Self-employment Income Support Scheme
The government has announced their intention to provide further support for the self-employed (including members of partnerships) in the form of a Taxable cash grant.
The scheme allows individuals to claim a taxable grant worth 80% of their trading profits up to a maximum of £2,500 per month for the 3 months from March to May 2020. This may be extended by the government if needed.
The taxable cash grant will be in the form of a single lump sum to cover the three months from March to May 2020. It will be paid in June 2020 to those that are eligible directly into their UK bank account.
The scheme will be open to those that have submitted an income tax self-assessment tax return for the year to 5 April 2019 (the 18/19 tax year). Worth noting that HMRC’s guidance does state that the 18/19 tax return must be filed by 23 April 2020 in order to eligible for this scheme! For those that have yet to file their 18/19 tax return, it represents something of an opportunity in the few days remaining to meet this deadline.
You will be eligible for the scheme if all of the following criteria apply:
- The individual must be currently self-employed (including partners in partnerships and LLPs);
- The individual must have lost trading profits due to Covid-19/Coronavirus and they must have traded in 2019/2020,
- The trader intends to trade in the current 2020/2021 tax year and are trading at the point of application or would have been except for Covid-19.
- The individual must have submitted a 2018/2019 self-assessment tax return (or will do by 23 April 2020) in order to qualify for this scheme. Individuals can of course submit a late return for 2018/2019 after 23 April 2020, however, this would mean that they would be precluded from qualifying for this scheme.
In addition to this, there are two alternative rules relating to earnings and sources of those earnings (a trader only needs to meet one of the following two requirements):
- The self-employed trading profits for 18/19 must be less than £50,000 and more than 50% of their income stems from self-employment or, alternatively
- Average trading profits for the tax years 16/17, 17/18 and 18/19 were less than £50,000 and more than 50% of their income stems from self-employment.
For those that started trading between 2016-19 HMRC will only use those years for which a Self-Assessment tax return has been filed.
Disguised Remuneration Scheme
The loan charge affects individuals if they used disguised remuneration tax avoidance schemes and they did not repay their loans, or provide HMRC with all the necessary settlement information by 5 April 2019. HMRC released updated Guidance on 7 April 2020 in respect of the Loan Charge.
HMRC offer the following advice to those individuals who have reported their Loan Charge, are aiming to settle their disguised remuneration scheme use by 30 September 2020 and wish to claim a grant under this scheme will have different criteria to adhere to. HMRC state that their grant will be based on either (presumably HMRC mean the higher of):
- the average of the tax years 2016 to 2017 and 2017 to 2018
- the tax year 2017 to 2018 if you were not self-employed in the tax year 2016 to 2017
In this circumstance, note that the 2018/2019 figures are not used in order to arrive at an average.
Note also that those that are declaring a Loan Charge should file their 2018/2019 self-assessment tax return by the 30 September 2020 (they do not need to file their return by 23 April 2020, see above) in order to qualify for a grant under this scheme.
If the self-employment began after 5 April 2019, i.e it began in the 2019/2020 tax year onwards, then unfortunately, the individual will not qualify for this scheme.
Tax Credits and Universal Credit
Individuals that claim Tax Credits would need to include the grant as part of their income. The grant will be treated as earnings for Universal Credit too and should be reported in the claimants online journal.
Making a claim
It is crucial to observe that HMRC will contact and invite those that are eligible to apply. Applications will need to be made online when the invitations have been issued by HMRC.
Individuals do not need to contact HMRC now.
This seems an opportune moment to remind readers that HMRC does not send texts or make calls asking for bank or credit card details. If this happens then it is likely to be a scam. Please be wary.
We will update this guidance as and when HMRC issue further guidance of their own.
If you have any further queries regarding the above or you wish to speak to one of our advisors regarding this please call the Croner Taxwise Tax, VAT and Payroll advice line fill out the form to request a callback.
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