Coronavirus (covid-19) – self employment income support scheme (seiss) + other updates [27th march 2020]

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30 30, 2020March 30, 2020

Following the announcement yesterday from the Chancellor on behalf of the Government in respect of financial supports for the Self employed and sole trader businesses etc., please now see our summary of the operation of the scheme.

There are also a few other key issues to be considered in respect of the scheme which I have also outlined below.

Separately there are a few other announcements that impact both our limited company and self assessment clients, along with some updated guidance for employees (and useful for Employers as well) on the ‘furlough’ process for employees under the CJRS scheme. (see attached)

CORONAVIRUS SELF EMPLOYMENT INCOME SUPPORT SCHEME (SEISS)

The Government has announced this scheme as a financial support for self-employed individuals, as well as members of partnerships, who will have lost income due to the coronavirus (COVID-19) situation.

What this means, is that self employed business owners including cleaners, plumbers, electricians, musicians, hairdressers and many others will now be eligible for the new scheme.

In summary, the scheme allows for a claim directly to HMRC of a taxable grant worth 80% of trading profits up to a maximum of £2,500 per month for the next 3 months (which may be extended where necessary)

Self employed individuals should not try to contact HMRC now, as all eligible taxpayers will be identified by HMRC who will make contact directly, with the details of how to make an application for the grant (likely to be an online application form).

Grants will be paid to the eligible claimants from the beginning of June 2020 in a single lump sum instalment, covering all 3 months – into the individual’s bank account.

Who can apply for the SEISS scheme

A self-employed individual (or a member of a partnership) can apply for the scheme where they meet the following conditions i.e.

  1. have submitted their Income Tax Self Assessment tax return for the tax year 2018-19
  2. traded in the tax year 2019-20
  3. are trading when making the application (or would be except for COVID-19)
  4. intend to continue to trade in the tax year 2020-21
  5. have lost trading/partnership trading profits due to COVID-19

The additional condition to apply for the scheme is that:

  • self-employed trading profits MUST be less than £50,000, AND
  • more than half of the income must come from self-employment

The £50,000 threshold will be determined by at least ONE of the following conditions being true:

  • having trading profits/partnership trading profits in 2018-19 of less than £50,000 (and these profits constitute more than half of your total taxable income) OR
  • having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 (and these profits constitute more than half of your average taxable income in the same period)

Where you have commenced trading between 2016 and 2019, and therefore have less than 3 years trading activity, then HMRC will only use those years for which a Self-Assessment tax return has been filed.

Calculation of the Grant under the Scheme

The amount of the (taxable) grant will be a monthly amount of up to 80% of the average profits from the applicable tax year(s), and up to a maximum of £2,500 (per month) for a period of 3 months (at present).

Where an average requires to be calculated to confirm if the £50,000 profits threshold is met across the 2016-2019 period, then to work out the average, HMRC will:

  • add together the total trading profit for the 3 tax years, (where applicable) then
  • divide by 3 (where applicable), and
  • use this to calculate a monthly amount.

Application for the Scheme

Self employed individuals (or members of a partnership) cannot apply for the SEISS scheme yet and also are encouraged NOT to contact HMRC about this scheme in the meantime.

HMRC will contact individuals who are likely to be eligible for the scheme in due course (possibly as late as June 2020 given that the systems are not yet in place), and will invite applications at that point to be made online.

Once HMRC has received the claim/application under the scheme and you are confirmed as eligible, it is expected that you will receive contact directly from HMRC to confirm how much will be received and to confirm payment details.

Grants will be paid to the eligible claimants from the beginning of June 2020 in a single lump sum instalment, covering all 3 months into the individual’s bank account.

Other Key Issues

  • Individuals who pay themselves a salary and dividends through their own company are NOT self employed and hence NOT covered by the scheme (but will be covered for their salary under the payroll scheme by the Coronavirus Job Retention Scheme (CJRS))
  • Where an individual has NOT yet submitted their Income Tax Self-Assessment tax return for the tax year 2018-19 i.e. you have missed the 31st January deadline, an extension has now been provided as part of this Government announcement, to 23 April 2020.
  • Unlike under the CJRS employee scheme, self-employed individuals can continue to work even where they receive the SEISS scheme support.
  • Please note that the grant support income received under the SEISS scheme will be taxable, and therefore required to be included in tax returns for the tax year 2020/21 (to be submitted by the 31st January 2022).
  • As there may be a requirement as part of the SEISS scheme to provide bank details to enable payment from HMRC, it is important that there is an awareness of the potential risks of scams operating in the interim i.e. receipt of texts, calls or emails claiming to be from HMRC, so ensure great care is taken around this process.

PLEASE NOTE – The Government has highlighted that given the timeframes for the receipt of the SEISS grant income payment (to June 2020), self employed individuals in the meantime, should be looking at availing of the existing financial supports offered by the Government in previous announcements, including

  1. Access to Universal credit payments system
  2. Using the Income tax and VAT payment deferment options
  3. Obtaining loan finance via the Coronavirus Business Continuity Loan Scheme (CBILS) scheme
  4. Obtaining short term funding from their bank i.e. overdrafts etc.
  5. Using the options now available to those with mortgages and residential rent liabilities (see below)

SELF ASSESSMENT INCOME TAX

For individuals who pay under the Income Tax Self-Assessment regime, payment on account which are due on the 31 July 2020, may now be deferred until 31 January 2021.

It is applicable to all Self assessment individuals i.e. you are eligible if you are due to pay your second self-assessment payment on account (POA) on 31 July 2020, and do not need to be self-employed to avail of the deferment.

Obviously if you are still able to pay your second payment on account (POA) on 31 July 2020 then you can do so.

The deferment is automatic for all taxpayers and no application is required. Additionally there will be no penalties or interest for late payment, as long as the payments are made up to date by 31st January 2021.

PROTECTION FROM EVICTION (FOR COMMERCIAL TENANTS)

Commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction.

These measures will mean no business will automatically forfeit their lease and be forced out of their premises, if they miss a payment up until 30 June 2020 (which may be extended if necessary).

The change will come into force when the Coronavirus Bill receives Royal Assent and therefore no action is required.

Please note that this is NOT a rental holiday, with all commercial tenants still be liable for the deferred rental payments.

COMPANIES HOUSE ANNOUNCEMENT

The Government has also announced that for all limited companies (and accountants), there will be an additional three months provided to file statutory accounts with Companies House i.e. to let them prioritise responding to the coronavirus pandemic. 

In practice, this means that any company that applies for an extension to file their results citing Covid-19, will automatically and immediately be granted an additional three-months.

It applies where the filing deadline has not yet passed, you can apply online for an automatic and immediate 3 month extension to file your accounts – https://beta.companieshouse.gov.uk/extensions

Please note that If you do not apply for an extension and your accounts are filed late, an automatic penalty will be imposed. Companies that have already extended their filing deadline, or shortened their accounting reference period, may not be eligible for an extension.