Support for Self Employed Businesses disrupted by COVID-19

There have been new measures released to support self-employed workers in a similar way to employees. The Chancellor has announced that the government will pay self-employed people a taxable grant based on their earnings. Earnings will be calculated based on three years average profits (or less if you have traded for fewer than that) submitted on self-assessment tax returns. The grant will be 80% of the average earnings figure and capped at £2,500 for a minimum of three months. 

Who can apply? 

1. Individuals who had self-employed income before 5/4/2019 and submitted a tax return. 
2. Individuals with self-employed profits of up to £50,000 over an average of three years. 
3. Individuals where the majority of their earnings has come from self-employment.
4. Those who have traded in year ended 5/4/2020 and at the point of the outbreak. 
5. Those who are expecting to continue trading in 2020/2021. 
6. Those who have lost trading/partnership profits. 

Newly self-employed people will not qualify for the grant and will have to seek financial support via a claim for Universal Credit. 

HMRC will be contacting the individuals they think qualify and hope to have the payments to those people by the end of June. 

There was a word of warning that if self-employed people were to be given similar benefits to that of employees then the contributions they make to the tax system might have to be aligned in the future. 

This support is in addition to the measures already released last week in respect of business rates, VAT payment deferral, loans and the ability to defer payments on account at the end of July. 

Further guidance on the Job Retention Scheme

Furloughing

Both the employee and employer must agree for the employee to be furloughed. The employer must put the decision in writing to the employee. Please ask us if you would like a template letter to use. The scheme applies to permanent, temporary and zero-hour contracts.

Employees can be furloughed by one employer but continue to work for another.

The claim of 80% of earnings (maximum £2,500) is for a minimum of 3 weeks. 

The employer can top up to 100% but does not have to. 

The payment will be subject to Tax and National Insurance in the normal way as earnings. 

Earnings calculation: If employed for a full year, you can claim the higher of: 

• The amount you earned in the same month last year;
• The average of your monthly earnings last year. 

If employed for less than one year, earnings will be calculated based on average since you started work. 

Bonuses, commissions and fees are NOT included as part of monthly earnings.

Vulnerable people : HMRC’s guidance to employees says: 

‘If you are shielding in line with public health guidance, then you should speak to your employer about whether they plan to place staff on furlough’. 

This statement suggests that if your employees are in the vulnerable category they can still be furloughed and entitled to 80% pay rather than just SSP.

Company Directors drawing dividends

There still appears to be no support for owned managed companies of Limited companies who derive the majority of their income from dividends. 

VAT Payment Deferral

As previously announced the VAT that would have ordinarily been collected in the first week of April, May and June can be deferred without application to HMRC.

HMRC has now confirmed that it will NOT automatically cancel collection of VAT payments by direct debit. Businesses that have a direct debit mandate in place to pay their VAT and wish to defer payment will need to contact their bank to cancel that mandate. This needs to be done before the direct debit is due to be collected. VAT returns should be filed as normal by the due date. You can of course still pay the VAT due if you wish. 

Businesses will also need to remember to reinstate their direct debit mandate once the deferral is over and to make arrangements to pay the accumulated VAT by the end of the 2020/21 tax year.