Coronavirus (COVID-19) Help for the Self-Employed
This evening the Chancellor Rishi Sunak announced the highly anticipated Self-Employed Income Support Scheme (SEISS) .
The government guidance gives a fairly concise summary of how the scheme will work and is found here: https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme
However, I’ll summarise a little further here:
- SEISS takes the form of a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.
- Applies to Self-Employed Sole-Traders and partners of Partnerships as long as your tax returns are up to date, you’re currently trading and you intend to keep trading beyond this crisis.
- Your trading profits must be under £50,000 to qualify for help.
- To work out your average trading profits HMRC will use the values declared in your Tax Returns 2016/17, 2017/18 and 2018/19.
- You do not need to contact HMRC to apply. HMRC will contact those eligible for SEISS and ask you to apply online.
- Remember this grant is taxable income. It will also need to be declared as income if your claim Tax Credits or Universal Credit.
What questions now remain?
Where does this leave directors of small limited companies?
The last line of the SEISS guidance reads: “If you’re a director of your own company and paid through PAYE you may be able to get support using the Job Retention Scheme.”
The position of directors remains a little unclear but it does seem that if they cease working, or have to stop because of COVID-19, and they furlough themselves that they’ll be able to claim funding for 80% of their salary just like any other employee. Whilst there is no written guidance yet, the Chancellor’s comments have strongly indicated that dividends will not be taken into account in working out the 80% funding.
In practice it might be difficult for a director to cease work – most companies need someone running the show – even if workload has been scaled right back. I’m currently hoping for more clarity before advising on this issue but it seems to me that one option for many companies may be to furlough all but one director.
Can the Self-Employed continue to work whilst claiming SEISS?
Yes. There is no restriction made due to claiming this grant. That of course is subject following the social distancing guidelines applicable to all as I’ve explained here Can the Self-Employed go to work?
In contrast employees being funded by the Job Retention Scheme are not allowed to work for their employer or take on any other employment during the term that they’re designated furloughed.
For a reminder on how to furlough a worker see here.
During the crisis I’ll be blogging about government help for small businesses as soon as the guidance is available. My previous COVID-19 post remain relevant and are:
Enjoy saving tax?