Coronavirus Self-Employment Income Support Scheme: What you need to know

Coronavirus Self-Employment Income Support Scheme: What you need to know

Self-employed workers have been hit particularly hard by the coronavirus (COVID-19) outbreak.

Not only do they face losing income because of the lockdown but they also have additional ongoing fixed-cost expenses such as vehicles or premises.

When it was introduced in March 2020, the Self-Employment Income Support Scheme (SEISS) was a lifeline and brought similar salary financial assistance as offered to furloughed workers within larger businesses.

In November 2020, the SEISS was extended so that it provides grants for two further consecutive three-month periods, running into 2021:

November 2020 to January 2021

You can claim up to 80% of three months of your average profits (see “How much do I get?” below), capped at £7,500.

HMRC will publish updated guidance how this average profit will be calculated but it is likely to be similar to earlier SEISS grants.

You can apply for this as of 30 November 2020.

February 2021 to April 2021

The government will announce the value of this grant at a later date.

Eligible self-employed people can claim grants for one or both of these trading periods, if their average trading profit has been impacted by coronavirus.

You don’t need to have claimed a SEISS grant up until this point, but you do need to have fulfilled the eligibility criteria when the SEISS originally started back in March 2020 (see “Am I eligible for the Self-Employment Income Support Scheme?” below).

In other words, you qualify for the grant only if you’ve carried on a trade in the tax years 2018/19 and 2019/20.

This means those who have recently become self-employed are not eligible.

Unlike some other government coronavirus schemes, the SEISS grants are not loans, so they don’t have to be paid back (outside of situations where they’re been claimed fraudulently).

The grants are considered declarable income just like any other, though, so are still subject to the usual tax and National Insurance deductions.

See below to check if you’re eligible for the SEISS, what you’re likely to receive, and when.

Am I eligible for the Self-Employment Income Support Scheme?

How much do I get?

Who isn’t eligible?

Can I continue to work while apply for, or after receiving, the SEISS grant?

What criteria is the government using to judge if I’m adversely affected by coronavirus?

How do I apply for the scheme?

When will I receive the grants?

What admin or paperwork requirements does the SEISS have?

Other coronavirus measures for self-employed workers

To claim the extended grants from November 2020 onwards, you’ll have to have been eligible for the first two grants that began back in March 2020 – even if you didn’t claim them.

You’ll also need to make a declaration as part of the grant claim process that either you’re currently actively trading but are impacted by reduced demand due to coronavirus, or were previously trading but are temporarily unable to do so due to coronavirus.

The government has created an online tool by which you can find out if you’re eligible. The tool uses your existing Self Assessment records to determine this.

To use the tool, you’ll need your Unique Taxpayer Reference (UTR), which you should find on your most recent Self Assessment return, and your National Insurance number.

Should the tool say you’re not eligible, and you believe you are, you can ask HMRC to review the conclusion by contacting them using the details they provide.

Alternatively, if your situation changes for any reason and you believe you’ve now become eligible, you can use the tool again.

If you wish to assess your eligibility manually, the criteria are as follows (all of the below statements must be true):

  • You’re an individual who’s self-employed in the UK (or a member of a partnership) for the tax year 2020/21.
  • You’ve been adversely affected by coronavirus for the period when the grant applies, in that you’re seeing reduced demand but are still actively trading, or have temporarily stopped doing so because of coronavirus. See below for guidance of what the government considers to be adverse reasons.
  • Your 2018-19 Self Assessment tax return was filed on or before 23 April 2020.
  • You’ve carried on a trade in the tax years 2018/19 and 2019/20 (or longer).
  • Your 2018/19 trading profit was £50,000 or less OR your average trading profit for tax years 2018/19, 2017/18 and 2016/17 were £50,000 or less. Your trading profit is the taxable profit generated from your business that is calculated as part of your income tax return, and the average is determined by the government simply by adding the trading profits (or losses) for the three years, then dividing by three. If you’ve only been trading for two years, the government will add those two years and divide by two instead.
  • More than half of your income comes from your self-employment. In other words, you can’t claim if more than half your income comes from another source, such as full-time employment. Similarly, if more than 50% of your income comes from other sources usually included on your Self Assessment tax return, such as investment or rental income, then you are not eligible.
  • You aren’t already above the state aid limits, as claiming the SEISS grants would take you above them.
  • You don’t trade through a trust.

Two grants are available. Each covers the equivalent of three months’ trading.

With the first SEISS grant for the extended scheme (November 2020 to January 2021), you can claim 80% of what your average earnings would’ve been for an averaged three months.

However, the grant is capped at £2,500 for each month (that is, £7,500 in total).

It can be claimed from 30 November 2020 onwards, but the final deadline for claiming has not yet been announced.

We don’t yet know how much the second grant will be for.

Each SEISS grant is paid in a lump sum after application, rather than in monthly instalments.

The details of the calculation for the November 2020 to January 2021 grant claim have not yet been published by HMRC but are likely to follow the same calculation approach as with earlier SEISS grants.

Under the earlier grants, to work out how much you should receive for each grant, the government calculated the average of your trading profit across the years you traded during the 2016/17, 2017/18 and 2018/19 tax years (that is, it added up your trading profits then divided by the number of years you traded in).

Then it produced a monthly figure from this by dividing by 12.

This figure is multiplied by three.

The previous grants then paid out at an agreed rate, which for November 2020 to January 2021 will be 80% (capped at £7,500).

If any of your Self Assessment returns have been amended or had a contract settlement applied after 6pm on 26 March 2020, the government will use the earlier, unamended version(s) for its calculations.

The grants are taxed, just like your regular income.

In other words, the income must be declared along with other income sources in your Self Assessment tax return.

You’ll then pay any tax due as you would usually. But you can also offset losses against them too, as usual.

If you claim tax credits, the grants will need to be listed in your tax credit claim as income.

If you are subject to a loan charge, the average trading profits of tax years 2016/17 and 2017/18 are used to calculate what you’ll receive (or 2017/18 if you didn’t trade across 2016/17).

You’re not eligible for the SEISS grants if any of the following apply:

  • You haven’t been trading for long enough, which is to say, you did not carry on a trade in the tax years 2018/19 and 2019/20. This means those who’ve recently started out as a sole trader can’t claim.
  • Your trading profits are more than £50,000 – for both tax year 2018/19 and when averaged across the tax years you traded in during the last three full tax years starting in 2016/17.
  • You aren’t self-employed or in a partnership, or don’t intend to be in the future. It’s not enough to merely be enrolled for Self Assessment and to have undertaken self-employment work or have a role in a partnership at some point in the past year. You must be trading now and intend to do so in the 2020/21 tax year too.
  • You failed to submit a Self Assessment tax return for the 2018/19 tax year before 23 April 2020.
  • You haven’t lost trading profits due to the coronavirus outbreak. During your application process, HMRC requires you to legally declare you are adversely affected, and it may attempt to retrieve the grants if it believes your application is fraudulent.
  • Less than 50% of your income came from your self-employment or partnership for both tax year 2018/19 and when averaged across the tax years you traded in during the last three full tax years starting in 2016/17.

Yes, you can continue to trade despite applying for or receiving the SEISS grants.

Similarly, the amount you can claim for each time is not affected by any work you’ve done, are doing now, or will do in the future.

This is a significant difference from the similar Coronavirus Job Retention Scheme Extended, which employers are using for the same period, where furloughed employees are not allowed to work or provide any services for the employer who furloughed them (but are allowed to work for other employers).

In other words, you may find that your furloughed employees are unable to work for you if you use the Job Retention Scheme to full-time furlough them, but you can continue to work within your business under the SEISS scheme.

The government says that, even though you apply for and receive the SEISS grants, you can also start a new trade or take on other employment. This includes voluntary work, or your duties if you’re a reservist in the armed forces.

The government quotes a handful of examples of how a self-employed person might be adversely affected sufficiently that they can claim the SEISS grants.

You might simply see reduced remand due to coronavirus, but are otherwise continuing with your trade.

Alternatively, you might be raring to work as usual, but find yourself unable to because you have no customers or clients because of the coronavirus outbreak.

You might be self-isolating after suspecting you have the virus, or sick because you’ve caught it. You may have caring responsibilities because of the virus outbreak.

You might be unable to work because your staff are isolating themselves. You might be unable to trade because your suppliers are affected and can’t provide the materials you need.

HMRC’s online portal for making applications for the next grant will open on 30 November 2020.

We’ll update this blog with a link when we have it but it should also be linked from the government webpage outlining the SEISS extension.

You must apply for the scheme yourself. A third party, such as your accountant or financial adviser, can’t do it on your behalf.

It’s vital to note that, unlike some of the other coronavirus-related grants from the UK government, receiving the SEISS grant money is not automatic.

If you don’t apply, you will not receive it.

If you’re unable to claim online (because of disability, for example), contact HMRC by phone for more guidance, on 0800 024 1222.

The government asks that, outside of this, applicants don’t contact HMRC to enquire about the grants because it’s busy supporting many other queries.

To apply online, you’ll need the following information to hand:

  • Your Self Assessment Unique Taxpayer Reference (UTR). This will be on your Self Assessment documentation.
  • Your National Insurance number.
  • The Government Gateway user ID and password that you ordinarily use to login the Self Assessment online services. If you haven’t already got one, you will be invited to create one by utilising the government’s SEISS eligibility service. Bear in mind this will require you to prove your identity, which could require details from personal documents such as your passport or driving licence.
  • The bank sort code and account number where you wish the money to be paid. You might want to inquire with the bank that they accept BACS payments for that particular account, although most UK banks do.

If previous grant payments are any measure, the money should be received within six working days after you apply online.

The entirety of each grant is paid in a single lump sum, rather than in monthly instalments.

Details from HMRC on the SEISS grant that you'll receive

Details from HMRC on the SEISS grant that you’ll receive

You need to keep the documentation relating to SEISS with your other Self Assessment records, as per existing requirements to keep records for five years.

In other words, you will need to keep the records until at least 2027 after the 31 January 2022 submission deadline for the 2020/21 tax year, and until at least 2028 for the second grant, part of which falls into the 2021/22 tax year.

You should keep the records relating to the amount claimed, the claim reference number, and any evidence that your business has been adversely affected by the coronavirus outbreak (cancelled orders, for example).

Remember that the reason for keeping the records in this way is to explain to HMRC what your situation was should it investigate for any reason. So the more evidence you save, the easier this will be.

There are other coronavirus emergency measures that the government has put in place that might help you, as a self-employed individual or member of a partnership.

Deferred income tax payments

Self Assessment payments that were due on 31 July 2020 and also on January 2021 can be paid back across the 2021 calendar year.

It’s accessed by making a request using the HMRC Time to Pay Scheme.

If you’re self-employed and struggling to meet outstanding tax obligations due to financial difficulties, you can contact HMRC to see if you’re eligible for support.

Contact HMRC on the special coronavirus helpline: 0800 0159 559.

Grants for businesses

As part of the lockdown measures in November 2020, the government is providing local authorities with funding so they can pay up to £3,000 every four weeks to businesses forced to close.

Local authorities are also receiving funding of £1.1bn that they can spend at their discretion.

Contact your local authority to learn more about these grants.

Coronavirus loan schemes

Several loan schemes are open to businesses that have been impacted due to coronavirus.

Small businesses can use the Bounce Back Loan Scheme, while SMEs can use the Coronavirus Business Interruption Loan Scheme.

The Future Fund is also available.

Businesses can apply for Bounce Back or Coronavirus Business Interruption loans with approved lenders.

The government will underwrite 80% of the Coronavirus Business Interruption loans, and 100% of Bounce Back Loans, making them more widely available to those who might not normally be able to apply. There’s no interest for the first 12 months, and no fees for that period.

The Future Fund has more complex eligibility rules. Your business will need to have raised at least £250,000 in equity investment, for example.

Conclusion on self-employment support

If you’re self-employed or in a business partnership, it’s worth making use of every government scheme that you’re eligible for.

Additionally, it’s vital to keep up with announcements and developments because the government is announcing additional measures on a regular basis.

Editor’s note: This article was first published in March 2020 and has been updated for relevance.

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The post Coronavirus Self-Employment Income Support Scheme: What you need to know appeared first on Sage Advice United Kingdom.

Keir Thomas-Bryant

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