COVID -19: Support for the Self-Employed

The UK Government has announced various schemes to help businesses overcome the financial challenges of the coronavirus. We take a look at what is available to businesses and the self-employed, and the criteria for securing support.

SELF-EMPLOYED INCOME SUPPORT GRANT

You can apply if you’re a self-employed individual or a member of a partnership and you:

• have submitted your Income Tax Self-Assessment tax return for the tax year 2018-19
• traded in the tax year 2019-20
• are trading when you apply, or would be except for COVID-19
• intend to continue to trade in the tax year 2020-21
• have lost trading/partnership trading profits due to COVID-19

Your self-employed trading profits must also be less than £50,000 and more than half of your income must be from self-employment. This is determined by at least one of the following conditions being true:

• having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
• having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period.

Please note:

• If you started trading after 2016/2017, HMRC will only use those years for which you filed a Self-Assessment tax return.
• Those who commenced Self-Employment after 5th April 2019 do not qualify.

This scheme will allow you to claim a taxable grant worth 80% of your average trading profits, for the 3 years as above (or the years traded if less), up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.

HMRC will contact you if you are eligible for the scheme and invite you to apply online. Payment is unlikely to be made before June but will be backdated.

However, you can check here to see if you can claim a grant through the Self-Employment Income Support Scheme.

This support does not apply to those who work through a limited company (often referred to as a personal service company). In this case, as the company’s director, you may be able to take advantage of the Job Retention Scheme. However, this scheme will only be beneficial if you receive a regular salary and does not apply to a loss of dividend income where profits are taken from the company in the form of dividends.

DEFERRMENT OF VAT PAYMENTS

If you’re a UK VAT registered business and have a VAT payment due between 20 March 2020 and 30 June 2020, you have the option to:

• defer the payment until a later date
• pay the VAT due as normal

HMRC will not charge interest or penalties on any amount deferred but you will still need to submit your VAT Returns on the normal due dates.

If you choose to defer your VAT payment, you must pay the VAT due on or before your VAT year end which will be 31/03/21, 30/04/21 or 31/05/21.

You do not need to tell HMRC that you are deferring your VAT payment, but if you pay by Direct Debit you will need to cancel the Direct Debit Authority.

Click here for further guidance on the deferral of VAT payments due to covid-19

DEFERRMENT OF SELF-ASSESSMENT PAYMENTS ON ACCOUNT

If you’re due to pay a self-assessment payment on account by 31 July 2020 but the impact of the coronavirus causes you difficulty in making payment by that date, then you may defer payment until January 2021. The deferment is optional. If you are still able to pay your second payment on account on 31 July you should do so.

This is an automatic offer with no applications required. No penalties or interest for late payment will be charged if you defer payment until 31 January 2021.

CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME

The temporary Coronavirus Business Interruption Loan Scheme supports SMEs with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years.

The government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.

There are 40 accredited lenders able to offer the scheme, including all the major banks.

You are eligible for the scheme if:

• your business is UK based, with turnover of no more than £45 million per year
• your business meets the other British Business Bank eligibility criteria

Find out which accredited lenders are offering the scheme here

ADDITIONAL DETAILS OF BUSINESS SUPPORT

Contact a member of our team for additional details of business support during Covid-19. Further information is also available here.

About the Author

Geoff Burningham

Tax Associate

• Telephone: 01428 652788
• Email: [email protected]