This scheme allows self-employed individuals to claim a taxable grant worth 80% of their trading profits up to a maximum of £2,500 per month for three months and capped at £7,500 altogether. 

On 29 May, the Chancellor announced the extension of the scheme for those people whose trade continues to be, or is newly, adversely affected by Covid-19 (coronavirus). Eligible self-employed people will be able to claim a second and final SEISS grant in August; this will be a taxable grant worth 70% of their average monthly trading profits for three months, paid out in a single instalment and capped at £6,570 in total.

An individual does not need to have claimed the first grant to receive the second: for example, they may only have been adversely affected by Covid-19 in this later phase.

The scheme will run from 17 August, when claims will open in the online portal, until 19 October. 

HMRC has announced that those individuals who may have overclaimed or should not have claimed due to not meeting the eligibility criteria should tell HMRC and repay any appropriate amounts to HMRC via the same online portal from which they made the claim. Further details of the repayment of the grant are available here

As long as appropriate evidence is maintained about eligibility to the scheme at the time of applying, no penalties should be charged if the business recovers after making the claim. HMRC will be checking for dishonest or inaccurate claims and therefore good record-keeping of the claims and conditions at the time of claim is vital.

Below is a list of frequently asked questions from ACCA members.

What support is available to the self-employed?

  • Initially, those who are self-employed will get a taxable grant worth 80% of average monthly profits over the past three years, up to £2,500 per month, capped at £7,500. It is the same amount of income as for furloughed employees. This is subject to conditions such as being adversely affected by coronavirus and the levels of both self-employed and other income reported on the self-assessment tax returns. Individuals who are eligible to claim for this first grant should claim this by 13 July 2020.
  • The scheme has been further extended for second and final SEISS grant worth 70% of average monthly trading profits for three months, paid out in a single instalment and capped at £6,570 in total. This will apply for those who have been adversely affected on or after 14 July 2020. Individuals can claim this second grant whether or not they have claimed the first one. Applications for the second grant will open from 17 August.
  • Individuals can sign up for an email alert rom HMRC regarding updated guidance and claims opening here.

Are there any conditions?

The self-employed can apply  for both grants if they:

  • have submitted their income tax self-assessment tax return for the tax year 2018/19 
  • traded in the tax year 2019/20
  • are trading when they apply, or would be except for Covid-19
  • intend to continue to trade in the tax year 2020/21
  • have lost trading/partnership trading profits due to Covid-19.

In addition, eligibility is also determined by at least one of the following conditions being true:

  • having trading profits/partnership trading profits in 2018/19 of less than £50,000 and these profits constituting more than half of their total taxable income
  • having average trading profits in 2016/17, 2017/18 and 2018-19 of less than £50,000 and these profits constituting more than half of their average taxable income in the same period.

If the business started trading between 2016 and 2019, HMRC will only use those years for which they filed a self-assessment tax return. 

  • You should not claim the grant if you’re above the state aid limits or operating a trade through a trust.
  • People do not need to have claimed the first grant to claim the second grant: for example, their business may have been adversely affected by Covid-19 more recently.

What happens if all the self-assessment tax returns are not submitted? 

If all the self-assessment tax returns for three years have not been submitted, HMRC will work out the average trading profit based on continuous periods of self-employment, which will be either:  

  • the tax years 2017/18 and 2018/19 
  • the tax year 2018/19 only, even if you were self-employed in the tax year 2016/17. 

The first grant will be 80% of your average trading profit divided by 12, which will give a monthly amount. HMRC will pay this or up to a maximum of £2,500 a month for a maximum of three months capped at £7,500, whichever is lower.

Is there a tool to check the eligibility for the claim? 

Yes. HMRC has created an online tool to check the eligiblity for this claim. Taxpayers will need their unique tax reference (UTR) and national insurance (NI) number to hand before they can use the tool. 

Can the self-employed ask their accountants to make a claim on their behalf?

No. HMRC has clearly specified that the self-employed cannot ask their accountant to make the claim on their behalf. If an accountant attempts to make a claim on behalf of their client, this will trigger a fraud alert and will result in significant delays to payment. However, they can help to prepare their clients by ensuring that they have the relevant information ready. Please see our further article on how accountants can help clients here.

To make the claim, the client has to have a Government Gateway account. If they do not have one, they need to create one sooner rather than later.

Full details are here.

Is there an allowance if my profits were affected in 2018/19 due to the parental leave? 

Yes. The chancellor announced on 17 June that parents, including mothers, fathers and those who have adopted, who took time out of trading to care for their children within the first 12 months of birth of the child or within 12 months of an adoption placement, will now be able to use either their 2017/18 or both their 2016/17 and 2017/18 self-assessment returns as the basis for their eligibility for the SEISS. 

HMRC will be publishing further details of the change for self-employed parents at the start of July.

When will the support be available?

  • First grant: claims for the first SEISS grant, which opened on 13 May, had to be made no later than 13 July. Eligible self-employed people must make a claim before that date.
  • Second grant: The grant will be available to claim from 17 August.

HMRC requires a bank account number and sort code. (Only provide bank account details where a Bacs payment can be accepted.) You’ll have to confirm to HMRC that your business has been adversely affected by Covid-19. It is imperative that HMRC has the correct contact details of taxpayers (current address, phone numbers and email) so that applicants can be notified of their eligibility to claim.

Once the claim has been submitted, HMRC will confirm if the grant is approved. HMRC is aiming to pay the grant within six working days of the claim submission, although it may take up to 10 days in some cases where complications or other issues exist. 

Are the recently registered self-employed who have not filed any tax return yet eligible?

According to the Treasury, it is very difficult to assess the benefit level for recently registered self-employed people. They may instead have to look at alternative financial support, i.e. Universal Credit or Employment and Support Allowance.  

Is there any extension on filing a 2018/19 return if the taxpayer has missed the deadline?

If the tax return for 2018/19 was not filed in January 2020, the deadline was extended to four weeks from 26 March 2020, i.e. 23 April 2020. Claims based on late returns submitted between 26 March 2020 and 23 April 2020 will be subject to additional anti-fraud checks. 

Can a taxpayer amend already submitted returns? 

HMRC will use data on the 2018/19 tax returns already submitted to identify those eligible. Any changes made to submitted returns after 26 March 2020 will not be taken into account when working out the eligibility or amount of the grant.  

To avoid scheme abuse, HMRC will use data on 2018/19 returns already submitted to identify those eligible and will risk assess any late returns filed before 23 April 2020 deadline in the usual way.

How are trading profit and total income calculated? 

As per HMRC guidance issued, trading profit is the taxable profit (after capital allowances etc) declared on the self-assessment, prior to off-setting of losses brought forward from previous years and personal allowance. 

Your total income is the total of all your: 

  • employment income 
  • trading profits 
  • property income 
  • dividends 
  • savings income 
  • pension income 
  • miscellaneous income (including social security income)
  • losses and personal allowances will not be deducted from the income to arrive at taxable profit.

HMRC example

If you’re not eligible based on the 2018/19 self-assessment tax return, HMRC will then look at the tax years 2016/17, 2017/18 and 2018/19.

  2016/17 2017/18 2018/19 Average for the three tax years Total
Trading profit/(loss) £50,000 £50,000 -(£10,000) - not eligible £30,000 £90,000
Non-trading income £15,000 £15,000 £15,000 N/A £45,000
Eligibility using the tax year 2018/19 only N/A N/A No N/A No
Eligibility using the three tax years N/A N/A N/A

Yes

 Yes

So even if you made a loss in the tax year 2018 to 2019, you would still be eligible because:

  • your average for the three tax years is £30,000 - which is less than £50,000
  • the sum of the trading profits for the three tax years (£90,000) is at least equal to the sum of your non-trading income of £45,000 for those years.

HMRC further guidance on calculation of profits can be accessed here.

Does farmers' averaging affect the grant relief?  

HMRC has confirmed that it will use profit figures before averaging the claim, to work out the eligibility and the amount of the grant.  

Can an individual affected by a new child make a claim?

If you’re self-employed and have a new child, you may still be able to make a claim if this either affected the trading profits or total income you reported for the tax year 2018/19 or you did not submit a return for 2018/19.

For this scheme, 'having a new child' is any of the following:

  • being pregnant
  • giving birth (including a stillbirth after more than 24 weeks of pregnancy) and the 26 weeks after giving birth
  • caring for a child within 12 months of birth if you have parental responsibility
  • caring for a child within 12 months of adoption placement.

You must have been self-employed in the tax year 2017/18 and submitted your tax return for that year, and must also meet all other eligibility criteria. You’ll need to confirm to HMRC that being a new parent affected your trading profits or total income in the tax year 2018/19 and provide supporting evidence such as:

  • child benefit reference number
  • birth or adoption certificate number
  • maternity allowance reference.

 

 

Can a company director make a claim?

A director of their own company who is paid through PAYE may be eligible to get support using the Coronavirus Job Retention Scheme

A director/shareholder cannot be treated as self-employed for this purpose. A director can continue to run their business in terms of performing their statutory duties as officeholders, but they must be furloughed from other day-to-day activities for raising any revenue for the company. Guidance issued up to 6 April 2020 states: 

‘Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would be judged reasonably necessary for the purposes, ie they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provide services to or on behalf of their company. This also applies to salaried individuals who are directors of their own personal service company (PSC).’

The chancellor has confirmed that ‘Work undertaken by a director of a company to fulfil a duty or other obligation arising by or under an Act of Parliament relating to the filing of company accounts or provision of other information relating to the administration of the director’s company must be disregarded for the purposes of cessation of all work in relation to furloughed employees’.

The claim will be only for the 80% of their salary processed through PAYE. Dividends are not included for the calculations of this grant. If a director is furloughed under the scheme, the company should document it and also communicate to the director in writing.

To avoid fraud, there are expected to be cross-checks between the applications for grants against PAYE records for each employer.

What should the self-employed do if they are contacted about the scheme? 

  • The self-employed should access this scheme only through GOV.UK. If someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a scam. HMRC contact with taxpayers will not contain any links to click, so if such an email or text is received, it will likely be a scam.

How is the grant accounted for?

You must keep a copy of all records in line with normal self-employment record- keeping requirements, including: 

  • the amount claimed 
  • the claim period
  • the claim reference number for your records 

evidence that your business has been adversely affected by Covid-19.

Additionally, the grant must be reported:

  • on self-assessment tax returns
  • as self-employed income for any Universal Credit claims
  • as self-employed income and that the person is working 16 hours a week for any tax credits claims.

Ask your clients to retain records for: 

  • business accounts showing a reduction in turnover 
  • confirmation of any Covid-19-related business loans received 
  • dates their business had to close due to lockdown restrictions 
  • dates where they or their staff were unable to work due to Covid-19 symptoms, shielding or school closures.

Is VAT payable on the grant?

The basic principles of supply and consideration can be expected to apply. VAT is a tax on supplies for consideration, so where a grant is made, and nothing is expected to be done in return, it will not be subject to VAT. HMRC guidance on supply and consideration can be seen here.

Hence, the business support funding being made available to alleviate the Covid-19 impact does not fall into this category and will be outside the scope of VAT.

Can a self-employed person still work while claiming this grant?

Yes.  A self-employed person who is claiming the grant can. continue to work, start a new trade or take on other employment, including voluntary work or duties as an armed forces reservist.

What happens if the self-employed individual has not lost any trading profits due to Covid-19? 

HMRC has stated that provided claims are genuine and in accordance with the guidance issued for businesses affected by Covid-19, the grant will not be repayable. The guidance states that HMRC will consider the business has been affected if:

You’re unable to work because you:

  • are shielding
  • are self-isolating
  • are on sick leave because of Covid-19
  • have caring responsibilities because of Covid-19

You’ve had to scale down or temporarily stop trading because:

  • your supply chain has been interrupted
  • you have fewer or no customers or clients
  • your staff are unable to come in to work.

HMRC guidance provides some examples of what it considers "adversely affected" to mean, although these are very limited examples based on the building trade. 

What support is available for limited liability partnership members?

Members of limited liability partnerships (LLPs) who are designated as employees for tax purposes (‘salaried members’) under the Income Tax (Trading and Other Income) Act (ITTOIA) 2005 are eligible to be furloughed and receive support through the Coronavirus Job Retention Scheme. 

To implement any furlough, the LLP agreement may need to be varied. This may include a separate agreement between the LLP and an individual member, setting out the terms applicable to that member’s relationship with the LLP. For an LLP member who is treated as being employed by the LLP (in accordance with s863A of ITTOIA 2005), the reference salary for this scheme is the member’s profit allocation, excluding any amounts that are determined by their performance, or the overall performance of the LLP.  

If any LLP members are not designated as employees as stated above, they should be able to claim the self-employment income support. 

ACCA continues to raise areas with government where policy change is required, as well as requesting further clarification with departments such as HMRC.

For further enquiries please contact:

Lilly Aaron
Policy lead - Europe
Email
+44 (0)7802381494

Jason Piper
Head of tax and business law
Email
+44 (0) 771175579