On 26 March, the government unveiled a new package of measures to support the UK’s 5 million self-employed workers: the ‘Self-Employed Income Support Scheme’.
The move follows considerable public and political pressure that has been building since the Chancellor announced the ‘Coronavirus Job Retention Scheme’ for employees last week. More details on that scheme will be announced later this evening.
Prime Minister Boris Johnson signalled in advance that the government wanted the self-employed to have ‘parity of support’ with the so-called furloughed employees, who will receive 80% of their lost earnings up to a maximum of £2,500 per person per month.
Extending support to the self-employed was described as ‘highly complicated’ by the Chancellor – not least because the risk of fraud and the challenge of ensuring that subsidies are targeted at those who most need them.
While we welcome the Self-Employed Income Support Scheme, important questions remain. As with the ‘Coronavirus Job Retention Scheme’, the announcement was light on detail, suggesting that important practical and operational considerations have yet to be thrashed out. It is important that the government finalises the finer points of the support package as soon as possible. In addition, the scheme is unlikely to be operational before early June – that is a very long time for the self-employed to wait. This will potentially leave a number of self-employed individuals without any income for the next two months, although they may be able to access the lending scheme.
SELF-EMPLOYED INCOME SUPPORT SCHEME
The Scheme will provide a cash grant of 80% of an individual’s average monthly profits over the last three years of up to £2,500 per month. It will apply where individuals:
- Have taxable trading profits of up to £50,000 per annum
- Earn the majority of their income from self-employment
- Are registered self-employed and have submitted a 2018/19 tax return to prove it
There does not appear to be a provision to recover the grant if it ultimately turns out that the individual has not seen reduced profits over the period, but this may come in later details. Similarly, there is no mention as to whether the scheme will apply to members of trading partnerships.
It is anticipated that 95% of self-employed people will benefit from this. Those above the income threshold will not benefit from these measures, as it is understood that they have average earnings of £200,000 per annum.
Access to the Scheme will start from the beginning of June. HMRC will contact individuals to complete a required form and the grant will be paid directly into their bank account.
If the 2018/19 tax return has not yet been filed, there will be a further four weeks from today to file to enable you to benefit from the Scheme.
Unusually (perhaps uniquely), however, for the schemes that have been introduced in recent weeks, there is a longer-term sting in the tail. By agreeing to treat the self-employed equally with employees, the Chancellor also announced that the National Insurance regimes for both will be aligned going forward. This will increase future National Insurance paid on profits, but this is an issue for the future.
OTHER MEASURES TO HELP THE SELF-EMPLOYED AND SMES
The government had previously introduced a number of other measures to help the self-employed and SME business owners. Here is a round-up of some of the most important of these below:
VAT has been deferred until 30 June 2020. This is what we know so far:
- All businesses, of any size or sector, can utilise the deferral
- The deferral is automatic with no requirement to apply for the extension
- Businesses will not be required to make a VAT payment during the deferral period
- The VAT return for the period will still need to be submitted on time
- Any VAT repayments arising in the period will still be refunded
- Businesses will have until the end of the 2020/21 tax year to pay VAT liabilities deferred
If you pay your VAT by direct debit, you should cancel this with your bank if you are unable to pay. This should be done in sufficient time so that HMRC does not attempt to automatically collect on receipt of your VAT return. We await more details of the deferral from the government.
Deferral of Payment on Account
For Income Tax Self-Assessment, payments due on the 31 July 2020 will be deferred until 31 January 2021 and no interest will be payable in the deferral.
This has now been confirmed to be all taxpayers who are required to make payments on account under self-assessment; initial government advice implied that this deferral was only available to the self-employed. However, HMRC has said that if you can afford to make your payment, you should do so (presumably to reduce interest costs).
As with the VAT deferral, this is automatic, and no application is required. If you make your payments on account by direct debit, you should ensure that this is cancelled with the bank in good time.
If you think that you taxable income for the 2019/20 tax year will be reduced as a result of the impact of coronavirus, you should also make a claim to reduce your payments on account, which could generate a partial repayment of the first payment on account.
Time to Pay
Time to Pay (TTP) is operated by HMRC with the aim of agreeing arrangements on delaying the payment of tax liabilities. It has been in existence for a number of years, although it has been expanded recently to specifically cover the difficulties caused by coronavirus. The agreements under TTP are reached on a case by case basis and are tailored to individual circumstances and liabilities.
All businesses across all sectors of the economy are covered by TTP, whether operating as companies or self-employed. Most taxes are covered - including PAYE & National Insurance, VAT, Corporation tax and income tax.
To access TTP, call HMRCs dedicated helpline on 0800 0159 559.
£330 billion of government backed and guaranteed loans on ‘attractive terms’ are available for any business that needs cash to pay rent or salaries etc. This funding is available in two main schemes, both of which are now active.
The ‘Coronavirus Business Interruption Loan Scheme’ (CBILS) is intended for businesses with a turnover of below £45 million. It is being delivered by the British Business Bank and is available from 40 accredited providers It will provide loans of up to £5 million, in the form of term loans, overdrafts, asset finance and invoice finance.
If you are looking for finance under CBILS, the government encourages you to approach your own provider in the first instance – ideally via their website. You may also want to take this opportunity to talk to us, as we can work with you to advise on your eligibility and the most appropriate facility for your business.
Commercial tenants who cannot pay their rent because of coronavirus will be protected from eviction. No business will be forced out of their premises if they miss a payment up to 30 June, although this grace period may be extended. Note, however, that the rent will remain payable in due course.
No action is required by the tenant, and the change will come into force now that the Coronavirus Act has received Royal Assent.
Business Rates and grants
For retail, hospitality and leisure businesses, a Business Rates holiday will apply in England for the 2020 and 2021 tax year. Occupiers will not need to take any action to benefit from this, and it will apply to your next Council Tax bill in April 2020.
In addition, the ‘Retail and Hospitality Grant Scheme’ will provide cash grants of up to £25,000 per property for businesses in England. Businesses with property with a rateable value of £15,000 or less will receive £10,000, whilst those with premises rated at between £15,000 and £51,000 will receive £25,000. No action is required, your local authority will write to you if you are eligible.
As part of the ‘Small Business Grant Scheme’, businesses in any sector in England that pay little or no business rates (under the small business rate relief (SBBR), rural rate relief (RRR) and tapered relief) will receive a one-off grant of £10,000 for their local authorities to support small businesses that already pay little or no business rates. You do not need to take any action to benefit from this scheme.
The measures available may differ if your business is in Scotland, Wales or Northern Ireland because some elements of business support are devolved.
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