COVID-19: Self Employment Income Support Scheme (SEISS)
Apr 29, 2020
PAGE UPDATED 30/04/20
Following the announcement about the Coronavirus Job Retention Scheme (CJRS) for employees, the Chancellor has now provided details of the Government’s support package for the self employed as a result of the coronavirus.
If you’re self employed, the SEISS will pay you a taxable grant worth 80% of your average monthly trading profit over the last three years, up to £2,500 a month. The scheme will last for three months, but may be extended if needed. If you only have one or two years of accounts, the government will use those profits to form the basis of the grant.
Who is eligible for the SEISS grant?
The scheme is available to self-employed individuals and members of a partnership if you satisfy all of the following conditions:
- You have submitted your Income Tax Self-Assessment tax return for the tax year 2018/19
- You have traded in the tax year 2019/20
- You are trading when you apply, or would be except for COVID-19
- You intend to continue to trade in the tax year 2020/21
- You have lost trading/partnership trading profits due to COVID-19
So if you started being self-employed in 2019/20, then you will not be eligible for a grant under the proposed rules. Instead you will be able to claim support through working tax credits and universal credit, which will now be available in full to the self employed.
At least one of the following conditions must be satisfied:
- You must have trading profits, or a share of partnership trading profits, in 2018/19 of less than £50,000 and these profits must constitute more than half of your total taxable income, OR
- You must have average trading profits in 2016/17, 2017/18, and 2018/19 of less than £50,000 and these profits must constitute more than half of your average taxable income in the same period
If your trading commenced between 6 April 2016 and 5 April 2019, HMRC will only use those years for which you’ve filed a Self-Assessment tax return.
HMRC guidance has defined self-employed profits for the purposes of SEISS as turnover for the business less allowable business expenses and capital expenditure. This figure may not be the same figure as that originally declared in your self- assessment tax returns. If the calculation results in a trading loss the amount that is averaged is not nil for that year but the negative result.
HMRC states that total profits for the purposes of the 50% test would be taxable income from all sources for the relevant year, such as property income, bank interest, employment income and social security income.
HMRC will use data on 2018/19 returns already submitted to identify those people who are eligible, and it will risk assess any late returns filed before the 23 April 2020 deadline in the usual way.
Amount of Grant Available
The taxable grant will be 80% of the average profits from these tax years (where applicable):
To work out the average HMRC will add together your total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount. If your trade commenced during that period, it’s assumed that the average will be computed on a pro-rata basis.
The average trading profits 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 your personal allowance
It will be up to a maximum of £2,500 per month for 3 months.
The grant will be treated as taxable income, and will have to be reported on tax returns for 2020/21. If you receive working tax credits or universal credit you will have to treat the SEISS grant as part of your self-employed income for 2020/21.
If you’re a director of your own limited company and you pay yourself a salary through PAYE and the rest as dividends, then you may qualify for the Coronavirus Job Retention Scheme up to 80% of your salary. However your dividends are not covered by the scheme and will not count for support, regardless of how small your salary may be.
When will the SEISS grant be available?
The SEISS is proving to be a very complex system, and is likely to take some time to build. As a consequence, you may have to wait until June before you are likely to receive your first payment.
You don’t need to apply – HMRC will aim to contact you directly by the middle of May if you’re eligible and ask you to complete an online form. Make sure you don’t succumb to any scams about tax grants from HMRC – the only way you can claim a grant is by using the Gov.uk online service, not by giving personal details via a phone call or by clicking a link in an email claiming to be from HMRC. You are likely to receive notification by letter, as HMRC has confirmed it will not make contact by email, telephone call or text message.
You won’t need to provide any figures to HMRC. It will calculate your average earnings based on your reported profit for the three tax years, or a shorter period as applicable. It is likely that you’ll have to confirm to HMRC that your business has been adversely affected by the coronavirus, but it has not been suggested that you’ll need to provide any forecast turnover figures for 2019/20 or 2020/21.
Once HMRC has received your claim, you’ll be contacted directly about how much you’re eligible to receive and the grant will be paid straight into your bank account. It will be paid in a single lump sum instalment covering the three months for which the scheme is applicable – the pay outs will be backdated to 1 March 2020.
If waiting over two months for your grant leaves you in financial difficulty, you will need to bridge the gap through accessing the Bounce Back Loan Scheme or by claiming universal credit in full. There are also grants available to businesses that pay little or no business rates, and you can defer your income tax payment on account which should have been due on 31 July 2020.
Unlike the furlough scheme mentioned earlier the self-employed can continue trading, albeit at a reduced level. If you’ve taken the decision to cease trading completely, no SEISS grant will be available.
Landlords and 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.
The same thing applies for the letting of furnished holiday accommodation. This is also not regarded as a trade, even though it is treated as such for certain pensions and Capital Gains Tax purposes. Therefore HMRC isn’t likely to consider that furnished holiday letting businesses qualify for the SEISS grant, even though this industry is likely to be very heavily affected.
The need to establish the SEISS has thrown into sharp relief the inconsistent contributions between people of different employment statuses. The new scheme mirrors the PAYE jobs retention scheme, which led the Chancellor to make reference to the discrepancies between the self-employed and the employed. One wonders if this could lead to a levelling of Income Tax and National Insurance Contributions (NICs) for the self employed once the pandemic subsides.
If you have any issues or concerns about your eligibility for the SEISS please do drop us an email and we will respond as soon as possible.