Coronavirus: FAQs on Help for the self-employed

On 26th March 2020, and following on the heels of the Coronavirus Job Retention Scheme, the Chancellor of the Exchequer announced a scheme to support self-employed individuals affected by the Coronavirus outbreak (the “Scheme”).

The Scheme will enable self-employed persons to apply to HMRC for taxable grants to cover most of their average monthly trading profits. Specific detail of the Scheme has not yet been published and there are still a lot of unanswered questions. We have set out below some of the key questions that self-employed persons are likely to have following the Chancellor's announcement. The information below is based on the announcement issued by the Government as at 26th March 2020. We will endeavour to update this as further information and updates become available but this document is only up to date as at the dateime-stamp set out above.

Which self-employed person are eligible under the Scheme?"]The Scheme will be open to those with trading profits of less than £50,000 in the 2018-19 tax year or (noting that trading profits may be volatile) average trading profits of less than £50,000 in the 2016-17, 2017-18 and 2018-19 tax years (for self-employed persons with less than 3 years of trading history, the Chancellor confirmed that HMRC will look at the years for which a tax return has been submitted). In each case, more than half of a self-employed person's income in the relevant period(s) must come from self-employment. Further, self-employed persons must:

• have submitted their tax returns for the 2018-19 tax year;
• have traded in the 2019-20 tax year;
• be trading when they apply, or would be trading but for COVID-19;
• intend to continue to trade in the 2020-21 tax year;
• have lost trading profits due to COVID-19.

It is not clear how the Government will determine whether these criteria (particularly the last two) are satisfied. To minimise fraud, only those who are already in self-employment and meet the above conditions will be eligible to apply though, generously, the Government has decided to allow anyone who missed the 31 January 2020 filing deadline (for the 2018-19 tax year), until 23 April 2020 to submit their 2018-19 tax return. The Scheme also applies to members of partnerships.

"What support can a self-employed person receive under Scheme?"

Self-employed persons can receive a direct cash grant worth 80% of their average monthly trading profit over the last three years (or such shorter period, as relevant), up to £2,500 per month. This brings parity with the Coronavirus Job Retention Scheme for workers who are furloughed during the outbreak.

"How long is the Scheme going to be in place for?"

The income support scheme, which is being designed by HMRC from scratch, will cover at least the three months to May 2020.

"When will HMRC make the first grants under the Scheme?"

Grants will be paid in a single lump sum instalment covering all 3 months, and will start to be paid at the beginning of June 2020.

"What do I need to do to benefit from the Scheme?"

The Government has advised that individuals should not contact HMRC now. HMRC will use existing information to identify eligible taxpayers and contact them directly with guidance on how to apply once the Scheme is operational - however, we understand that self-employed persons who are eligible for the Scheme will be able to apply directly to HMRC for the taxable grant, using an online form, with the cash being paid directly into their bank account. In relation to support before the first payments under the Scheme are made, the Government has advised that self-employed will still be able to access other available government support for those affected by Coronavirus including more generous universal credit and business continuity loans where they have a business bank account.

"How does this Scheme work for persons who provide their services through a personal service company (PSC)"

The Government has advised that those who pay themselves a salary and dividends through their own company are not covered by the Scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if (and to the extent that) they are operating PAYE. Separately, as noted in our Q&A for Employers, the Government have delayed the implementation of the new IR35 rules by 12 months.

"Is there anything else to note?"

The Chancellor obliquely noted that, in devising the Scheme, “it is now much harder to justify the inconsistent contributions between people of different employment statuses”. Whilst the Chancellor refused to be drawn further on what this meant, it does suggest that self-employed people may be required to contribute more through the (income tax and) NICs system in future.

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If you would like to talk through the consequences for your business, please email us and one of our team will get in touch.