The government have now announced a new support measure that will be available to the self employed whose income has been negatively impacted by COVID-19 (their emphasis). The support will extend to 80% of the monthly self employed profits, based on the average of the last three years, up to a maximum of £2,500 per month. The funding received will be taxable.
As this has only just been announced there is little detail at present.
- The average profits will be based on those reported on the 2016/17, 2017/18 and 2018/19 tax returns
- The scheme is open to the self employed (either sole traders or partners in a trading partnership) with profits of less than £50,000 and where more than half of their income is from self employment.
- You must have filed a 2018/19 tax return, have traded in the tax year 2019/20, be trading when you apply (or would be except for COVID-19) and intend to continue to trade in the tax year 2020/21.
- Claimants must have a bank account.
It is not possible to apply for the funding now, we have been informed that once the scheme is operational HMRC will contact potentially eligible claimants based on the information they already hold. Application will then be by an online form.
The scheme is open for an initial three month period and is has been stated that the government expect people to be able to make their first claim by the beginning of June. This may obviously present a cash flow problem until claims are paid out. The government has said that in the interim the self-employed will still able eligible for other government support including more generous universal credit, business continuity loans, Income tax payments due in July 2020 being deferred until January 2021 and VAT payments in the next three months deferred until March 2021. Those affected may also wish to contact their local council for assistance with paying council tax, seek payment holidays from landlords and finance providers and look to suppliers for extended credit terms to help see them through.
The published guidance states that directors of their own company who are paid through PAYE may be able to get support using the Covid 19 Job Retention Scheme (subject to the eligibility criteria of that scheme). This seems to quash any hopes that such individuals might be assisted as part of the support for the self employed.
As ever we will keep you informed of further details as they are released.