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Self employed

Coronavirus self-employed scheme: Get the details right

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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
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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)

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Replies (199)

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Morph
By kevinringer
06th Apr 2020 14:35

Do we know if 2018-19 is measured before or after losses b/f from 2017-18?

2017-18 loss (£7000) carried forward to 2018-19
2018-19 profit £25,000 minus loss b/f £7000 = £18,000

What profit is used for 2018-19: £25,000 or £7000?

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Morph
By kevinringer
06th Apr 2020 14:38

Do we know if agents can claim on behalf of clients? Only 1% of my clients have setup their BTA/PTA. The majority will not be able to do it. HMRC have granted MTD exemption for a sizeable proportion of my clients on the grounds of digital exclusion. I'm going to have to claim it for my clients because they can't. It would make my life a lot easier if I can claim it through my agent HMRC online services account.

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By Duggimon
07th Apr 2020 08:09

Come on Kevin, come and sing the "nobody knows" song with me.

Nobody knows
Nobody knows
We haven't been told yet
Nobody knows

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Replying to Duggimon:
Morph
By kevinringer
07th Apr 2020 09:25

Nobody knows that one ;-)

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By Stalytax
07th Apr 2020 17:49

I was out for my statutory one hour walk last week, when my phone started ringing. A client who was filling in the form she had received to get support from the local authority, as she gets rate relief, so should qualify for the £10,000 grant. First she was totally thrown by questions about de minimis state aid, later, as I was slogging up a steep path, I got a call asking what 'capacity' meant under the signature. I suppose as I fill in forms for a living, I take it for granted that they are straightforward for everyone.

Regarding the SEISS grant, the devil will be in the detail, I'm sure. Even if one's income remains flat or even increases, who's to say that it wouldn't have been higher were it not for the present crisis? What if you lose money now but make more post lockdown? Using that logic I don't see how they could possibly police the system or claw back overpayments. I think it may just be a tickbox, 'have you lost trading profits due to Covid19?' and that will be an end to it. That could be famous last words, though, please remind me when we are all filling in some Kafkaesque form showing profits week on week.

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By Amritaksr
09th Apr 2020 10:44

What about women who are se but are currently on maternity leave reviving Maternity Allowance but doing KIT days, so are still ‘trading’?

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By Amritaksr
08th Apr 2020 15:34

What about women who are se but are currently on maternity leave reviving Maternity Allowance but doing KIT days, so are still ‘trading’?

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x
By rockallj
09th Apr 2020 15:17

How about a subbie who has income as such:-

2016/17 £25,000 only self-employment
2017/18 £ 2,500 self employment £20,000 PAYE
2018/19 £10,000 only self employment.

Is the answer
(1) £35,000 /2 x 80%?
(2) £35,000 /3 x 80%?
(3) nil
(4) £37,500/3 x 80% (can't be this as middle year's SE income was less than 50%).

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Replying to rockallj:
Morph
By kevinringer
09th Apr 2020 16:53

'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:

'x 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
'x 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'

They meet the first of these bullet points so qualify.

'You’ll get a taxable grant which will be 80% of the average profits from the tax years (where applicable):

'2016 to 2017
'2017 to 2018
'2018 to 2019
'To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount.

'It will be up to a maximum of £2,500 per month for 3 months.'

That's your 4th answer.

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Replying to kevinringer:
x
By rockallj
09th Apr 2020 21:25

Aha, so S/E has to be more than 50% of income over the whole trading period in total, rather than year by year? Go it, thanks!

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By Death
10th Apr 2020 13:39

So if someone started self-employment on 01.03.18 are we basing over two tax years or 13 months to get to a monthly average from which to apply 80%?

As always, apologies if this has been asked elsewhere countless times already!!

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Replying to Death:
Morph
By kevinringer
10th Apr 2020 14:00

The guidance at https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-... says:

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

Then:

'You’ll get a taxable grant which will be 80% of the average profits from the tax years (where applicable):

2016 to 2017
2017 to 2018
2018 to 2019
To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount.'

It only makes reference to years which suggests they use 1, 2 or 3 years. So it would be 2 years in your case. This doesn't seem fair for those who started during the 2016-19 period. HMRC have had lots of questions (eg losses) which will have to be clarified in further guidance. Perhaps HMRC will clarify whether they mean years or months in future guidance.

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Replying to kevinringer:
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By LookingForHelp
13th Apr 2020 11:55

Does the term 'trading' profit (Net Profit) relate to the section 64 of the SA100 (SA302) figure, ie what one would pay tax against (after capital allowances) If so should this not state taxabable' profit? Or is is Section 47 (Net Profit before capital allowances) of the SA100 titled 'business income' ? Now I know it's the section 64 figure that is used for tax calculation but just confused as this appears to use non-earnings allowances such as Investment allowance. Both are reported to HMRC. As the chancellor advised it was a 'compensation' against 'earning's up to £50k and uses the term 'tradeable' not 'taxable' profit it has caused a little confusion. I am not an accountant but no accountant can appear to answer this, only offer interpretation nor can HMRC! So any help appreciated. Thank You

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Replying to LookingForHelp:
Morph
By kevinringer
13th Apr 2020 12:19

No one can answer your question because the Government has said. There are loads of unanswered questions and we really do not know. This is not priority for the Government because we don't need to know until we start putting in claims and that won't be for another month at least. In contrast HMRC has had to issue clarification about CJRS because that affects employees now. That is why the CJRS guidance has been updated twice since publication whereas SEISS has not. All you can do is monitor https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-....

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Replying to kevinringer:
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By LookingForHelp
13th Apr 2020 13:28

Thank You. It's a real tough one. I sit (literally) £100 either side of the line. Section 47 I get a grant, section 64 I get nothing. My earnings are certainly not £200k and when you have played your part in raising 5 kids you are certainly not a rich person!!! With my SE sector now virtually closed for new business I could draw down from my tax bill savings to pay bills etc that is now deferred but that would be a dangerous gamble if I drew down and there was no grant to replace what I have spent!!!

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Replying to LookingForHelp:
Helen Froggett Thomson
By Helen Froggett-Thomson
27th Apr 2020 12:14

Hi you've probably worked out the answer to your question but there's two points I'd like to clarify here.
The money you've put aside for tax payments does not need to be used in the calculation for Universal Credit - although you will need to declare it/
And 2) the figure being used is after capital allowances have been taken into account, so taxable profit.
Hope those help. Feel for you :)
This link might help https://www.gov.uk/guidance/how-hmrc-works-out-total-income-and-trading-...

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By zebs
13th Apr 2020 10:09

trying to find out if the small business grant for low rateable value affects universal credit payments? is it classed as income or a grant please

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By zebs
13th Apr 2020 10:09

trying to find out if the small business grant for low rateable value affects universal credit payments? is it classed as income or a grant please

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Replying to zebs:
Morph
By kevinringer
13th Apr 2020 10:17

All we know is what the published guidance says. The small business grant details are on pages published by the county councils. Tax doesn't come onto their radar so they don't mention it. We will get clarity over the coming weeks because there are so many questions like this that need addressing. In the meantime we don't know. For the time being I am working on the small business grant as being taxable income and therefore will affect UC.

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By LookingForHelp
13th Apr 2020 11:52

Does the term 'trading' profit (Net Profit) relate to the section 64 of the SA100 (SA302) figure, ie what one would pay tax against (after capital allowances) If so should this not state taxabable' profit? Or is is Section 47 (Net Profit before capital allowances) of the SA100 titled 'business income' ? Now I know it's the section 64 figure that is used for tax calculation but just confused as this appears to use non-earnings allowances such as Investment allowance. Both are reported to HMRC. As the chancellor advised it was a 'compensation' against 'earning's up to £50k and uses the term 'tradeable' not 'taxable' profit it has caused a little confusion. I am not an accountant but no accountant can appear to answer this, only offer interpretation nor can HMRC! So any help appreciated. Thank You

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Replying to LookingForHelp:
Helen Froggett Thomson
By Helen Froggett-Thomson
27th Apr 2020 12:16

Recent updates have confirmed that it is after the capital allowances are taken into consideration, so taxable profit :) https://www.gov.uk/guidance/how-hmrc-works-out-total-income-and-trading-...

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Replying to Helen Froggett-Thomson:
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By LookingForHelp
27th Apr 2020 12:31

Thanks. So if the Capital allowances 'pushed' the average from £49,500 to £50,100 that would lead to disqualification? As capital allowances can increase or decrease the Net Profit figure on section 47 of the Tax Return. Looks like I'm stuffed then. After Capital Allowance adjustments I'm over by £100! Incredible that I read millionaire footballers on mega bucks contracts will get (via their clubs claiming) £2500 p/m from the Gov (taxpayers like me) towards their mega wages whilst those literally a few pounds over get nothing. Dont know how £100 the wrong way puts me in a £200,000 earnings bracket, and £100 the other way puts me in the 'vulnerable' bracket. Bizarre beyond my understanding. Thank You.

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By Arbitrary
14th Apr 2020 10:58

The item I am most muddled about and which does not seem covered much by the discussion is what constitutes 'lost income because of coronavirus' for the self employed. If you are unable to work because of not being allowed to by social distancing rules the situation seems clear; but where, as a result of the coronavirus pandemic, your income simply falls considerably because of, for example, knock on effects in the economy, but you are not legally prevented from working, what is the situation with claiming SEISS and how will this be calculated? And does the self employed person need to carry out specific actions to enable themselves to qualify? Has the Government been more specific about the requirements? What will be the relationship between the amounts of profits lost and the grant? What will need to be included in the actual claim when the forms are issued? There seems an awful lot of detail missing presently.

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Replying to Arbitrary:
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By johnjenkins
15th Apr 2020 09:02

I understand your concern but I don't think Government are bothered about all the intricacies, they just want people to be able to live. Hence the need for the self-employed to claim and we sort out the details later. I cannot see any situation whereby legalities will stop these payments. As I see it, and what I will be doing for my clients come June, is that if you are not working (for whatever reason) you claim for 3 months (March April May) based on an average of up to the last 3 years profit. If there is a loss in say the middle year then I will only take the last year. The idea is to get the claim in then sort out any problems afterwards. Don't forget it's not a grant (grants don't get repaid) it is taxable income.

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Replying to Arbitrary:
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By johnjenkins
15th Apr 2020 09:02

I understand your concern but I don't think Government are bothered about all the intricacies, they just want people to be able to live. Hence the need for the self-employed to claim and we sort out the details later. I cannot see any situation whereby legalities will stop these payments. As I see it, and what I will be doing for my clients come June, is that if you are not working (for whatever reason) you claim for 3 months (March April May) based on an average of up to the last 3 years profit. If there is a loss in say the middle year then I will only take the last year. The idea is to get the claim in then sort out any problems afterwards. Don't forget it's not a grant (grants don't get repaid) it is taxable income.

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By YDUNLOP
16th Apr 2020 11:10

By "trading profits", does HMRC mean gross profit? -- trading profit is usually defined as an alternative name for gross profit. If that is the case then will self-employed who used the short tax return SA100 need to provide a breakdown of expenses for previous tax years showing direct expenses and overheads seperately?

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Replying to YDUNLOP:
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By johnjenkins
16th Apr 2020 12:34

I have interpreted the Government to mean that they want to reimburse 80% of loss of money that went into the self-employed pockets. So I will be using the taxable profit figure on the SA302 less CA's. If HMRC don't like what I'm doing then they can challenge and no doubt someone higher up the chain will make a sensible decision.

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Replying to johnjenkins:
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By Southwestbeancounter
16th Apr 2020 13:53

We're presuming that to be the case too.

In any event, I understand that HMRC are contacting clients with the amount they can potentially claim (which they then need to confirm) rather than us as agents computing the amount so if that is the case it will make life simpler - provided we can agree HMRC's figures that is..........

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Replying to Southwestbeancounter:
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By johnjenkins
16th Apr 2020 14:47

Therein lies the difference. What HMRC think they should pay out (no doubt after CA's) and what the Government intends the self-employed to have. Given that PAYE tax payers will get 80% of gross pay it would seem only fair that the self employed should get 80% of, what is in essence, their gross pay. We shall see, but as you quite rightly say "if we can agree a figure".

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By chronus
16th Apr 2020 12:43

Number crunching aside, what matters is, whatever may the amount be it will not be in the bricklayer, plasterer, plumber, painter `s pockets until June.
What then do they live on in the interim, how do they pay for rent or mortgage. If they go and "sign on " for any state benefit/support, will that then affect their entitlements to SEISS.
The devil is in the details and that`s still being worked out.

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Replying to chronus:
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By keith_j
16th Apr 2020 15:17

Actually the guidance was issued by HMRC earlier in the week - surprised that this article hasn't been updated - and we now know how the SEISS payments will be calculated.
https://www.gov.uk/guidance/how-hmrc-works-out-total-income-and-trading-...

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Replying to keith_j:
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By chronus
16th Apr 2020 16:31

If it has all been worked out, then why the delay in getting it up and running.

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Replying to chronus:
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By johnjenkins
17th Apr 2020 09:22

If you are referring to June then the answer could be that perhaps Government think that if a lot of the self-employed are back at work and earning by then, then some might not bother claiming thereby reducing Government outlay (perhaps).

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Replying to johnjenkins:
Helen Froggett Thomson
By Helen Froggett-Thomson
27th Apr 2020 12:21

We are advising our clients to apply for Universal Credit to tide them over.
'The Self-employment Income Support Scheme will be treated as earnings in Universal Credit. Your Universal Credit payment will adjust in response to changes in your earnings.' https://www.understandinguniversalcredit.gov.uk/employment-and-benefits-...

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By [email protected]
17th Apr 2020 16:23

HI there, can someone clarify what this means please?

You will need to confirm to HMRC that your business has been adversely affected by coronavirus. HMRC will as usual use a risk based approach to compliance.

Specifically, RISK BASED APPROACH

Thanks

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Replying to [email protected]:
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By andrew1211
20th Apr 2020 16:22

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.

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By LookingForHelp
17th Apr 2020 16:36

Hi Can anyone clarify the following two queries please?

Q1 - Rental Income. I am a bit confused as to whether property income is actually used as part of trading profits, or as just part of the 'overall' income assessment?

Q1 Cont
Scenario A
If the Electrician earns £45k from his 'job' and £6k from his rented property
He fails as his collective income totals £51k (last year or average)

or

Scenario B
He is ok as his income from his 'job' (£45,000) is more than half his 'total' income (£51,000) but less than £50,000.01

Q2

Also I assume it is the (after) Capital Allowance (section 64 of the SA 100, the SA302 figure ) that is used?
I have read it a few times and it looks very much that it is?
It keeps saying after business expenses (capital allowance) but capital allowances can adjust the Net Profit figure up or down. Bit confused.

Thanks all and stay safe.

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Replying to LookingForHelp:
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By andrew1211
20th Apr 2020 16:24

Scenario B...yes.

Yes net off all capital allowances up/down.

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By LookingForHelp
20th Apr 2020 16:36

Hi. The more I read about this scheme in detail the more I have drawn the conclusion that it is something of a shambolic farce. It would appear that

Trader No 1
£49,999 2018/2019 - automatically qualifies, no averaging required
But just for the sake of Maths
£150k 2017/2018
£150k 2016/2017
Average £116,666 (but this is irrelevant as they instantly qualify from 2018/2019 figure)

Trader No 2
£50k
£50k
£50k
Average £50k PA
Gets absolutely nothing
They fail the 2018/2019 £50k test
They fail the averaging £50k test

Yet Trader No 1 would (you would expect) have a lot more reserves to see them through.

The arbitrary cliff edge £50k appears incredible unfair. No taper (like child benefit) just a penny over and it's no help whatsoever. A penny the other way and it's £7,500 of much needed (taxable) help.

Yet we read about professional footballers on £1m PA contracts effectively getting £2500 p/m from the scheme towards their salaries as PAYE has no cap.

Does anyone think the scheme rules will be looked at to help those just over the cliff edge?

The PAYE scheme was recently tweaked in respect of the much criticised 28/02/2020 date.

Or is this with the SE scheme, sink or swim?

Thanks all & stay safe!

Thanks (0)
Replying to LookingForHelp:
Helen Froggett Thomson
By Helen Froggett-Thomson
27th Apr 2020 12:29

I am not sure if Trader 1 qualifies. Only if the self employed can elect which years are being taken into account (we have yet to see). I've been re reading the guidance and it MIGHT be that only if you've got one years trading will they use 18/19. Otherwise they might average out the profits over two or three years - and they are also 'adding' in losses too. So if you had a really bad year and a really good one - let's say 16/17 was loss of £10,000, 17/18 break even and 18/19 profit of £10,000, you may get zilch.

'How much you’ll get
You’ll get a taxable grant based on your average trading profit over the 3 tax years:

2016 to 2017
2017 to 2018
2018 to 2019
To work out the average trading profit we will add together your total trading profits or losses for the 3 tax years then divide by 3.' https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-...

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By Tremayne Jennings
21st Apr 2020 08:51

2016-2017 less than 50% income from self employed
2017-2018 self employed
2018-2019 self employed

Will this be calculated over 24 months or 36?

From my understanding as 2016-2017 was mainly from employment, this year will not count as a self employed year?

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Replying to Tremayne Jennings:
Helen Froggett Thomson
By Helen Froggett-Thomson
27th Apr 2020 12:31

I would agree with you

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By tracybacon
25th Apr 2020 08:36

Im a self employed counsellor in private practice.
16/17 less than half income from self employment
17/18 less than half income from self employment
18/19 self employment main income.
It seems that any grant i get will be based on 18/19?
I did have a job in 18/19 as i still worked for Tesco untill i was made redundant in May 2019. I did have rental income in 18/19. My question is will they add my rental income to my paid work at Tesco and say that less than half my income comes from self employment? Even though if you look at them individually my self employment income was the highest of all three.

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Replying to tracybacon:
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By andrew1211
27th Apr 2020 10:27

Yes they will for 18/19...sounds like all three years your self employed income will be less than 50% of the overall total income

Thanks (1)
Helen Froggett Thomson
By Helen Froggett-Thomson
27th Apr 2020 12:02

Hi Rebecca, thanks for updating this for us. Just a couple of questions please.

I've read and re read the guidance and it's ambiguous still on the point of WHEN the 18/19 return will be used. Is it only used solely, if there's only one year of trading? and if there are two or more, they will be used?

So if someone was under 50K in 18/19 and over the other two years (to the tune of more than £150k over the three) would they be able to elect to have just the 18/19 figure used. Or is that only if they've only got one year trading that they will use the 18/19 in isolation?

I wonder if they will ask on the initial form which period you would like to be used when sending out in May? does anyone know what's on that form? as they are also going to be asking regarding 'trading losses due to Covid-19' aren't they.

And what do you see as 'risk based approach to compliance'. Would this mean using vat returns perhaps? as those are still meant to be being submitted (even if the payments are deferred)?

thank you

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Replying to Helen Froggett-Thomson:
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By andrew1211
27th Apr 2020 12:40

I thought it was either/or but happy to stand corrected. So even if the 3 year average is over, and 18/19 alone is under, you can still claim. But then the 3 year average is used for the value of the claim itself although it might be subject to capping in any case. All sounds a bit odd though. No one knows what the form will say yet but yes they will undoubtedly ask that question. Not everyone does VAT returns so that isn't really going to work. I have said before it is unworkable. Accounts are done annually encompassing a whole year of trade. Monthly management accounts are not done for the vast majority. Trade may drop off a cliff for 3 months but then be made up over the rest of the year. There is no crystal ball to tell what might have happened had COVID never existed. Maybe trade was on the up anyway?

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By Stewart Wightman
02nd May 2020 09:44

Oh wow. Latest guidelines published on May 1st state that Agents cant submit for Clients, they have to do it themselves. None of my Clients have a Gateway, I submit their Returns. Half my Clients dont have internet or computer. This has not thought through HMRC disaster for smallest businesses written all over it. Any suggestions please?

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Replying to Stewart Wightman:
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By Stewart Wightman
02nd May 2020 09:46

I would also add, the Guidelines tell my Clients to get in touch with their Agent for advice....but HMRC dont provide me with any!!!!

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Replying to Stewart Wightman:
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By andrew1211
02nd May 2020 10:37

I thought the guidance said "If you’re unable to claim online an alternative way to claim will be available." I would not jump the gun yet as we are probably still 2 weeks away from seeing the final details.

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Replying to andrew1211:
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By Stewart Wightman
02nd May 2020 10:52

"Your tax agent or adviser cannot make the claim for you. You must make the claim yourself. If you use an agent you should contact them if you need any help or support."
Just added yesterday.

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