Self Employed Income Support Scheme – how does it work?
The Chancellor of the Exchequer announced on 26th March the Self Employed Income Support Scheme (SEISS) to help self employed individuals through the COVID-19 pandemic. The statement came over a week after the announcement of the Job Retention Scheme to help employees, and the Chancellor admitted that it had been difficult to create a scheme that was in his words both deliverable and fair.
Further information was released on 14 April and the key details are as follows:
- Support will be 80% of monthly profits, capped at £2500 per month.
- Individuals need to have been self employed before 5 April 2019 to be eligible.
- For those self employed on 6 April 2016 the award will be based on an average of the three years profits to 5th April 2019. For those who have started self employment since April 2017 the award will be based on the average profit in this period.
- If this figure is greater than £50,000 then no claim is possible.
- The figure used in the calculations is the taxable profit as submitted on your tax return. It ignores losses brought forward and your personal allowance. The profit is also before any adjustments are made for farmers’ averaging.
- A person needs to receive the majority of their income from self employed sources. This covers both sole trader businesses and partnerships.
- The first payment is unlikely to be received before June 2020.
- Tax returns for the year to 5th April 2019, which should have been filed by 31st January 2020, need to be filed by 23 April in order to be eligible.
- Businesses operating via a limited company are not eligible under this scheme.
- Unlike the Job retention Scheme, it is not necessary for the business to have ceased trading.
- It is however necessary for a business to have lost profits as a result of COVID-19.
- HMRC has said they will contact those they think are eligible and invite them to make a claim.
The scheme fails to help those who became self employed since 5 April 2019 and this seems a deliberate omission. HMRC does not have any details of profits for this group as their first tax returns are up to 5 April 2020, and they are concerned about fraudulent or inflated claims. This contrasts with employees where employers make Real Time Information submissions of PAYE data each month and HMRC hold up-to-date information.
A second group who look as if they will miss out are those running Furnished holiday Cottages, as under a quirk of the tax legislation, the income is taxed as property income rather than trading profits.