been arrived at. Once processed, it will be paid to you as a single payment, generally within six working days.
If you receive an SEISS grant, this will be treated as taxable income and will need to be included in your 2020/2021 Self Assessment tax return. Please also bear in mind that it will need to be included in any claims for Universal credit or tax credits that you make.
The SEISS grant is considered to be State Aid and is therefore subject to the State Aid cap. However, it falls within a new regime introduced specifically for COVID-19 related State Aid and so we expect the cap will not affect most, if not all, clients claiming the grant. However, if you receive other forms of government grant or State Aid you will need to consider whether you need to limit your claim to SEISS.
As the grant is taxable, you should remember to keep a record of this in line with normal record-keeping procedures. In particular, you must ensure that you keep a record of the amount claimed, the claim reference number, and evidence that your business was adversely affected by COVID-19.
Advice and assistance
Although we are not able to submit the claim on your behalf, we may be able to support you through the claim process by providing you with relevant data for submitting your claim and advising on specific aspects of the grant, particularly if you consider that the amount HMRC pay might be incorrect.
If you wish to discuss the any of the above matters, please liaise with your usual Wenn Townsend contact who will be happy to assist.