Advice for individuals and small, medium and large businesses

Advice for individuals and the self-employed

Self employed income support scheme

From 13 May 2020, self employed people will be able to claim under the self employed income support scheme by logging on to an HMRC portal, subject to them meeting the conditions of the scheme.

Main Features

  • The Scheme is Available to self employed who have lost income due to Covid-19.

The scheme only applies to sole traders and partners. It does not apply to businesses that operate through limited companies or to property landlords.

You have to be trading when the claim is made, (or would be trading but for the conditions caused by Covid 19).

You must have traded in the tax year ended 5 April 2020

You must be intending to continue to trade in the tax year ended 5 April 2021

You must have lost profits due to the coronavirus

  • The Scheme applies to those with declared profits of no more than £50,000 averaged over the last three tax years to 5 April 2019

This is a cliff edge test. If your average is £50,001, you are not eligible.

If you started trading after 6 April 2019, you are not eligible.

If you have not been trading 3 years, the average is taken over the shorter period, using a complete number of tax years.  For example, if you started trading in October 2017, you will have traded for a 18 month period to 5 April 2019. However, the averaging calculation will simply be to add the profits of 2017/18 and 2018/19 and divide by two.

  • A majority of income must come from self-employment

More than half of income must be from self-employment. This can be calculated based on 2018/19 only or on the average of the three years to 2018/19.

This is another cliff edge test. If your property income is £20,000 and your self-employment income is £19,999, you are not eligible.

  • The scheme applies to those who have filed a 2019 tax return

The 2019 return must be filed before 23 April 2020.

The scheme is not available to anyone who ceased in business before 6 April 2018 or started after 5 April 2019.

Amount of Support Provided

  • 80% of the average declared trading profits, as calculated for tax purposes
  • Capped at £2,500 a month for the next 3 months
  • Paid in a single instalment, no earlier than June.
  • This is treated as a taxable receipt, and as income for tax credit purposes

Note that the trading profits used in the calculation are as calculated for tax purposes, after adding back expenses which are not allowable for tax purposes and deducting capital allowances. The Personal Allowance and losses brought forward do not have to be deducted.

Note that this means that the taxable profits of businesses that have claimed the Annual Investment Allowance will be significantly reduced, and this may have an impact on the amount of the income support received.

Where a tax return has been amended or has been the subject of an HMRC enquiry, the original figures will used.

If you are a farmer, the profits will be taken before any claim for farmer’s averaging.

Example 1

Trading profits:

2016/17 £16,000
2017/18 £18,000
2018/19 £20,000
Average £18,000
80% of Average £14,400
Monthly £1,200
Support payment £3,600

Example 2

Trading profits:

2016/17 £46,000
2017/18 £48,000
2018/19 £50,000
Average £48,000
80% of Average £38,400
Monthly £3,200
Capped at £2,500
Support payment £7,500

Example 3 (including losses)

2016/17 Profit  £60,000
2017/18 Profit  £60,000
2018/19 Loss -£30,000
Average £30,000
80% of Average £24,000
Monthly £2,000
Support payment £6,000

The support payment received will be included as income on the 2020/21 tax return

How to claim

  • Application will be by an on line portal on the HMRC website
  • You will need to have registered with HMRC via the Government Gateway.
  • Unfortunately, we cannot claim on your behalf, but we can assist with any queries
  • You will need to confirm that your business has been adversely affected by the coronavirus.
  • The on-line portal is not expected to be available until June.
  • First payments expected to be made from June

HMRC say they will use a risk-based approach to compliance. In other words, they will not check each and every claim, but they will enquire into a sample, especially where HMRC data suggests that the claim may not be valid. However, they have stated that returns will  be subject to extra scrutiny if they were submitted after the scheme was announced.

Scam Alert

HMRC will contact taxpayers by letter, email or texts. But they will never ask for personal details, and the claim must be made via the HMRC portal. If you receive an email asking you to click on a link to make a claim, it will be a scam. Delete it.

Future taxation of Self Employed

The Chancellor made the “observation” that employed and self employment were taxed differently. Mr Sunak has signalled his intention to review this area, in due course.

Universal Credit and Statutory Sick Pay (SSP)

If you are not eligible for SSP (including those who are self-employed), and you are advised to self-isolate, it is now easier to make a claim for Universal Credit (UC) or the ‘New Style’ Employment and Support Allowance.

The Government have further guidance on SSP available here.

Financial support – mortgages and rent

If you are experiencing financial difficulties meeting your mortgage payments or rent, you may be entitled to a mortgage or rental holiday for 3 months.

Mortgages

The government has agreed with mortgage lenders to offer repayment holidays of three months to households in financial difficulty due to COVID-19. This also applied to landlords whose tenants are experiencing financial difficulties as well.

The offer can be made available to customers who are up to date with payments, and not already in arrears. Please contact your lender as soon as possible to discuss your options.

Rent

Emergency legislation will be taken forward. This means landlords won’t be able to start proceedings to evict tenants for at least three months. This will apply to both private and social renters.

Financial support – loans and credit cards

If you find yourself unable to pay back personal loans or credit card bills as a result of COVID-19, the Financial Conduct Authority (FCA) has called on lenders to use flexibility to support consumers.

If a payment holiday is agreed, it should be recorded in a way that doesn’t impact your credit score.


Advice for Businesses

Small Businesses

Relief Available Outline Availability Key Details
SSP Relief Reclaim SSP payments made to employees for Coronavirus related sickness When COVID bill is passed SME’s with less than 250 employees, two weeks per employee
Business Rates Holiday 12 month Business rates holiday for retail, hospitality and leisure businesses in England Your local authority will automatically reissue your bill. No action is required. Retail, leisure and hospitality businesses
Emergency Business Grant Up to £25,000 available  where rateable value is £15-51k Click here for a review of the local authority websites across the North West regarding grants and rates relief available Retail, leisure and hospitality businesses operating from premise’s with a rateable value of £15k-51k
Business Rate Relief £10,000 grant for ongoing business costs Click here for a review of the local authority websites across the North West regarding grants and rates relief available Must be in receipt of Small Business Rate Relief or Rural Rate Relief
Bounce Back LoansBusinesses loans between £2,000 and £50,000Scheme will launch on 4 May 2020 You can apply for a loan if your business is based in the UK, has been negatively affected by Covid-19, was not ‘undertaking in difficulty’ on 31 December 2019. Further information can be found here
Coronavirus Business Interruption Loan Scheme (CIBLS) Up to £5m funding for viable businesses with a six month interest holiday Scheme currently open for applications UK Based with turnover less than £41m, operate within a eligible industry, insufficient security to meet lenders current criteria
HMRC Time to Pay Support in meeting current tax liabilities through delayed payments Available now Case by case basis

Medium Businesses

Relief Available Outline Availability Key Details
SSP Relief Reclaim SSP payments made to employees for Coronavirus related sickness When COVID bill is passed SME’s with less than 250 employees, two weeks per employee
Business Rates Holiday 12 month Business rates holiday for retail, hospitality and leisure businesses in England Your local authority will automatically reissue your bill. No action is required. Retail, leisure and hospitality businesses
Bounce Back LoansBusinesses loans between £2,000 and £50,000Scheme will launch on 4 May 2020You can apply for a loan if your business is based in the UK, has been negatively affected by Covid-19, was not ‘undertaking in difficuluty’ on 31 December 2019. Further information can be found here.
Coronavirus Business Interruption Loan Scheme (CIBLS) Up to £5m funding for viable businesses with a six month interest holiday
Scheme currently open for applications
UK Based with turnover less than £41m, operate within a eligible industry, insufficient security to meet lenders current criteria
HMRC Time to Pay Support in meeting current tax liabilities through delayed payments Available now Case by case basis

Large Businesses

Relief Available Outline Availability Key details
SSP Relief Reclaim SSP payments made to employees for Coronavirus related sickness When COVID bill is passed SME’s with less than 250 employees, two weeks per employee
Business Rates Holiday 12 month Business rates holiday for retail, hospitality and leisure businesses in England Your local authority will automatically reissue your bill. No action is required. Retail, leisure and hospitality businesses
Coronavirus Business Interruption Loan Scheme (CIBLS) Up to £5m funding for viable businesses with a six month interest holiday
Scheme currently open for applications
UK Based with turnover less than £41m, operate within a eligible industry, insufficient security to meet lenders current criteria
HMRC Time to Pay Support in meeting current tax liabilities through delayed payments Available now Case by case basis