Tax Writer Taxwriter Ltd
Share this content

Coronavirus self-employed scheme: Get the details right

HMRC guidance on the self-employed income support scheme (SEISS) was updated on 4 May, setting out how applications for the SEISS grant will be made. This article has been revised to reflect announcement of the second SEISS grant. 

5th May 2020
Tax Writer Taxwriter Ltd
Share this content
Self employed

HMRC will pay a taxable grant to self-employed individuals and partners equivalent to 80% of their average trading profits for three months, capped at £2,500 per month. A second SEISS grant will be payable in August at a rate equivalent to 70% of the taxpayer's average trading profits for three months, capped at £2,190 per month

The SEISS Direction (law underpinning the scheme), currently provides for a maximum grant of £7,500 per person, but this is likely to be revised to reduce the maximum for the second SEISS grant to £6,570. 

Who qualifies?

The SIESS grant will be payable to taxpayers who meet these conditions:

  • registered with HMRC as self-employed
  • submitted tax returns for 2016/17 to 2018/19 (or years within that period when trading) which include self-employed trading income
  • was trading in 2018/19 and 2019/20 (see Direction para 4.2(c)),
  • is still trading in 2020/21 (or would be if it were not for the coronavirus shutdown)
  • has lost trading profits due to coronavirus (new condition per 14 April)
  • self-employed profits make at least half of their annual average income (condition clarified by Direction para 5.3(c)) 
  • average self-employed profits for 2018/19 do not exceed £50,000 and were more than nil or
  • average annual self-employed profits for 2016/17 to 2018/19 do not exceed £50,000 and were more than nil (Direction paras 5.2 and 5.3)

Checking who is eligible 

HMRC has released an eligibility tool to help taxpayers check whether they are eligible to claim the SEISS grant. Tax Agents can use the eligibility tool to check for their clients and ask HMRC to request a review of eligibility.  

If the taxpayer submitted their 2018/19 tax return late after 31 January 2020, they can still qualify if the tax return was received by HMRC by midnight on 23 April 2020. The eligibility tool may say such taxpayers are not eligible but you can ask for a review. 

There are slightly different rules for self-employed taxpayers who have received loans covered by the loan charge, and who had not agreed a settlement with HMRC by 20 December 2019. These individuals have until 30 September 2020 to submit their 2018/19 tax return, and the grant will be based on their average profits for 2016/17 and 2017/18. 

Members of partnerships and LLPs can claim the SEISS grant on an individual basis. HMRC will look at the partner’s share of the partnership profits to determine if the partner qualifies for the grant and how much they will get.  

Individuals on all categories of work visa can claim the grant, as it is not counted as “access to public funds”.

How much?

Taxpayer will not be required to submit any figures of past or current profits or turnover for their business in order to claim the SEISS grant. The grant is entirely based on the taxpayer’s average trading profits as reported in their last three tax returns submitted for: 2016/17 to 2018/19.

If the taxpayer started trading within this three year period the monthly average of profits will be calculated based on the tax years in which the individual was trading.

HMRC has provided details of how it will calculate the taxpayer’s average annual profits used to arrive at the  SEISS grant. It will start with gross turnover and deduct:

  • allowable expenses as claimed on the tax return
  • capital allowances as claimed for the trade
  • trading losses incurred in the three-year period 2016/17 to 2018/19

The average annual profit calculation does not take into account:

  • Averaging of profits made by farmers or artists
  • Deduction of losses brought forward from years before 2016/17
  • Deduction of the taxpayer’s personal allowance

HMRC will arrive at the taxpayer’s average earnings from the reported profit for the three tax years, or shorter period as applicable (see Example 2). However, any amendments made to those tax returns after 6pm on 26 March will be ignored, so attempts to increase profits by reducing capital allowance claims will be ineffective.      

Example 1

Adam has reported the following profits and losses on his tax returns:

  • 2016/17: loss £20,000
  • 2017/18: profit £60,000
  • 2018/19: profit £70,000       

He also receives pension income of £15,000 per year.

Adam’s total trading profits less losses are £110,000, giving an average of £36,666 per year. This is less than £50,000, and more than 50% of his total average annual income of £51,666, so Adam qualifies for the SEISS grant.

Adam’s SEISS grant should calculated as:

£36,666/ 12 = £3,055 per month

80% x £3,055 = £2,444

For three months: 3 x £2,444 = £7,332

Adam should receive £7,332 as a single payment in June.

Example 2  

Sarah started trading in October 2017 as a hair-stylist, but made a loss. She changed her trade to dog grooming from April 2018 and made a profit. Her reported results for two years are:

  • 2017/18 £8,000 loss
  • 2018/19 £20,000 profit

Although Sarah started a different business in 2018/19, that is irrelevant as HMRC has confirmed that it will sum the profits and losses of all trades to arrive at the average annual income.

Sarah’s average annual profit over two years is £6,000. HMRC treat 2017/18 as a full year although she only traded for six months. Her SEISS grant for three months will be £1500.

Making the grant application

Tax agents will not be able to make SEISS grant applications on behalf of their clients.

HMRC has now started to contact those taxpayers who are eligible for the SEISS grant to invite them to apply online through their government gateway account on a specific day between 13 and 18 May. The application day will be allocated by HMRC and will not be on a first come first served basis.  

The taxpayer will need all of the following to apply for the grant:

  • National Insurance number
  • Self-assessment UTR number
  • Government gateway ID and password (this can be applied for at stage 1 of the grant application)
  • Bank account number and sort code for the account which the grant will be paid into

HMRC warns taxpayers not to be taken in by scammers who email, text, or call, offering money from HMRC then ask for the business bank details to be confirmed. Warn clients not to click on a link in an email, or reply to a text, purporting to be from HMRC.

The taxpayer will have to confirm to HMRC that their business has been adversely affected by the coronavirus, and this could include any of the following reasons:

  • Proprietor is unable to work due to COVID-19 sickness, is self isolating, shielding or caring for someone else due to coronavirus
  • Staff are unable to come to work
  • Fewer or no customers
  • Supply chain has been interrupted

When will the money arrive?

The SEISS grant for three months will be payable in one lump sum into the taxpayer’s bank account. The money should start to arrive from 25 May, and will be payable within six working days of HMRC approving the application.

The grant will be treated as taxable income, and will have to be reported on tax returns for 2020/21. Taxpayers in receipt of working tax credits or universal credit will have to treat the SEISS grant as part of their self-employed income for 2020/21.       

Who is excluded?   

Those who started trading on or after 6 April 2019 are not eligible for the SEISS grant. This seems harsh, but HMRC has to draw the line somewhere. These individuals can apply for universal credit.  

If the taxpayer has taken the decision to cease trading completely, no SEISS grant is payable.   

Trustees who are carrying on a trade are not eligible to claim the SEISS grant.

Property letting businesses are not regarded as a trade, so landlords will not qualify for the SEISS grant even if more than half of their taxable income is from rental income. This also applies for owners of furnished holiday accommodation. On 28 April 2020 Jesse Norman MP, Financial Secretary to the Treasury, confirmed in Parliament that the letting of furnished holiday accommodation is not within the scope of the SEISS grant.   

It is difficult for HMRC to determine how much self-employed individuals earn in real time, in order to replace their lost income with government support. If MTD for income tax had already been in place, reporting self-employed income on a quarterly basis, the calculation of the support needed for each person may have been much easier.

Replies (199)

Please login or register to join the discussion.

avatar
By anthonystorey
02nd Apr 2020 10:32

A good article Rebecca but you haven't mentioned the condition that the business must have lost trading profits due to COVID-19 to qualify. What evidence will HMRC be asking for I wonder.

Thanks (1)
Replying to anthonystorey:
By TMK Accounts
03rd Apr 2020 13:54

Can you point me to the guidance where that is stipulated as a condition of receiving the grant? thanks

Thanks (0)
Replying to TMK Accounts:
By Duggimon
06th Apr 2020 09:51

It's not hard to find, literally the second condition listed on the first result from googling SEISS

https://www.businesssupport.gov.uk/self-employment-income-support-scheme/

Thanks (0)
Replying to TMK Accounts:
avatar
By norstar
06th Apr 2020 09:58

Under HMRC guidance - Who can apply:

- are trading when you apply, or would be except for COVID-19
- intend to continue to trade in the tax year 2020-21
- have lost trading/partnership trading profits due to COVID-19

Thanks (1)
Replying to norstar:
By TMK Accounts
06th Apr 2020 10:23

Thanks, that's been added in since the first announcement.

Thanks (0)
avatar
By ronmorris23
02nd Apr 2020 10:58

I believe it is imperative to meet the Statutory obligations required by clients for PAYE and VAT purposes. We will not be charging for this work at the present time, but will such work affect payment to furloughed employees and my potential claim as a self-employed individual? Perhaps the detail is not yet available?

Thanks (0)
Replying to ronmorris23:
By Duggimon
06th Apr 2020 09:53

You don't have to stop working to get it. If you want the grant covering your employees wages they have to be furloughed though, which means they have to stop working entirely.

Thanks (1)
Avatar
By I'msorryIhaven'taclue
02nd Apr 2020 11:02

The entire scheme looks rather arbitrary to me, perhaps inequitable, with apparent scope to sail close to the wind legally, morally, and ethically. I have three s/e clients in mind:

1. Mrs Ducker, who as usual missed the 31st January SA filing deadline but has been galvanised into action to beat the 23rd April deadline; her 2018/19 profits have taken a steep upturn.

2. Mr Pinchmoore, SA return filed in January, but whose 2018/19 s/e profits were minuscule would now like a resubmitted SA return in which non-allowable P&L addbacks are uplifted by a further £10k.

3. Mr Hopper, whose income across the three relevant years are divided equally time-wise but unequally profit-wise between partnership and self-employment (both within the same continuing business).

This could be April's fun and games!

Thanks (1)
Replying to I'msorryIhaven'taclue:
avatar
By JimLittle
02nd Apr 2020 18:59

Yes totally agreed and then there will be some in the construction industry who have not declared their earnings suddenly will come forward either submit a tax return or amend their tax return to increase their profits

I think they should have said no one is allowed to amend their tax return and those who missed the 2018/19 cut off should only be allowed to be included if they can give a good enough reason for not submitting in the first place.

Thanks (3)
Replying to JimLittle:
By turchyna582
05th Apr 2020 16:48

I disagree: those who are not shown to be fully compliant in any aspect of the 3 years should not be included. Certainly if someone has not submitted an SA Return by 31/01/20 for the 2018/19 year, WHY should they be given extra time - they have already had more than sufficient?
They will, I am sure, be the same clients who have to be 'coerced' into submitting their SA Return, or are the 'carrier bag' type on the 29 January anyway!

Thanks (3)
Replying to JimLittle:
avatar
By brumsub
06th Apr 2020 10:06

I don't think they cannot not allow taxpayers to amend their tax returns under existing legislation. However, what they will do instead is look very closely at amended or late tax returns that are subject to the grant to assess the risk of fraud, etc.

Thanks (3)
Replying to JimLittle:
wolfy
By rob winder
06th Apr 2020 11:52

If any of my clients ask me to amend their returns the answer will be NO.

Thanks (6)
x
By rockallj
02nd Apr 2020 13:35

How about....

2016/2017 client traded
2017/2018 no income, SA filed, but on maternity allowance all year
2018/2019 client traded.

Do I average 36 months, or 24 months?

Thx

Thanks (0)
Replying to rockallj:
Avatar
By I'msorryIhaven'taclue
02nd Apr 2020 14:53

I guess the Revenue will decide that for themselves.

But it raises the interesting question of if, because of the maternity pay, your client in 2017/18 received less than half of her annual taxable income from self-employed profits would that disqualify her claim altogether; or would it simply remove that one particular year from the Revenue's calculations?

Thanks (1)
Replying to rockallj:
avatar
By Adam12345
02nd Apr 2020 19:25

If they didn’t trade in 17/18 I would imagine the profits in 18/19 will be divided by 12 to get the average, but who knows!?

Thanks (0)
Replying to Adam12345:
avatar
By johnjenkins
06th Apr 2020 09:41

correct

Thanks (0)
bike
By FirstTab
03rd Apr 2020 07:25

Thank you Rebecca.

Thanks (1)
avatar
By SXGuy
03rd Apr 2020 09:36

"The taxpayer may need to confirm to HMRC that they were trading in 2019/20 and expect to continue to trade in 2020/21. Some indication of the business turnover for 2019/20 may have to be provided at that point"

And how will they do that exactly? Most of my clients have no money to pay to get their 19/20 accounts done, most wont even know what their business turnover was accurately enough to give a figure, most will be waiting for the grant before they even have any funds available for me to calculate that figure for them.

Thanks (3)
Replying to SXGuy:
By turchyna582
05th Apr 2020 16:56

It cites "Some indication of the business turnover for 2019/20 may have to be provided at that point".
For goodness sake, if a client does not have an 'indication' of the turnover , then they cannot in all honesty consider themselves truly in business!
It is asking for Turnover, not Accounts!

Thanks (1)
avatar
By seitler
03rd Apr 2020 12:41

What happens if they are still trading in 19/20 (and beyond) and actually doing better now - eg delivery drivers/pharmacists/NHS suppliers/hand gel suppliers . Will they still get the grant ?

Thanks (0)
Replying to seitler:
By Duggimon
06th Apr 2020 09:55

There needs to be a negative impact on business profits as a result of the crisis. It is not clear how this is measured, assessed, or reported yet.

Thanks (0)
Replying to Duggimon:
avatar
By norstar
06th Apr 2020 10:02

That's because they haven't got a clue and it's been rolled out without anyone actually thinking about the detail...

Thanks (1)
Replying to norstar:
By Duggimon
06th Apr 2020 10:15

To be fair, it would have been quite astounding if they'd had the plan ready to go in anticipation of the crisis.

Mitigating the financial impact is one small part of the response to this crisis, and mitigating the impact on the self employed is one small part of that, I'm not surprised or angry that they haven't got all of the detail in place yet and I'm quite sure we'll hear about it when they do.

I would imagine the detail of it all won't emerge until after the deadline given for people to file their 2018/19 tax returns.

Thanks (2)
Replying to seitler:
avatar
By brumsub
06th Apr 2020 09:56

Yes, they will get the grant initially. In addition to the grant being taxable in 2020/21 , they may need to repay some of the grant if, when they submit the 2020/21 returns, their average earnings show that they did not lose any revenue during the period covered by the grant. However, we do not have any details yet or how it will work.

Thanks (1)
Replying to brumsub:
avatar
By andrew1211
20th Apr 2020 16:19

We have no details as it is not workable. Annual figures encompassing the whole year are prepared, not monthly management accounts. Trade might drop off a cliff for 3 months but then be fully recovered over the next 9 months. There is no crystal ball saying what results might have been was it not for COVID-19.

Thanks (3)
avatar
By Sanjeev Nanda
03rd Apr 2020 12:46

The SIESS is one part, in the long way to recovery post-covid-19 for the UK. As much as 2.3 million folks will face unemployment if the pandemic passes July of this year. Not everyone who should be guaranteed employment will do so. A lot of this ruling should be tweaked to accommodate a poorer margin than the ones just enlisted.
~Sanjeev Nanda

Thanks (0)
avatar
By OrmeGoat
03rd Apr 2020 13:48

Thanks Rebecca.

Would you or anyone else like to hazard a guess what will happen if there are tax returns outstanding from 2017-18 and/or before?

Thanks (0)
avatar
By Graeme Lindsay Abdn
03rd Apr 2020 16:37

Hi Rebecca,

Thank you for the article, however, I just wished to check one point. You state someone who has 'average annual profits of £50,000 or more –... will get nothing'. However, I understood there were two tests and if you passed one, you would qualify.

'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; OR

•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'

So one test is based on actual profits being less than £50K and the other is the averaged profits being less than £50K. So if actual is less and averaged is more, you would qualify?

Is my understanding correct?

Thanks (3)
Replying to Graeme Lindsay Abdn:
avatar
By hmlask
06th Apr 2020 10:03

I agree.

My reading of the guidelines is that someone with a profit profile of £70k/£30k/£70k would get nothing, as their average is over £50k, but someone with a profile of £70k/£70k/£30k would get a £7500 grant

Do others agree?

Thanks (1)
Replying to Graeme Lindsay Abdn:
avatar
By Mark Garrett T and A
06th Apr 2020 10:08

I think it is. The guidance on Gov.uk specifically states that only one of the two cases need be met if a claim is to succeed.

Thanks (0)
Replying to Graeme Lindsay Abdn:
avatar
By Partick22
06th Apr 2020 10:14

I agree, and the HMRC guidance that you quote seems very clear on that point, but I've come across other articles saying that qualification is based only on the 3 year average.
E.g. in the FT on 3rd April ’Coronavirus crisis: your financial rights’ the article stated ‘To qualify, the self-employed must receive the majority of their income from their business and cannot earn a penny over £50,000 annually — averaged over three years.’ I've emailed the FT about this but have not heard back.

Thanks (1)
avatar
By vfilipova
06th Apr 2020 09:36

What happens in the situation where a taxpayer had been trading for several years as a sole trader and in summer 2019 decided to incorporate the business and set up a limited company? They keep doing the same business but no longer self - I have few hairdressers and beauty technicians in that situation
What would they do? It would be very unfair if they would be eligible for the job retention scheme only as their director's salary is £700? But their profit in 2017/18, 2018/19 has been £20-£25k?

Thanks (0)
Replying to vfilipova:
avatar
By johnjenkins
06th Apr 2020 09:47

Brilliant point. As the grant is based on an average of 3 years up to April 2019 then there would be a good case for 80% of self employed. However if they incorporated prior to 5th April 2019 what then? Perhaps pro rata self-employed, employed? I'm sure the treasury have "experts" to work out all these scenarios.

Thanks (1)
Replying to vfilipova:
By Duggimon
06th Apr 2020 09:57

They are not self employed currently and so not eligible for the grant. They are eligible for the job retention scheme grant if furloughed, that's it.

It's not fair but it's clear that at this point, that is the position.

Thanks (2)
Replying to vfilipova:
By turchyna582
06th Apr 2020 17:15

Tough! They decided that being incorporated was a 'grass was greener ' situation.
Now they find that (for the present COVID 19) it is not - they may get furlough instead.
Typical of everyone who wants their cake and eating it!!

Thanks (4)
Replying to turchyna582:
avatar
By moneymanager
07th Apr 2020 17:27

I would quite like some hard tack; we sold down our PRS portfolio but still have significant holdings, fortunately all let but pity those with, or about to get voids with no commercial prospect of a let even if they can be done COVID compliantly, on our car parks we are getting cancellations from tenants who moved home with M&D and are getting 80% pay for sitting on their [***], essential maintenance, council tax, service charges, mortgage debt carries on regardless.

Thanks (0)
avatar
By ianrookb
06th Apr 2020 09:37

One thing not obvious is whether a partnership or the partners will be assessed for the £50K profit?

Thanks (1)
Replying to ianrookb:
By Duggimon
06th Apr 2020 09:59

It is clear, it's the individuals, not the partnership.

The grant is paid based on self employed earnings per your tax return, i.e. your partnership share.

Thanks (4)
avatar
By EricO
06th Apr 2020 09:39

Does anyone know if a taxpayer can qualify under both the SEISS and also the Job Retention Scheme?
They are both self employed and a director of their own limited company. I would expect not but there is no detail I can find on this point.

Thanks (0)
Replying to EricO:
avatar
By johnjenkins
06th Apr 2020 09:49

Another good point. I would say this is a case for pro rata. Should be easy enough to work out.

Thanks (0)
Replying to EricO:
avatar
By johnjenkins
06th Apr 2020 09:49

Another good point. I would say this is a case for pro rata. Should be easy enough to work out.

Thanks (0)
Replying to EricO:
By Duggimon
06th Apr 2020 10:01

There has been nothing in any of the guidance published thus far to indicate individuals can't be eligible for both.

The grant is not claimed by, or paid to, the furloughed employee, only to their employer, so there's no basis for assuming one claim will preclude the other.

Thanks (0)
Replying to EricO:
Morph
By kevinringer
06th Apr 2020 14:28

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus... says 'Employees can be furloughed in one job and receive a furloughed payment but continue working for another employer and receive their normal wages.' In which case I don't see why they can't be furloughed and self-employed.

Thanks (0)
Replying to EricO:
By turchyna582
06th Apr 2020 17:23

I see no reason why they cannot - but only on the basis that it is NOT the same business.
It perfectly possible to be a Director of a business in which you are the sole shareholder i.e. 'own business'; and I would expect you to be able to obtain support under the furloughing arrangements, on the proviso that you carry out only 'statutory obligations' as a Director whilst furloughed. Any other work (even checking e-mails from customers/suppliers to ensure business retention may be construed as non-statutory work.
Simultaneously, it may be that you are self employed (weekends and evenings) , unconnected to the Company you own - and with that status you may qualify under the SEISS.
Given that it is possible to be furloughed in genuine different PAYE jobs and receive multiple support; then I wonder about multiple SEIS if you have genuine multiple unconnected self-employment businesses/partnerships?

Thanks (0)
avatar
By mhkay
06th Apr 2020 09:48

So what happens to someone who is part of the gig economy, and some of their gigs over the last 3 years were freelance while others were short-term PAYE employments?

Thanks (1)
Replying to mhkay:
By Duggimon
06th Apr 2020 10:03

I would say if you re-read the article above it explains it clearly enough.

If more than half their income is self employment, and they filed a 2018/19 tax return, and remain self employed, they get a grant of up to £7500. If not, they don't, but may get wages if currently furloughed from a PAYE scheme.

Thanks (0)
Replying to Duggimon:
avatar
By mhkay
06th Apr 2020 10:19

More than half in each of the three years? In any of the three years? In the most recent year? In the three years taken as a whole?

Thanks (1)
Replying to mhkay:
By Duggimon
06th Apr 2020 10:41

Last year, or averaged across three years.

Thanks (2)
By KPEM online
06th Apr 2020 09:48

Trading profits - do we know as yet that this is pre or post capital allowances as yet?

I have one or two two who will qualify based on SE earnings after CA's but will drift over £50k if 'trading profits' equals adjusted profits before CA's.

Cases like these may wish to increase a CA claim to push average profits under £50k too. I don't see this as a major issue as those with such profits will most likely already have claimed CA's to reduce tax exposure.

But with all scenarios relating to amending tax returns, I feel this is similar to requests to amend payroll. I think HMRC may compute the SEISS grants based on EXISTING tax returns in order to get payments processed in the shortest time-frame possible.

As with all current support packages, there will be those who can avail, those who can't, those who need it and those who don't.

Thanks (0)
avatar
By sherodwilliams
06th Apr 2020 09:48

I don't believe 2015/16 (as stated in the article) is relevant?
Are not the 3 relevant tax return periods 2016/17,2017/18 & 2018/19 ?

Thanks (3)

Pages