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Covid-19 - Self-employed workers to receive support package

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The Government has announced yesterday (26 March 2020) the introduction of a package for self-employed individuals called the Coronavirus Self-employment Income Support Scheme. This is different to the Coronavirus Job Retention Scheme (CJRS) which was announced on 20 March 2020 for employees but did not include provisions for self-employed individuals.

What had been announced for self-employed individuals prior to 26 March 2020?

To assist the self-employed, the government had said that they would suspend the minimum income floor so that self-employed workers can access Universal Credit at a rate equivalent to the SSP received by employees. Self-employed workers would also be entitled to Employment and Support Allowance, now also payable from day one of sickness rather than day eight, if they had Covid-19 or had been advised to stay home.

They had also pushed back the deadline for self-employed workers to file self-assessment tax returns from July 2020 until the end of January next year.

What does the new scheme include?

The new scheme will provide self-employed individuals with a taxable grant of up to 80% of their average monthly income (calculated based on their average income over the last three years). The grant will be capped at £2,500 and will initially run for three months.

Who is eligible for the scheme?

Apparently some 3.8 million self-employed people may be eligible.

The scheme is available to:

  • self-employed individuals with trading profits of less than £50,000 in the 2018/19 tax year or an average trading profit of less than £50,000 over the last three tax years (if you started trading between 2016 – 2019, HMRC will only use the years for which individuals filed a self-assessment tax return);
  • individuals who make more than half of their income from self-employment, and
  • self-employed individuals who submitted their 2019 tax return. However, those who did not submit a 2019 tax return by the due date (31 January 2020), have until 23 April 2020 to do so.  

Who is not eligible?

  • Self-employed individuals with trading profits above £50,000;
  • Self-employed individuals who did not make a profit in the last 3 years (thus excluding those who run their businesses at a loss or draw on savings);
  • those who are employees but also have a ‘side’ self-employed job that provides them with less than half of their income; and.
  • those who do not intend to keep trading in the tax year 2020-21; and
  • those who pay themselves through dividends.

How is it different from CJRS?

The difference between the two schemes is that self-employed individuals can claim this grant and continue to do business, whereas ‘furloughed’ employees must not work in order to qualify for CJRS.

What do I need to do if I am self-employed?

Nothing – HMRC will contact eligible self-employed individuals directly. If the grant is available to you, it will be paid directly into your bank account. It will be paid as a single lump sum, covering March to May inclusive (therefore will be a maximum payment of £7500). Please note however, that currently, it is unlikely that the payment will be available until June.

We have seen a suggestion that those who wish to take part in the scheme will have to show that they lost trading profit due to the Coronavirus pandemic. Tax officials will be able to check when the 2020/2021 tax returns are filed. We imagine that, in the current business climate, it will be relatively simple to show this. If not, we have seen suggestions that there might be penalties for false claims.

This guidance is current as at 27 March 2020.

For information on our employment services visit our employment law page.

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