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COVID-19 self-employed scheme

After mounting pressure for clarification on the COVID-19 support that was expected to be made available on the 26 March, the Chancellor Rishi Sunak has now announced the details of the self-employed income support scheme (SEISS) and how it will work.

SEISS is a taxable grant payable to the self-employed (including partners).

It is set at 80% of a qualifying person’s average trading profits, payable for 3 months and capped at £2,500 per month.

No real-time information?

With it being almost impossible to determine what the self-employed earn in real time, the government has opted to base the grant a person should receive on an average of their trading profits arising in three tax years ending 5 April 2019, as reported under self-assessment.

Where self-employment started later 6 April 2016, the average profit will be calculated by reference to actual period of trading, from commencement to 5 April 2019.

Nothing to do…. yet

As HMRC already holds the data there is nothing for the taxpayer or their agents to do. Instead, the revenue authority will use what it holds to establish eligibility and, if appropriate, the size of grant.

One quarter of the average annual profit will form the basis of the SEISS grant awarded, at the rate of 80% of taxable profits up, with the maximum monthly grant being £2,500.

Who qualifies

The SEISS grant is payable to anyone who is self-employed and meets these conditions:

  • average annual taxable profits of no more than £50,000;
  • submitted a tax return for 2018/19;
  • more than half of taxable income from self-employment;
  • continued to trade throughout 2019/20 tax year;
  • an intention to trading throughout 2020/21 tax year.

Started after 6 April 2019

Those who started trading on or after 6 April 2019 are not eligible for the SEISS grant. Tough, very probably, but the government had to draw a line somewhere.

To qualify for the cash-grant, a self-employed person must have traded in 2018/19, filed a 2019 Tax Return, and would still be trading in the current tax year if it hadn’t been for the interruption to business due to the Coronavirus. In fact, to be eligible for SEISS it is not necessary for your business to cease entirely. It just needs to have suffered a loss of income as a result of the pandemic.

Where a trader has already decided to cease trading, no grant is payable.

Taxpayers who have not submitted their 2018/19 tax return were given until 23 April 2020 to get it in to HMRC and still qualify for the grant. Although, it should be noted that for late filing, and late payment of tax, penalties are not going to be waved. 

HMRC contact

HMRC will contact those eligible and invite them to apply for the grant online. At the time of writing, it is not clear how that approach will be made.

When will it arrive

The three month’s grant will be paid into the applicants bank account in one lump sum, starting early June.

The number of months covered by a SEISS grant may be extended beyond three months if the COVID-19 shutdown continues into July.

As observed earlier, the grant will be treated as taxable income and those in receipt of working tax credits or universal credit should treat the SEISS grant as part of their self-employed income.

Points to note:

  • Those who pay themselves a salary and dividends through their own company are not covered by the scheme. Instead they will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.
  • Property letting businesses are not regarded as a trade, therefore, landlords will not qualify for the SEISS.
  • Similarly, the letting of furnished holiday accommodation is not strictly a trade and, as believed, HMRC is unlikely to consider income from furnished holiday lets as qualifying for the SEISS grant.