Covid 19 - Self-employment Income Support Scheme
The government have announced the introduction of the Self Employment Income Support Scheme.
The scheme will allow certain self-employed individuals to claim a taxable grant. The amount of the taxable grant will be 80% of the average profits for the tax years 2016/17, 2017/18 and 2018/19 up to a maximum of £2,500 per month.
To work out the average profits HMRC will add together the trading profits for each of the above tax years then divide by 3 (or by the number of years trading arises) and use this to calculate the amount of monthly income. 80% of this monthly amount up to a maximum of £2,500 per month for 3 months, will then be paid as one lump in June 2020 directly into the individuals bank account.
The scheme will initially run for the 3 months from 1 March 2020 to 31 May 2020 but may be extended if necessary.
Individuals that claim Tax Credits would need to include the grant as part of their income. The grant is taxable income so will need to be included within the relevant accounts and tax return.
HMRC have said that Individuals should not contact them to make a claim now. HMRC will in due course contact those that are eligible to apply. At that point if the individual chooses to make a claim then an online application will need to be submitted to HMRC.
The conditions for eligibility are as follows:
Trading profits for the 2018/19 tax year must be less than £50,000 and their self-employment income represents more than 50% of their total taxable income. Or:
Their average trading profits for the tax years 2016/17, 2017/18 and 2018/19 are less than £50,000 and their self-employment income represents more than 50% of their total taxable income.
In addition, the individual must have lost trading profits due to the Coronavirus, they must have continued to trade since 6 April 2019, are intending to trade in 2020/2021 and are still trading at the point of application or would have been if it were not for the Coronavirus.
For those that started trading after 6 April 2016 but before 5 April 2019 HMRC will only use the above criteria for the tax years for which a Self-Assessment tax return has been filed. Therefore, if any tax returns for 2016/17, 2017/18 or 2018/19 remain outstanding they should be submitted as soon as possible. In fact, HMRC have set a deadline of 23 April 2020.
Unfortunately, at the present time individuals who commenced self-employment after 6 April 2019 will not be able to claim. Instead they will have to look at making a claim for Universal Credit. It maybe that depending on political and/or media pressure that this changes and we will of course keep any of our clients affected by this fully informed.
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