The self-employed were the subject of the Chancellor’s announcement on Thursday. Anything is welcome but not everything is crystal clear. As with most of the initiatives announced, there are big question marks over some of the proposed measures.
Before going into the detail, it is worth pointing out that you cannot apply for the scheme yet, so please don’t ask us to do so.
A little bit complicated but this is a summary:
- Applies to self-employed and partners in a business
- Traded during 2019/20 tax year
- Still trading or would be except for Covid-19
- Intend to continue to trade during 2020/21 (provided the outbreak permits it)
- Have submitted a Self-Assessment tax return for 2018/19 (This seems to exclude anyone who became self employed after 5 April 2019. If this applies to you, you will probably need to make a benefits claim)
- Have lost profits because of the Covid-19 outbreak. (This seems to exclude those self-employed people who are doing quite well at the moment, such as delivery drivers, small shopkeepers etc. It doesn’t seem to exclude people who are still working but are experiencing reduced demand)
- Your self-employed profit must be less than £50,000 and more than 50% of your income must come from self-employment. (There are two tests for this – one looks at 2018/19 profits and one looks at a three year average – only one of these has to be over £50,000 to disqualify you)
If you started trading after 5 April 2016, the years for which self-assessments were filed will be used to determine the average.
If you are self-employed or in a partnership and haven’t submitted your 2018/19 tax return yet, you must do so before 23 April. If this applies to you, give us a call (01509 816150). We will try to help – but existing clients come first.
The grant will be 80% of your average profits over the three tax years or a shorter period if you haven’t traded for the full three years.
There is a maximum of £2,500 per month and this will be paid for three months. Payment will be at the end of the three months. We think the plan is to add another three month period if the effects of the virus have not resulted in an easing of restrictions.
One of the big questions is how they define “trading profit”. There are, potentially, at least three different profit figures which could be used. There is a profit according to accounts produced. There is a profit where WDA (Written Down Allowance) is substituted for Depreciation. There is a profit where AIA (Annual Investment Allowance has been claimed. There are other possible variations.
It would be grossly unfair to someone who has invested in their business by buying equipment in order to expand the business if the profit after deducting AIA were to be used. Clarification and explanation is being sought.
When will you get it?
The guidance is that HMRC will contact you if they believe you are eligible and invite you to apply online.
Once HMRC has received the claim and they decide you are eligible, they will contact you to tell you how much you will get and how it is going to be paid. It will only be paid after three months (end of June). If you are suffering hardship in the interim, you need to apply to the DWP for benefits. This is outside our expertise.
We assume there will be some form of appeals process if you (or we) think the calculation is incorrect. However, no details have been issued.
Scammers are likely to seize on this initiative as an opportunity to try to extract money, possibly by pretending to be HMRC. This is the warning from HMRC:
You will access this scheme only through GOV.UK. If someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a scam.
We don’t know what information will be required to submit your claim. Obviously, we will help as much as we can. We have the ability to screen share so we can complete the application together while firmly following the social distancing rules.
Our existing clients will receive preferential treatment. However, if you are not currently a client and feel you need assistance, call us (01509 816150) or complete the enquiry form below. We will do our best to help.
You should read previous posts covering the Coronavirus crisis and the actions being taken.
The crisis will end. You need to prepare your business as much as possible for the period after the crisis. Spend some of your time planning and be ready.
We will be available to help you with this.