COVID-19: Support for Self-Employed

1 April 2020

The government has now unveiled income support for self-employed people who are facing financial difficulties due to the ongoing coronavirus (COVID-19) health crisis. This promises help for hairdressers, builders, childminders and taxi drivers with financial package, being one of the measures intended to help private sector during coronavirus outbreak.

This is a new and temporary measure only. After the end of the epidemic or stabilization of the situation, this approach will be terminated.

Income Support Scheme

New support measure covers more thanfive million self-employed workers in the UK.

Application Process

The government is working to ensure that the support process is automated and does not require additional action from self-employed people.

• How do I apply to the scheme?

Self-employed people cannot apply for this measure yet.HM Revenue & Customs will contact eligible self-employed individuals and provide access to online application.

After providing such access, self-employed will be asked to fill in an online form. This scheme will work only through GOV.UK.

Subject to a successful application, HMRC notify you to confirm how much you will receive and will confirm the payment details. The support will then be paid directly into your bank account.

If you claim tax credits you will need to include the grant in a claim as your income.

If you believe you are eligible and have not been contacted by HMRC, we recommend that you contact HMRC. Their contact details are available fromhttps://www.gov.uk/contact-hmrc.

• Paying back

There is no information regarding paying back of such support in any case, even if there is high overall earnings in 2020/21.

Income Support Scheme example

For example, self-employed worker has been carrying out activity for 3 years. His/her profit for 2016/17, 2017/18, 2018/19 years amounted to£55,000, £60,000, £50,000 respectively.His/her trading profit for 2016/17, 2017/18, 2018/19 years amounted to £45,000, £50,000, £40,000 respectively.

• Qualifying test

In the beginning, the self-employed must pass the qualifying test.

A self-employed person should answer “yes” to all following questions:

1) Is a self-employed individual or a member of a partnership?

2) Did self-employed file an Income Tax Self Assessment tax return for the tax year 2018-19.

3) Did self-employed trade in the tax year 2019-20?

4) Is self-employed trading at the time when he/she applies for the support scheme?

5) Do self-employed intend to continue to trade in the tax year 2020-21?

6) Have self-employed suffered a loss of trading/partnership trading profits due to the COVID-19.

• Trading profit test

If the self-employed passed the qualifying test, he/she can try to pass the trading profit test.

1) Average trading profit must be less £50,000. Calculation: (£45,000+ £50,000+£40,000) / 3 years = £45,000.

2) More than half income must come from self-employment trading profits. For 2016/17: £45,000 / (£45,000+£10,000) *100% =81.8% > 50%.

For 2017/18: £50,000 / (£50,000+£10,000) *100% =83.3% > 50%.

For 2018/19: £40,000 / (£40,000+£10,000) *100% =80% > 50%.

Our self-employed worker passed both tests, he/she can apply for support under this measure.

• Support

The Self-employment Income Support Scheme isa new temporary measure only through which self-employed workers will be able to apply for taxable grants worth up to 80% of their average monthly profits to combat loss of income due to the COVID-19 pandemic.

Due to the fact that the situation is changing rapidly, the provisions may be changed or updated in the near future.

For further information on any of the points above contact

Mikita Makayou at mikita@lexefiscal.com, or

Dr. Frank at clifford.frank@lexefiscal.com.