Coronavirus: An overview to the Self-Employment Income Support Scheme

26th May 2020
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The Self-Employment Income Support Scheme (SEISS) has opened to help Britain’s self-employed get through the coronavirus pandemic.

If your clients are self-employed or a member of a partnership, HMRC will provide a grant of up to 80% of their average monthly trading profits for three months, capped at £7,500 in total.

Additionally, to qualify for the SEISS, your client’s annual trading profits must be less than £50,000, and these profits must derive at least 50% of their total income.

Unlike other government coronavirus schemes, the SEISS is a grant and does not have to be paid back. The grant is considered declarable income just like any other, so is still subject to the usual tax and National Insurance deductions.

In this article, Sage has created an in-depth overview to check if you’re clients are eligible for SEISS, what they are likely to receive and when.

Eligibility for the SEISS

You can check your client’s eligibility by using the HMRC’s online tool .

To access this tool, you’ll need to your client’s Unique Taxpayer Reference (UTR) and National Insurance number. You can find this on their most recent Self Assessment return, and their National Insurance number.

If the tool says they are not eligible, you can ask HMRC to review the conclusion by contacting them using the details they provide.

Alternatively, if the situation changes for any reason and you believe they have now become eligible, you can use the tool again.

The SEISS grant will be payable to clients who meet these conditions:

  • They are an individual who is self-employed in the UK (or a member of a partnership) for the tax year 2020/21.
  • They have been adversely affected by the coronavirus (refer to government examples) and has lost trading profits.
  • They have filed a 2018-19 Self Assessment tax return on or before 23 April 2020.
  • They have carried on a trade in the tax years 2018/19 and 2019/20 (or longer).
  • Their 2018/19 trading profit was £50,000 or less OR have an average trading profit for tax years 2018/19, 2017/18 and 2016/17 of £50,000 or less.
  • More than half of their income comes from self-employment. In other words, they can’t claim if more than half their income comes from another source, such as full-time employment, investment profits or property income.
  • They aren’t already above the state aid limits, as claiming the SEISS grant would take them above the state aid limits.
  • They don’t trade through a trust.

What will the scheme cover?

The SEISS will provide 80% of your client's average earnings for three months. However, the grant is capped at £2,500 for each month (that is, £7,500 in total). It is paid in a lump sum after application, rather than in monthly instalments.

To work out how much your clients should receive, the government will calculate the average trading profit across the 2016/17, 2017/18 and 2018/19 tax years ( it adds up their trading profits then divides by the number of years they traded in).

Then it produces a monthly figure from this by dividing by 12. This figure is then multiplied by three and the government will then give them a grant of 80% of that amount.

If any of your clients Self Assessment returns have been amended or had a contract settlement applied after 6pm on 26 March 2020, the government will use the earlier, unamended version(s) for its calculations.

The grant is taxed, just like the regular income. In other words, the income must be declared along with other income sources in the 2020/21 Self Assessment tax return.

Your clients will then pay any tax due as they would usually, but they can offset losses against it too, as usual.

If they claim tax credits, the grant will need to be listed in their tax credit claim as income.

If they are subject to a loan charge, the average trading profits of tax years 2016/17 and 2017/18 are used to calculate what they’ll receive (or 2017/18 if they didn’t trade across 2016/17).

Making a claim

Your client must apply for the scheme by themselves, you cannot do it on their behalf. However, you can help them provide the following paperwork that the SEISS requires.

To make a claim clients will need their:

  • Self-Assessment Unique Taxpay Reference (UTR)
  • National Insurance number
  • Government Gateway user ID and password – if they do not have a user ID, they can create a new one when making a claim.
  • UK bank details including: bank account number, sort code, name of the account and you address linked to your bank account.

Who isn’t eligible?

Clients are not eligible for the SEISS grant if any of the following applies:

  • Their trading profits are more than £50,000 – for both tax year 2018/19 and when averaged across the tax years they traded in during the last three full tax years starting in 2016/17.
  • They failed to submit a Self Assessment tax return for the 2018/19 tax year before 23 April 2020.
  • They haven’t lost trading profits due to the coronavirus outbreak. During the application process, HMRC requires a legal declaration to show that their business has adversely affected, and it may attempt to retrieve the grant if it believes their application is fraudulent.
  • Less than 50% of your clients income came from your self-employment or partnership for both tax year 2018/19 and when averaged across the tax years they traded in during the last three full tax years starting in 2016/17.

Can my client continue to work whilst awaiting or receiving the SEISS grant?

Yes, your clients can continue to trade despite applying for or receiving the SEISS grant. Similarly, the amount they can claim for is not affected by any work they have done, are doing now, or will do in the future.

This is a significant difference from the similar Coronavirus Job Retention Scheme that employers use, where furloughed employees are not allowed to work or provide any services for the employer who furloughed them (but are allowed to work for other employers).

The government says that, even though your clients apply for and receive the SEISS grant, they can also start a new trade or take on other employment.

When will my client receive the grant?

Payments should be received within six working days after you apply online.

If your clients can apply as of 13 May 2020, this could mean payments are received around 21 May 2020. The entire grant is paid in a single lump sum, rather than in monthly instalments.

What documentation requirement does the SEISS have?

You need to keep the your clients’ documentation relating to SEISS with the other Self Assessment records, as per existing requirements to keep records for five years. In other words, you will need to keep the records until at least 2027 after the 31 January 2022 submission deadline for the 2020/21 tax year.

You should keep the records relating to the amount claimed, the claim reference number, and any evidence that their business has been adversely affected by the coronavirus outbreak (for example, cancelled orders).

Remember that the reason for keeping the records in this way is to explain to HMRC what their situation was should it investigate for any reason, so the more evidence you save, the easier this will be.

Keep in mind

Self-employed workers have been hit particularly hard by the coronavirus outbreak.

If your clients are self-employed or in a business partnership, it is worth noting what government schemes they are eligible, so they can receive the full benefits available to their businesses.

Additionally, as their financial advisor, its essential to keep up to date on announcements and developments because the government is announcing new measures on a regular basis.

We post regular updates with the latest information on government measures, on our coronavirus hub.

Furthermore, you can support your clients by accessing our free solutions and training such as Online Bureau, Sage Business Cloud Accounting, Satago and more