Self-employed Income Support Scheme and update on other support.

SEISS Update: What’s New and What’s Next for Self-Employed People

At TAG Accountants, we remain open for business to support our clients, although we are now a remote team! Further to our recent articles we wanted to get some information out on the support for self employed announced last night as well as providing further updates on some of the previously announced Government support schemes.

Self-employed Income Support Scheme (SEISS)

The long-awaited statement from the Chancellor regarding COVID-19 support for the self-employed was announced on 26^th March. The scheme is designed to benefit around 95% of people whose main income source is derived from self-employment.

In short, those that qualify will receive a cash grant from HMRC based on 80% of profits, up to £2,500 per month. The initial grant will be for the 3 months, from 1 March to 31 May, but could be further extended. This means the scheme is broadly in line with the already announced Coronavirus Job Retention Scheme (CJRS), previously announced to support employers.

To be eligible the following conditions will be taken into account. Applicants must:

• Be self-employed or a member of a trading partnership.
• Have lost trading profits due to COVID-19.
• Have filed a tax return for 2018-19 (late file deadline now 4 weeks from 26 March 2020)
• Have traded in 2019-20, be currently trading at the point of application (or would be except for COVID-19) and intend to continue to trade in the tax year 2020-21.
• Have trading profits of less than £50,000 and more than half of total income from self-employment. This can be with reference to at least one of the following conditions:
• Your trading profits and total income in 2018-19
• Your average trading profits and total income across up to 3 years between 2016-17, 2017-18 and 2018-19. Note: If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.

There is no application process to HMRC as they will contact you if you are eligible to encourage you to apply online. HMRC will use existing data to make this judgement – it is not yet clear what you have to do if you believe you are eligible but are not contacted.

The initial 3-month grant will be paid directly to a nominated bank account in a single lump sum and is expected to be paid out at the beginning of June. This delay is to allow late filers of 2018/9 tax returns to file their returns and to reduce the risk of fraud. There was never going to be an overnight solution as this is a complex new system being launched alongside the CJRS and has to be developed and implemented from scratch.

For those self-employed who have experienced a significant drop in income due to COVID-19 disruption, they will need, in the meantime, to apply for Universal Credits to tide them over until June or potentially apply for bank funding via the CBILS loan scheme. If your

If you claim tax credits you will need to include the grant in your claim as income.

For those for became self employed after the end of the 2018/9 tax year, the scheme will not be available to you, unfortunately. It will also not apply to Limited companies, nor to ‘director only’ companies who pay themselves via salary and dividends (see update on CJRS below).

Coronavirus Job Retention Scheme (CJRS) update

An update to this scheme was issued on 26^th March and can be viewed at:

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Director/shareholders situation

The position of director/shareholders trying to claim under the CJRS has been uncertain as their income is usually taken from their company as a combination of a low salary and dividends.

Guidance has now been clarified such that those who pay themselves a salary and dividends through their own company are not covered by the SEISS scheme (the Self-employed Scheme) but will be covered for their salary by the CJRS if they are operating PAYE schemes, inferring that directors will only be eligible for the CJRS based on their salary alone, and only if there is a proven PAYE record.

There is still some uncertainty around furloughing of directors, especially in small businesses where there may only be one director, as technically there must be someone working on the business even if it is not currently operational and that would most likely be the director.

Employer top-up (as CJRS only covers 80% of employment cost)

The employer can choose to top up the CJRS grant to 100%, but it is not compulsory – but note that this is subject to employment law and renegotiating any contractual entitlements so take proper HR advice on this area.

Impact of 80% on minimum wage

Employees are only entitled to the minimum wage for the hours they work.  If they are furloughed and do not work but 80% of their earnings takes them below the minimum wage based on their normal working hours, the employees will still only receive 80% as they are not actually working.  Be aware that they are entitled to be paid at least national minimum wage if they spend time on training.

Employees on variable pay

If employees have variable month-on-month pay, the employer can claim for the higher of the same month’s earning from the previous year; or average monthly earnings in the 2019-20 tax year.

Flexibility of furlough

Furlough leave must be taken in minimum blocks of three weeks to be eligible for CJRS funding.

There do not seem to be any rules preventing rotation of furlough leave amongst employees as long as each employee is furloughed for a period of at least three weeks.

When furloughed, the employee must not be working at all.  If they work for even an hour during their 3-week furlough period, they may well not be eligible.  Guidance indicates that they can undertake training and do volunteer work, as long as they do not provide services to or generate profit for their employer.

Employees who are on sick leave or self-isolating cannot be furloughed but would be entitled to SSP (which the employer can reclaim) but can be furloughed after the end of sickness/self-isolating period (14 days) if they have no work to do.

The Government will issue further guidance on the claims’ mechanism in due course, which will be through a new online portal.  The scheme should be up and running by the end of April so it would not be wise to assume any reimbursements until May at the earliest.

Coronavirus Business Interruption Loan Scheme (CBILS) update

Personal guarantees

We have been hearing reports that many financial institutions have opted out of CBILS and many of those who are included in the scheme have been asking directors to personally guarantee loans despite the fact the Government has provided an 80% loan guarantee.

Thankfully we have heard that most banks are now moving away from this requirement provided the loan is less than £250k – this has been confirmed so far by RBS, HSBC and Barclays with the hope that the others follow suit.

Support for businesses who pay little or no business rates – update

As announced, there is a £10,000 grant available for businesses in receipt of small business rates relief or rural rate relief (rising to £25,000 for retail, hospitality or leisure businesses. This is being administered by local authorities who will contact eligible businesses direct.

We have received an email from City of Wolverhampton Council indicating that they will start sending letters and emails from 27^th March to the thousands of city businesses eligible to receive grants. The communication will provide guidance about how to go online to provide information so that the following grants can be paid. The grant funding is expected to be with the council on 1 April 2020, at which point claims can start being paid.

We trust other local authorities are making progress on this along similar lines to Wolverhampton.

Conclusion

So, there are now schemes in place to support both companies and the self-employed. However, the devil is in the detail so we will continue to provide updates as we get them notified to us.

Remember, the TAG team is still up and running and here to help – give us a call on 01902 783172 and let’s work together to see our businesses get through this.