COVID-19: Support for the Self Employed

04.06.20

 

There are a range of measures that provide support to the self-employed.

Self-Employment Income Support Scheme (SEISS)

The scheme provides support to self-employed taxpayers who receive most of their income from self-employment and have been adversely affected by COVID-19.  On 29 May 2020, the Chancellor announced changes to the SEISS, including an extension of the scheme on different terms. Those adversely affected by COVID-19 from March to May 2020 may apply for the 'first grant'.  The first grant is a taxable grant equal to 80% of the average monthly profits over the last three years for three months up to a cap of £2,500 per month., and payable in one lump sum.  The taxpayer must intend to continue trading in the tax year 2020-21. The 'second and final grant' was announced on 29 May and will be a taxable grant worth 70% of a self-employed taxpayer's average monthly trading profits for a further three months, paid in a single instalment and capped at £6,570.

The scheme is targeted at those taxpayers with trading profits less than £50,000 in 2018-19 or an average profit of less than £50,000 for 2016-17, 2017-18 and 2018-19.  To qualify individuals must have been trading in both the 2018-19 period and the 2019-20 period.  The individuals must have submitted their self-assessment tax return for the 2018-19 period by 23 April 2020. The Chancellor confirmed that the same eligibility requirements apply to the first and second grants.

Payments of the first grant were expected to be received by 25 May, or within six working days of completing a claim.  HMRC have been contacting taxpayers who are eligible by a combination of text, email and letter with guidance on how to make an application. The online claim scheme opened on 13 May and will close to those claiming the first grant on 13 July. 

The second and final grant will be paid to those eligible in August, and we expect that the application process will be similar if not identical to that currently in place. An alternative claim route will be provided for those who are unable to claim online.

Taxpayers do not need to wait for an invitation to claim from HMRC and can check their eligibility using the recently launched online tool. The tool is designed to provide immediate guidance on whether an individual can make a claim, and those eligible will be given a date on which they can submit their claim. To use this tool taxpayers should have their UTR number and National Insurance number to hand. If HMRC determines that a taxpayer is ineligible, a review of the decision can be requested.

The claim has to be submitted by the taxpayer themselves - agents cannot submit claims on behalf of taxpayers.

HMRC have confirmed that the self-employment income support scheme grant will be taxable in the 2020/2021 tax year, with no part of the grant being treated as relating to March 2020.

HMRC are currently consulting on draft legislation to form part of the current Finance Bill which will allow penalties to be charged where the self-employment income support scheme grant has been claimed in circumstances where it is not due. The proposed penalty is equal to 100% of the receipt, but would only be chargeable where the error was deliberate. 

Self-employed individuals should also consider seeking assistance under the Coronavirus Business Interruption Loan Scheme or consider whether a claim should be made for Universal Credit.  It is understood that the Department for Work and Pensions would be able to provide advance payments of Universal Credit while their applications were being processed.

The SEISS is not available to those operating through personal service companies, although support may be available to your personal service company under the Coronavirus Job Retention Scheme in relation to the amounts which would otherwise have been paid by your personal service company as salary (but not dividends).  The proposed changes to IR35 in the private sector will be delayed until April 2021.

HMRC has asked that the self-employed do not call them to query the SEISS so as not to divert efforts from establishing the scheme.   

 

Scotland's Newly Self-Employed Hardship Fund

The Scottish Government announced an additional £34 million for Scotland's newly self-employed to be managed by local authorities.  Those eligible may receive cash grants of £2,000 which will be paid in early May.

The scheme is targeted at self-employed individuals in Scotland who became self-employed on or after 6 April 2019 and do not qualify for SEISS. Applications should be made directly to local authorities, with further information available here.

 

Coronavirus Business Interruption Loan Scheme

UK based businesses with a turnover of no more than £45m per year are eligible for the Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank.  These loans are up to £5m and are interest-free for the first twelve months.  The scheme is available through all major banks – further details are on the British Business Bank website.

You should contact your bank or finance provider (not British Business Bank) and discuss business plans and other requirements.

 

Bounce Back Loan Scheme

The latest support announced by the UK Government is the Bounce Back Loan scheme. This scheme is designed to assist small and medium-sized businesses with loans of between £2,000 and £50,000. The government will provide a 100% guarantee and no fees, interest or repayments will be due for the first 12 months. 

If your business is based in the UK, was trading on 1 March 2020, has been negatively affected by coronavirus and was not an 'undertaking in difficulty' on 31 December 2019, then you will likely be eligible. For further information, please read our blog.

Applications should be made through the British Business Bank website.

 

VAT - Payments deferred for three months from 20 March 2020 until 30 June 2020

All VAT registered businesses benefit from VAT payments being deferred for three months starting from 20 March 2020 until 30 June 2020, though VAT returns still have to be submitted on time. Refunds and repayments will be processed by HMRC as usual.

There is no need to apply for this, but if you pay by direct debit, cancel your direct debit or the VAT will still be collected. Cancel direct debits as soon as possible if you have a 31 March return date, but do remember to reinstate for VAT payments after 1 July 2020.

You have until the end of the 2020-21 financial year to pay the VAT deferred.

If you have a VAT payment that was due on or before 19 March 2020 and you have not made payment, this payment will still be due and you should pay this to avoid surcharges.

HMRC has confirmed that this support does not extend to VAT MOSS and import VAT payments.

 

Income tax self-assessment payments due 31 July 2020 deferred to 31 January 2021

Payments due on 31 July 2020 may be deferred until 31 January 2021. This means that if you are due to pay a second instalment of income tax on 31 July 2020, it can be deferred. You do not have to be self-employed to benefit from the deferral.

There is no need to apply, but if you have a direct debit in place, cancel it or payment may be taken automatically.

Deferral is optional, and you can pay the income tax due on 31 July 2020.

Self-assessment returns still require to be submitted by the normal filing dates.  You may wish to consider filing early to crystallise any refunds due if relevant.

 

HMRC Time to Pay – call HMRC on 0800 024 1222

HMRC may negotiate time to pay arrangements for tax and have set up a COVID-19 specific hotline.  The line can be very busy, but persevere.   It is useful to have cash flow forecasts and budgets ready to hand and worth ensuring that tax filings are up to date. Alternatively, the webchat function is offering customers a quicker response.

If you have filed an income tax return and the amount overdue is less than £10,000 you may be able to arrange to pay in instalments through your online self-assessment account.

 

Business (Non-domestic) Rates and Support Grants

Depending on the type of business and its location, specific COVID-19 related business rates relief and support grants may be available.

It is important to note that each of the four UK jurisdictions has separate rules and guidance on COVID-19 support available. Broadly, each jurisdiction is providing (a) business rates relief of between 25% to 100% for businesses in the retail, hospitality and leisure sector for 2020/21, and (b) two tiers of loans aimed at small businesses and businesses in the retail, hospitality and leisure sector.

The support grants are treated as taxable income of the recipient's business, and so are subject to income tax or corporation tax.

ENGLAND

Business Rates Relief for Retail, Hospitality and Leisure sector

No rates are payable for 2020/2021 for properties which are wholly or mainly used:-

  • as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
  • for assembly and leisure, including museums, theatres and gyms
  • as hotels, guest & boarding premises and self-catering accommodation
  • as estate agents, lettings agencies and bingo halls

This 100% retail discount will be applied automatically by local authorities, though in some cases rates bills may have to be reissued to reflect this.

Contact your local authority if you think you are eligible for this relief and you haven’t heard from them.

Business rates holiday for nurseries for 2020/2021

Nursery premises used by providers on Ofsted’s Early Years Register and wholly or mainly used for the provision of the Early Years Foundation Stage are eligible for 100% relief from rates for 2020/2021.

This relief should be applied automatically but contact your local authority if it isn’t.

Support Grants

  • Retail, Hospitality and Leisure Grant (RHLG) - Businesses in the retail, hospitality and leisure sector with a Rateable Value between £15,000 and £51,000 can apply for a cash grant of £25,000.
  • Small Business Grant Fund (SBGF) – cash grants of £10,000 are payable to businesses in England in receipt of either Small Business Rates Relief or Rural Rates Relief (including those with Rateable Value between £12,000 and £15,000 in receipt of tapered relief) as of 11 March 2020.
  • Additional fund announced 2 May 2020 – a new £617 million 'discretionary' fund will be made available to local authorities. The fund is aimed at small businesses with under 50 employees that have previously been outside the scope of the RHLG and SBGF.

Under each of the above grants eligible businesses will receive one grant per property. Cash grants have been paid from early April. Businesses should refer to their local authority website for information on how to apply.

In addition, local authorities may be able to agree special payment plans so that the business rates due for 2020/21 are split over 9 months from July 2020 to March 2021, meaning that businesses will not have to pay anything until July 2020. Contact your local authority for further information.

SCOTLAND

Business Rates Relief

All non-domestic properties in Scotland will get a 1.6% rates relief for 2020/21 which effectively reverses the increase in poundage for 2020-21 previously announced at Scottish Budget 2020.

Retail, hospitality and leisure businesses will get a 100% rates holiday for 2020/21.

These reliefs will be applied automatically by local authorities.

Support Grants

The Coronavirus Business Support Fund is being administered by local authorities on behalf of the Scottish Government. This fund is broken into two grants:

  • Retail, Hospitality, Leisure Support Grant (RHLSG) - Retail, hospitality and leisure business ratepayers with a rateable value between £18,001 and up to and including £50,999 can apply for a one-off grant of £25,000
  • Small Business Support Grant (SBSG) – small businesses can apply for a one-off cash grant of £10,000 if they are eligible for the Small Business Bonus Scheme relief or the Rural Relief. You can also get this grant if you applied for Nursery Relief, Business Growth Accelerator Relief or Disabled Relief but are eligible for the Small Business Bonus Scheme.

For businesses operating out of multiple premises, the cash grant was initially a one-off grant to be paid to each business, regardless of the number of properties. However, on 15 April 2020 the Scottish Government announced an extension to the Business Support Fund for additional premises. If businesses are eligible for the full one-off £10,000 or £25,000 on their first property as above, they may be eligible for a grant worth 75% of these amounts for each subsequent property. This brings the scheme in Scotland more in line with the position in England where there is a full grant for each property.

Businesses should apply for grants on their local authority website by filling in the Coronavirus Business Support Fund form. Payments are being made within 10 working days of receiving the form.

WALES

Business Rates Relief for Retail, Hospitality and Leisure sector

No rates are payable for 2020/2021 for properties which are wholly or mainly used:-

  • as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
  • for assembly and leisure, including museums, theatres and gyms
  • as hotels, guest & boarding premises and self-catering accommodation
  • as estate agents, lettings agencies and bingo halls

This 100% retail discount will be applied automatically by local authorities, though in some cases rates bills may have to be reissued to reflect this.

Contact your local authority if you think you are eligible for this relief and you haven’t heard from them.

Support Grants

  • Businesses in the retail, hospitality and leisure sector with a Rateable Value between £12,000 and £51,000 can apply for a cash grant of £25,000.
  • Welsh businesses in receipt of the Small Business Rates Relief with a Rateable Value up to £12,000 can apply for cash grants of £10,000. Ratepayers with multiple premises are restricted to a maximum of two grants in each local authority area. 

Businesses should refer to their local authority website for information on how to apply.

NORTHERN IRELAND

Business Rates Relief

All business ratepayers in Northern Ireland will be given a three month rates holiday for April, May and June 2020, effectively giving businesses a 25% discount on 2020/21 rates bills.

Support Grants

  • Small Business Support Grant Scheme – businesses currently in receipt of the Small Business Rate Relief may be eligible for a one-off cash grant of £10,000. Businesses are restricted to one grant, regardless of the number of premises held. The application form can be found here.
  • Hospitality, Tourism and Retail Grant – businesses in the hospitality, tourism and retail sectors with a rateable value between £15,000 to £51,000 are eligible for a one-off cash grant of £25,000. From Monday 20 April 2020, access to the application and further information will be available on the Northern Ireland Executive website.

ADDITIONAL SCOTTISH GOVERNMENT ASSISTANCE

£20 million Creative, Tourism & Hospitality Enterprises Hardship Fund

The Scottish Government has announced a £20 million Creative, Tourism & Hospitality Enterprises Hardship Fund to be managed by the Enterprise Agencies in partnership with Creative Scotland and VisitScotland for creative, tourism and hospitality companies not in receipt of business rates relief. This will benefit companies of up to 50 employees with rapid access £3,000 hardship grants or larger grants of up to £25,000.

£45 million Pivotal Enterprise Resilience Fund

The Scottish Government has also announced a £45 million Pivotal Enterprise Resilience Fund to be managed by the Enterprise Agencies for vulnerable SME firms who are vital to the local or national economic foundations of Scotland.

 

 

Our legal update, COVID-19: Government Support Schemes for Businesses, provides further information on UK and Scottish Government support available.