This afternoon the Chancellor announced the government’s intention to implement a financial support package for the self employed, termed the “Self Employed Income Support Scheme”.
- Available to the self employed only, small company owners won’t qualify
- Cash grant of 80% of monthly profits as calculated by reference to last three tax returns.
- Cash grant is limited to a maximum of £2,500 per month
- Cash grant is not available to those whose annual profits exceed £50,000
- No cash grants are likely to be paid until early June 2020
- Must have filed 2018/19 Tax Return to qualify
- Grants are taxable and don’t prevent the taxpayer continuing to work/earn.
In general terms the scheme will mirror the Coronavirus Job Retention Scheme and will offer financial support to the self employed in the form of a cash payment of up to 80% of their monthly profits as calculated by reference to the previous three tax years. However, as with the Coronavirus Job Retention Scheme, this support will be limited to a maximum of £2,500 per month and crucially is only available for those with profits of less than £50,000 per annum (we assume this will be determined by the average profits over a three year period).
Of concern to many will be the fact that the scheme is likely to be ready for the beginning of June so the prospect of any immediate financial assistance is unlikely. That said, the government have urged the self employed to look into claiming Universal Credit in the short term if their income is low as a result of the impact of the Coronavirus crisis. Although there is a wait of six weeks before payment of Universal Credit, those in need of more immediate assistance can request a cash advance on their benefit entitlement to tide them over until Universal Credit begins to be paid.
At present there will be little comfort to those small businesses who operate through a limited company as the detail published so far confirms that they won’t benefit from this financial support (as they are company employees rather than self employed). Small company owners may benefit from the Coronavirus Job Retention Scheme if they pay themselves through PAYE although the need to have been furloughed may complicate the eligibility criteria position somewhat. We await the detailed guidance on both schemes to provide more clarity generally.
How do I apply?
The scheme is not yet launched, it is likely that it will be early June before HMRC have developed and launched the application process. From what we understand, HMRC will determine who is eligible based upon the information already held from the Self Assessment process up to 5 April 2019 and then contact you directly to invite an application.
IMPORTANT – If you have yet to file your 2018/19 Tax Return you have a matter of weeks to do so to ensure that you are eligible for financial support under the SEISS.
The financial support being offered to the self employed will be a relief to a great many of our clients but there remain gaps in the coverage. It remains unclear whether there is any support to be offered to small limited companies but we will be sure to provide further updates as further information is released.