This article was last updated on 5 November at 13:20.
Self-employed people have been hit hard financially by the COVID-19 pandemic. The Government has announced an unprecedented package of assistance for business, employees, and for the self-employed whose business has been adversely affected by the COVID-19 crisis.
Self-Employment Income Support Scheme: HMRC checks eligibility of businesses which have ceased trading
The intention to continue to trade was one of the eligibility criteria for the first and second SEISS grants. HMRC has published guidance on the notification requirements for businesses which received one of the first two grants, and have since stopped trading and has contacted some businesses. Businesses which continue to trade will also need to respond to HMRC’s request, and may need to provide evidence that they are still trading. In order to avoid penalties, those who received the grant before 22 July 2020 must inform HMRC on or before 20 November 2020, and those who received the grant on or after 22 July 2020 must inform HMRC within 90 days of receiving the grant.
Third and Fourth SEISS Grants
The second Self-Employment Income Support Scheme (SEISS) grant, which closed for applications on 19 October, was announced as the final assistance grant for the self-employed.
In the Winter Economy Plan, delivered on 24 September 2020, the Chancellor announced that a third SEISS grant will be available to cover 20% of average monthly profits for three months, for those who were eligible for the first and second SEISS grants. This will be capped at £1,875 per taxpayer. On 22 October, the Chancellor announced further changes to the scheme, increasing the amount of profits covered by the third and fourth self-employed grants from 20% to 40%, meaning the maximum grant will increase from £1,875 to £3,750. We await details of the opening date and process for applications. Following the announcement of the second lockdown in England from 5 November, the Government has announced that the SEISS grant will increase to 80% for November 2020 to January 2021 and that the claims window will open towards the end of November, rather than in December as previously planned. There are no changes to the eligibility criteria. Self employed individuals and partnerships must:
- Have been previously eligible for the SEISS first and second grant (although they do not have to have claimed the previous grants)
- Declare that they intend to continue to trade and either:
- Are currently actively trading but are impacted by reduced demand due to COVID-19
- Were previously trading but are temporarily unable to do so due to COVID-19.
As SEISS grants are calculated over three months, the uplift for November to 80%, along with the 40% level of trading profits for December and January, increases the total level of the third grant to 55% of trading profits. The maximum grant will increase to £5,160.
A fourth SIESS grant will be made available for the three months to cover February to April 2021. Further details are to follow.
Tax Payment Deferral
The Chancellor announced a 12-month extension to the ‘Time to Pay’ facility: tax payments on account (POA), deferred from 31 July 2020, and all tax payments due on 31 January 2021 will not need to be paid until January 2022. This applies to the following:
- Second POA 2019/20
- Balancing payment 2019/20
- Capital Gains Tax 2019/20 (if not paid under 30-day rule)
- First POA 2020/21
Taxpayers will have to apply for Time to Pay to spread the tax due over 12 monthly instalments to January 2022. Where the total tax due is less than £30,000 the application for Time to Pay will be agreed automatically on completion of an online form. However, if the tax due exceeds £30,000, or the taxpayer needs longer to pay, HMRC’s telephone service will still be available to agree a bespoke payment plan.
Second SEISS Grant
On 29 May, the Chancellor announced plans to extend the SEISS for those people whose trade continues to be, or is newly, adversely affected by COVID-19. 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.
The eligibility criteria for the second grant will be the same as for the first grant. 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.
Claims for the first SEISS grant (see below), which opened on 13 May, must be made no later than 13 July. Eligible self-employed people must make a claim before that date to receive the first SEISS grant (a taxable grant of 80% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £7,500 in total). So far, we’ve seen over 2.3 million claims worth £6.8 billion.
First SEISS Grant
Taxable grants of 80% of taxable profits, averaged over the last three years, will be paid to the self-employed and partners with taxable profits of up to £50k per year. Only those who traded in 2018-19 and 2019-20 and intend to continue to trade in 2020-21, are already registered for Self Assessment and have submitted a 2018-19 tax return will qualify. HMRC is now contacting eligible taxpayers. The online claim service will be available from 13 May, and it is intended that successful claimants will receive payments within six working days.
Claims must be made by the taxpayer through their Government Gateway account. It will not be possible for agents/accountants to make the claims, so if you don’t already have a Government Gateway account, set one up now.
An online eligibility tool is now available, which can be used by taxpayers and their agents by inputting the taxpayer’s UTR and National Insurance Number.
The self-employed can continue to work, where they can, and still benefit from the scheme.
Other assistance for the self-employed previously announced includes:
- Self Assessment Income Tax payments on account due 31 July 2020 are deferred until 31 January 2021 – this should ease cashflow
- Self Assessment Income Tax POA: it may be possible to request a refund of some of all of the POA for your 2019-20 tax liability (paid on 31 January 2020), if your income has reduced significantly in the current year
- VAT payments due before the end of June 2020 are deferred
- Time to Pay arrangements are available for all taxes, including PAYE and VAT
- Business Rates relief and cash grants
- The Job Retention Scheme, if you employ others
- Business Interruption Loan Scheme
- The self-employed don’t qualify for Statutory Sick Pay (SSP) but instead may qualify for Universal Credit or the Employment Support Allowance