Self-Employed Income Support Scheme (SEISS)
The first Self-Employed Income Support Scheme (SEISS) will pay self-employed individuals an amount equivalent to up to 80 per cent of their average monthly trading profits, capped at £2,500, to cover at least the three months from March.
This is being paid in a single lump-sum and based upon tax returns from 2016-17, 2017-18 and 2018-19. Applications for the current round of funding remain open here until 13 July 2020.
A second round of funding available for applications from August will be 70 per cent of average monthly trading profits, capped at £6,570 and paid in a single instalment.
For the first round of funding a self-employed individual must have trading profits of no more than £50,000 and must receive the majority of their income from self-employment. Trading profits will either be based on an average of the 2016-17, 2017-18 and 2018-19 tax years or where a person has only been self-employed for just over a year, their trading profits and total income in 2018-19.
Therefore, you must also have submitted a Self-Assessment Tax Return for 2018-19. Anyone who has missed the deadline will have four weeks from 26 March 2020 to do so before they become ineligible for the scheme.
People who pay themselves a salary and dividends through their own company will not be eligible for the scheme but could be eligible for the Coronavirus Job Retention Scheme if they use PAYE.
Alongside these existing conditions, HMRC has said that self-employed people will have to confirm that their trading has been adversely affected by Coronavirus. To assess this the tax authority will use a ‘risk-based approach’ to compliance.
To get an idea of whether an individual may be eligible for the funding, HMRC has created a new online tool that allows the self-employed and their agents, such as accountants, to check. To use the tool please click here.
To use this service, individuals will need:
- Their Unique Taxpayer Reference (UTR) and their National Insurance Number
- To ensure their details are up-to-date in their Government Gateway account.
Once an individual, or their agent, has completed the eligibility check they will be given a date from which the individual can submit their claim. In many cases, individuals will also have been contacted in advance by HMRC to confirm their eligibility.
HMRC has now clarified that in order to qualify for the second grant, a self-employed individual must confirm that their trading has been adversely affected by the coronavirus outbreak on or after 14 July 2020.
This means it is possible for a self-employed individual not to have qualified for the first round of funding by virtue of not having been adversely affected, but to qualify for the second round because they have subsequently been adversely affected. This might be in circumstances where they become unwell with Coronavirus in July and are then unable to trade as a consequence.
However, this also means that some self-employed individuals who were able to confirm that their business was adversely affected for the first round of funding may find that this is no longer the case and so do not qualify for the second round of funding.
The criteria to qualify for the scheme otherwise remain unchanged.
Self-employed individuals will still be able to do business while they receive a grant from the scheme. This differs drastically from the Coronavirus Job Retention Scheme, which requires employees not to work to be eligible.
The scheme is only intended for those who have lost trading profits due to COVID-19.
The claims service for SEISS is now available online to those that are eligible. You can begin this process by clicking here.
If, as your accountants and agents we file your tax return you may not have a Government Gateway Account. However, when making your claim you will be given the option to create an ID as part of the application process.
Individuals that are eligible for the scheme will see the grant paid into their bank account by 25 May, or within six working days of completing a claim.
Self-employed people are eligible to apply for a Business Interruption Loan if they think they meet the criteria.
Alternatively, the Government has changed the rules around Universal Credit and Employment Support Allowance to ensure self-employed people can access the support they need immediately.
Applications for both these benefits can be found online if needed, as can details of the Business Interruption Loan.
HMRC will use turnover figures provided on tax returns and then to calculate trading profit, it will deduct expenses including:
- Office costs
- Travel costs
- Clothing expenses
- Staff costs (for example, in the case of a partnership)
- Things bought to sell on
- Financial costs, such as insurance or bank charges
- Costs of business premises
- Advertising and marketing, such as website costs
- Train courses
- Business expenses deducted through the trading allowance
- Capital allowances used to buy assets used in the business
- Qualifying care relief
- Flat rate expenses.
HMRC will also take into consideration:
- any business expenses deducted through the trading allowance
- capital allowances used to buy assets used in your business
- qualifying care relief
- flat rate expenses
Any losses carried forward from previous years and the personal allowance will not be deducted from trading profits.
HMRC will also consider other income reported on your self-assessment return. Your total income is the total of all your:
- income from earnings
- trading profits
- property income
- savings income
- pension income
- miscellaneous income (including social security income)
At the same time, HMRC has confirmed that it will not deduct losses carried forward from previous years from trading profits, nor will it deduct an individual’s personal allowance.
Grants from the various Government schemes to provide support during the Coronavirus outbreak are taxable in the same way as other income. Payments made under SEISS are considered to be taxable income.
The position had been set out in the various guidance documents for the schemes but has now been underscored by a series of Government amendments to the Finance Bill 2020.