Following its announcement on Friday 20th March to provide much-needed assistance to UK employers and employees in the short-term through the Coronavirus Job Retention Scheme, and intense pressure to provide similar assistance to self-employed workers, the UK Government has released details of a similar scheme intended to support this group: the Self-Employment Income Support Scheme (the “SEISS”).
The SEISS will support self-employed individuals (including consultants and members of partnerships) whose income has been negatively impacted by COVID-19, but is unlikely to apply to consultants who provide their services through a personal services company, given the criteria set out below. Further, the Chancellor indicated that tax payable by the self-employed would, in future, need to be brought in line with that paid by employees.
The scheme will provide a taxable grant to self-employed individuals or members of partnerships, worth 80% of their trading profits up to a cap of £2,500 per month, backdated to March. Individuals will be able to access this from the beginning of June at the latest.
HM Revenue & Customs (“HMRC”), the U.K. tax authority, will use the average profits from tax returns in the last three years to calculate the size of the grant, but those with less than three years of tax returns, will not be excluded. The scheme will be open to those where the majority of their income comes from self-employment and who have profits of up to £50,000. The scheme will be open for an initial three months but, as with the scheme for employees, may be extended.
To be eligible, individuals must meet all of the following criteria:
- Be self-employed or a member of a partnership;
- Have lost trading/partnership trading profits due to COVID-19;
- File or have filed a tax return for 2018-19 as self-employed or a member of a trading partnership (those who have not yet filed for 2018-19 will have an additional four weeks from today to do so);
- 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 to 2021; and
- Have trading profits of up to £50,000 and more than half of their total income come from self-employment. This can be with reference to at least one of the following conditions:
- Trading profits and total income in 2018/19; and
- Average trading profits and total income across the three tax years between 2016-17 and 2018-19.
Individuals who believe themselves to be eligible for this support must wait for HMRC to contact them. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational. HMRC will then pay the grant directly to eligible claimants’ bank accounts. It is unclear if and when individuals will be able to provide supporting information to HMRC, but we know payment of the grants is unlikely to be made before June. Self-employed workers in need of urgent financial assistance can, however, apply for business interruption loans and other forms of financial support that the Government has made available for businesses.