What is the Self-Employment Income Support Scheme (SEISS)?
The Chancellor announced a new Self-Employment Income Support Scheme (SEISS) as a response to the Coronavirus outbreak.
This follows on from the Coronavirus Job Retention Scheme (CJRS) which was recently announced to support employers to pay employees who are furloughed as a result of the outbreak.
What payments will be available from the SEISS?
Eligible self-employed individuals will be able to claim direct cash grants from HMRC. Grants will be:
- Based on 80% of their average monthly trading profit over the last 3 years
- Capped at £2,500 per month
- Taxable, so individuals will have to report them on their tax returns
- Available initially for the 3 months to 31 May 2020
These figures mirror the financial support to employers under the CJRS.
Who will be eligible for the SEISS?
Individuals must already be in self-employment and have lost trading profits due to the Coronavirus. It remains to be seen how this will be tested. They must have traded in 2019/20 and be intending to trade in 2020/21. There will be a ‘means tested’ limit of £50,000 of trading profits below which they will be eligible.
This will be based on a trading profit of less than £50,000 in 2018/19 or an average trading profit of less than £50,000 from 2016/17, 2017/18 and 2018/19. HMRC will review the tax returns for those years to determine who is eligible. We do not know the definition of ‘trading profit’ as yet, whether this is accounting or taxable.
A tax return must be submitted for 2018/19 for the individual to be eligible. The tax return filing deadline is being extended to 23 April 2020 to allow individuals to file who have not already done so.
Those who combine self-employment with employed roles may be eligible. However, more than half of the individuals’ income during the above periods must have come from self-employment.
What if I don’t have 3 years of returns?
The individual must have at least one self-employed tax return (for 2018/19) to be eligible. This single year could be the basis for their grant claim. HMRC will look at 1, 2, or 3 years of returns, as relevant.
What about Personal Service Companies (PSCs)? And partnerships?
PSCs, where there is typically a single director / shareholder, will not be covered by the SEISS. However, these individuals may be eligible for the CJRS where they pay themselves a salary under a PAYE scheme with HMRC. We understand dividend payments will not be covered by either scheme.
In our view, if there was the will from government it would be relatively straightforward to make grants to PSCs in a similar manner to the grants to be made to the self-employed.
The SEISS will cover members of partnerships.
When will SEISS be available? How will claims be made?
HMRC hopes to start making SEISS grant payments from the beginning of June 2020. These will be backdated for 3 months to 1 March 2020 and paid as a single lump sum. This also mirrors the timeframe under the CJRS.
HMRC will review individuals’ tax returns to determine who is eligible and invite them to apply. Individuals have been asked not to contact HMRC now. Applications will be by way of an online form and individuals will be asked to verify that they are still trading as self-employed. Grants will be paid in cash directly into individuals’ bank accounts.
As HMRC will contact individuals directly, and any application will be via the official gov.uk website, any emails, calls or letters asking for bank details will be a scam and should not be acted upon.
What if I’m not eligible?
Individuals who aren’t eligible for the SEISS may still be able to claim other forms of support such as Universal Credit or the Coronavirus Business Interruption Loan Scheme (CBILS). Individuals who are eligible may also be able to claim this support in the period before the SEISS is up and running.
Self-assessment income tax payments (the second payment on account for 2019/20 due on 31 July 2020) are also being deferred until 31 January 2021.
This general guidance is based on the information available as at 27 March 2020. It is therefore subject to change based on further information and details of the SEISS being issued by HMRC. It should not be relied on as advice in relation to individuals’ specific circumstances.
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