Following in-depth consultations with many business groups and trade unions, the Chancellor has unveiled the new Self-Employed Income Support Scheme. This will give self-employed individuals a taxable grant worth 80% of average monthly profits, up to £2,500 a month for the next three months. Payments are expected to be available by the beginning of June.
There are some concerns that the June date may be too late for many self-employed individuals, who would clearly welcome the support sooner.
The calculations will be based on individuals’ self-assessment tax returns for the last three tax years, where possible, to obtain a fair and reasonable average.
Those with only one year of trading history will have their income based solely on their most recent self-assessment tax return.
The scheme will be open to all individuals with trading profits up to £50,000 in tax year 2018/19 or an average trading profit of less than £50,000 from earlier tax years, 2016/17, 2017/18 and 2018/19, and where those individuals derive more than half of their income in these periods from self-employment.
All individuals eligible for the new Self-Employed Income Support Scheme will be notified by HM Revenue and Customs (HMRC) in the coming days.
Mr Sunak confirmed that eligible applicants will receive access to funds no later than the beginning of June, with self-employed and freelance taxpayers encouraged to apply for Universal Credit in the meantime.
The Chancellor also provided a lifeline for taxpayers that missed the 31st January 2020 deadline for 2018/19 self-assessment tax returns, with taxpayers given a new deadline of 23rd April 2020.
Delays to payments on account for self-assessment taxpayers due on 31st July 2020 have also been confirmed until 31st January 2021.
Directors of limited companies
The Self-Employed Income Support Scheme applies only to the self-employed or members of a partnership, and unfortunately does not apply to directors of limited companies.
HMRC has stated that if you are a director of your own company and are paid through PAYE, then you may be able to get support using the Job Retention Scheme instead. This, however, only covers the salary that you take from your limited company and will not include any dividends that you may receive.
A bit of caution needs to be exercised here because not all company directors will be able to make use of the Job Retention Scheme. There are many situations where a claim could be successfully made. For example, if a director had recently been appointed to the board of a company and it was decided the part of the business they led was not needed due to COVID-19, provided they met the relevant criteria, then a claim could be made and the director ‘furloughed’. The other directors would continue to run the business and deal with the affairs of the company.
However, to be eligible for the subsidy when furloughed, an employee cannot undertake work for the company. This includes providing services or generating revenue. In many cases, where a director is the only officer of the company, it is unlikely they will be able to avoid undertaking work for the company and would likely be found to have failed the furlough conditions. We would therefore advise to exercise caution when you are a director and should seek advice to check you can make a claim.