Coronavirus and the Self Employed

The Government has published further guidance for the self-employed.

The guidance is very comprehensive and set out in the attached link.

Guidance - Claim a grant through the coronavirus (COVID-19) Self-employment Income Support Scheme

The guidance sets out a grant of 80% of trading profits over years 2016/17, 2017/18 and 2018/19 or £2,500 maximum.

It represents a grant and so is not repayable but is subject to Income Tax and NIC.

HMRC aim to contact eligible persons by mid-May with payments due in early June.

In the meanwhile, individuals are eligible to make a claim for Universal Credit which, like the Covidvirus grant, is also part of a person’s income and subject to Income Tax and NIC.

The criteria require the claimant to have filed a tax return for 2018/19 or will have done by no later than 23 April 2020. The claimant must also be trading in 2019/20 but for Coronavirus.

Where bank details are known payments will be made directly into the claimants bank.

The grant does not apply if income exceeds £50,000, and crucially self-employed income must be more than 50% of the individual’s income (many individuals have more than one occupation and many are both employed and self-employed concurrently).

A second document was published giving further details about what constitute profits for the purposes of determining the grant.

The guidance is very comprehensive and set out in the attached link.

Guidance - How HMRC works out total income and trading profits for the Self-employment Income Support Scheme

Whilst the definition is much clearer, and excludes losses used to offset profits, many individuals claim various legitimate expenses against profits such that profits are lower than the “actual drawings” enjoyed from the business from previous year retained profits – an example is capital equipment representing the tools of the self-employed person’s trade.

In addition, the document defines total income that is to be used for the purposes of the 50% rule; it includes unearned income and therefore it is clear that the grant is not really intended for small part time self-employed income earners who use the income to support their overall income.