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Self-employed income support scheme

Calculating profits

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Hi everyone

According to the Self-employed Income Support Scheme pages, the following is stated regarding calculation of average profits:

Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment. This is determined by at least one of the following conditions being true:

having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income

having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period

If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.

My question is this - will we be expected to use the taxable profit figures, rather than the profits as calculated in the accounts.

This may be a stupid question, and if so, I'm sure one or two may tell me that in the comments section!!

Many thanks in advance

Replies (17)

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Scooby
By gainsborough
31st Mar 2020 09:35

Not stupid at all - we just don't have the detail at the moment - see previous thread
https://www.accountingweb.co.uk/any-answers/trading-profits-for-self-emp...

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Scooby
By gainsborough
31st Mar 2020 09:35

Duplicate

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RLI
By lionofludesch
31st Mar 2020 09:56

It's not a stupid question but, as Capital Allowances have been treated as a trading expense since 1996, my money is on profits after Capital Allowances.

Maybe someone smart at HMRC will spot that there's an anomaly. Who knows ?

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By andrew1211
31st Mar 2020 10:05

Taxable as things stand

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RLI
By lionofludesch
31st Mar 2020 10:12

Disregarding Capital Allowances is a two-edged sword, of course.

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By pauld
31st Mar 2020 11:03

I was about to post the same question. I have a self employed bod whose trading profits in the accounts for the last 3 years amount to approx. £49,000 per annum. However taxable profits are around £53 per annum each year. The guidance does say trading profits and not taxable profits. My feeling is that this is an oversight and it will be the tax computation that is used i.e. taxable profits.

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By John R
31st Mar 2020 11:16

As this also applies to partners, the only figure on the individual partner's SA will be the share of adjusted profit after CAs. I cannot see that the self-employed will be treated differently so I am almost sure that this is how it will operate.

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By John Stone
31st Mar 2020 11:22

If HMRC are calculating, it is unlikely to be profit per the accounts as, for businesses with turnover below £85000 (reportingthree line figures) HMRC would generally not know what the profit per the accounts was. My money is firmly on the taxable amount (after capital allowances).

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By Duggimon
31st Mar 2020 11:29

HMRC don't get the accounts of self employed people but they do get the tax returns. Some self employed people don't do accounts but all of them do tax returns.

I'm not sure why there's this much uncertainty, it would seem insane for them to use anything other than the already reported figures from tax returns, especially since they've already said people will, in the the first instance, receive a letter from HMRC inviting them to apply.

Given that nobody sends HMRC their accounts, and some people don't prepare them, how are HMRC going to know who qualifies unless they're using tax return figures?

You can argue that it's unfair that people may have capital allowances, that's why there's a three year averaging option. It's certainly no more unfair than PSCs who are getting SFA.

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Replying to Duggimon:
By Steve Holloway
31st Mar 2020 14:28

How do I claim the SFA ... I am a PSC and feel you know something I don't!!

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Replying to Steve Holloway:
RLI
By lionofludesch
31st Mar 2020 14:33

Steve Holloway wrote:

How do I claim the SFA ...

Ermmmm.........

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Replying to Steve Holloway:
By Duggimon
31st Mar 2020 14:58

I think you're joking but in case not it's an acronym that means one of two things and I'm not talking about the Scottish Football Association here.

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Replying to Duggimon:
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By legerman
01st Apr 2020 00:48

Duggimon wrote:

I think you're joking but in case not it's an acronym that means one of two things and I'm not talking about the Scottish Football Association here.

Sweet Fanny[***] Adams?

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Replying to Duggimon:
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By Elvis11
01st Apr 2020 05:41

You're probably right, but I hope HMRC clarify this as soon as possible. Another £50,000 threshold, regarding Child Benefit entitlement is of course based on net adjusted income, with pension contributions and Gift Aid payments being taken account of. Presumably this won't apply, but certainty is required so that we can advise clients.
In addition, how will a loss be treated in the three year averaging calculation, zero or the actual negative figure?
And if we really want to complicate things, what is the VAT status of any taxable payment received by a taxpayer using the Flat Rate Scheme....

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Replying to Elvis11:
RLI
By lionofludesch
01st Apr 2020 06:48

Elvis11 wrote:

And if we really want to complicate things, what is the VAT status of any taxable payment received by a taxpayer using the Flat Rate Scheme....

Who has supplied what to whom ?

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Replying to lionofludesch:
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By Elvis11
01st Apr 2020 10:02

The Government has supplied taxable income to the taxpayer.

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Replying to Elvis11:
RLI
By lionofludesch
01st Apr 2020 10:26

Elvis11 wrote:

The Government has supplied taxable income to the taxpayer.

The mere transfer of money does not create a taxable supply.

What goods or services has the trader supplied ?

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