Posted on 1/04/2020 by Fulvia Connsonni
Correct as of 1st April 2020.
On Thursday 26th March the Chancellor finally announced a financial aid package for self-employers, to support those affected by COVID-19, in a similar way they are offering support to PAYE employees.
The scheme will in fact offer a taxable grant of 80% of the Self-employed’s monthly average profit, that will begin being paid from June 2020.
The scheme is not open for application yet, and HMRC will use their own information to identify those eligible and will invite them to apply online.
To determine eligibility HMRC will use the following criteria:
- Your self-employed trading profits must be less than £50,000
- more than half of your income must come from self-employment
- you have submitted your Income Tax Self Assessment tax return for the tax year 2018-19 (any late filers will be given an additional 4 weeks to file their return)
- you must have traded in the tax year 2019-20 and intend to continue to trade in the tax year 2020-21
- you are trading when you apply, or would be except for COVID-19
- you have lost trading/partnership trading profits due to COVID-19
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.
It will be up to a maximum of £2,500 per month for 3 months and HMRC will pay the grant directly into your bank account, in one instalment.
You can find out more information at the following link:
https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme
Unfortunately, the UK government has confirmed that Self-employed contractors in the UK who operate through limited companies will not be covered by the latest package of measures.
However, those who pay themselves a salary and dividends through their own company may be covered for their salary by the Coronavirus Job Retention Scheme (CJRS) if they are operating PAYE schemes. (https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme)
The Chancellor is expected to provide additional information for limited companies and PSCs in the coming days, and we recommend to keep a close eye on the government website as the material gets released, as well as raise enquiries with your accountant who should be able to identify and advise on the best option for your specific situation.
In the meantime, why not signing this petition to bring the issue of limited companies being left out from the grant, to Parliament’s attention:
http://chng.it/ffT2JJNrcM
Ultimately, if you are a Umbrella contractor, you may also be eligible for CRJS as you are on the umbrella PAYE scheme, and therefore should be able to be furloughed and receive 80% of the salary. It is however not yet clear how the 80% will be calculated for umbrella contractors.
Here is what Parasol Umbrella Group says:
“Parasol welcomes the job retention scheme, which we understand will be applicable to Umbrella employees but it is not fully clear from Government how this scheme will apply. Parasol is working very closely with FCSA to lobby Government for urgent support and guidance. There are a number of points on which we are seeking urgent clarification from the Government, in particular regarding how to calculate the furlough pay rate for contractors whose income varies. […] We, along with FCSA, are actively lobbying on behalf of over 625,000 Umbrella employees seeking to ensure that they can receive furlough pay based on their average earnings, and not solely the NLW portion. We have also encouraged our contractor employee base, to make their MP aware of the situation, who in turn should write to the Treasury with their concerns. Doing this urgently will strengthen our collective voice. ”
And while we wait to hear more from the government, you may find it useful to check out the following links on other forms of help you can get:
• deferral of Self Assessment income tax payments due in July 2020 and VAT payments due from 20 March 2020 until 30 June 2020
• grants for businesses that pay little or no business rates
• increased amounts of Universal Credit
• Business Interruption Loan Scheme