Knowledge

COVID-19 Grants for the self-employed

dividend tax

The government has, at last, announced a package of support for self-employed individuals and clarified more about how to access the coronavirus job retention scheme.

Let’s start with the Coronavirus Job Retention Scheme:

In terms of the clarified advice on the Coronavirus Job Retention Scheme, we have learnt:
• You can claim for any employees who have been PAYE on your payroll including part-time or full-time employees, flexible or zero hours employees, employees on agency contracts who are now NOT working
• If the employee is currently on Statutory Sick Pay, e.g. because they are self-isolating, they are not eligible for the scheme until they have come off Statutory Sick Pay
• You will get a grant for the wages you will pay out to Furloughed employees
• The “up to £2500 per month” is actually “up to £2500 per month + associated Employer NI contributions, and minimum enrolment employer pension contributions on that wage”
• The scheme is not yet live, but when it is we will be in contact for how you can make a claim.

Further details can be found here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

A quick summary of the grant being made available for self-employed individuals:

Self-employed individuals will be eligible for a taxable grant up to £2500 per month for at least 3 months, which will be equal to 80% of their profits. And the self-employed can carry on working to access this grant. So far so good. But with all these things there are caveats, namely:

• If you are a director of a limited business or operate through a personal services company then this scheme does not apply to you
• You need to have 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.
• More than half of your income in these periods must come from self-employment. If you started trading between 2016 – 2019, HMRC will only use the years that you filed a self-assessment tax return
• You need to have submitted your personal tax return for 2018/19 (and if you haven’t you must do so by April 23rd 2020)
• You have been trading in 2019/2020
• You need to have lost money due to COVID-19

You may be thinking, but I’m self-employed but get paid as a mixture of dividends and salary. Why can’t I access this scheme? The government may have put IR35 back for a year for the private sector, but they do seem to be making a point here!

Full details of the scheme can be found here: https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

How will HMRC work out what I can claim?

HMRC will take your trading profit for the last 3 years you have traded, then divide by 3 and divide by 12 to get your average monthly profit.

Example: Dave is a self-employed plumber who has been trading for 3 years. In his self-assessment tax returns he declared a profit of £48 000, £35 000 and £45 000. His average monthly profit is: (48 000 + 35 000 + 45 000)/(3*12) = £3 556. This means he would be eligible to claim for £2500 per month of grant.

Example: Sarah is a mobile hairdresser and started trading in May 2019. Her self-employed income was 20% of her income for the year, so she is not eligible for the scheme, as her trading profits in tax year 2018/2019 was not more than half of her taxable income for 2018/2019.

Example: Rishi is a taxi driver and started trading in April 2018. His trading profit in 2018/2019 was £20 500. He got all of his income from self-employment in 2018/2019. He would, therefore, be entitled to £20 500/12 = £1708.33 of a monthly grant.

How do I make a claim?

If you are eligible, HMRC will be in touch.

What help is available to me as someone who is self-employed but operates through a limited company and doesn’t have premises?

In this scenario then you may be able to access a grant via the Coronavirus Job Retention Scheme. I.e. if you pay yourself a salary through payroll, then you may be able to get 80% of this salary. However, you would need to prove you are no longer working and have Furloughed yourself to access the scheme.

Please do get in touch with us at info@rjf.uk.com if you want to know what grants and financial help are available to you.