September 18, 2020
The Covid-19 outbreak has negatively impacted the businesses and livelihood of almost all the self-employed people in the UK. Therefore, the announcement of the Self-Employment Income Support Scheme by the Chancellor Rishi Sunak brought a big sigh of relief among the Self-employed workers, who have suffered adversely.
Originally two grants were announced under this scheme for the self-employed:
1. First Grant - 80% of your trading profits, up to a maximum of £2,500 per month. The grant is capped at £7,500 for the entire 3-month period. It is non-repayable, but you will need to pay income tax and national insurance on the income.
2. Second Grant - 70% of your trading profits, up to a maximum of £2,190 per month.
The first Grant scheme is backdated to 1st March 2020 and was open for applications until 13th July; so it is closed now.
The second Grant is open now, if you’re eligible and your business has been adversely affected on or after 14 July 2020, you must make your claim for the second grant on or before 19 October 2020. You can make a claim even if you did not make a claim for the first grant.
What you can avail under the second Grant?
If you are eligible, the taxable grant available is normally 70% of the average monthly profits in the tax years 2016/17, 2017/18 and 2018/19, the average profits reported for these tax years on your submitted tax returns are capped at £2,190 per month. The tax years used for averaging may vary if trading began later than 2016/17 or if the parental leave rules apply to you (click here to know more about whether you satisfy the parental rules).
The grant is for three months, so the maximum grant will be £6,570. HMRC should start making the grant payments in August 2020.
Are your eligible for the scheme?
Sole traders and partners may be eligible for the Self-Employment Income Support Scheme.
Your business must have filed a tax return for the tax year 2018/19 by 23rd April 2020. A business must also:
- Have traded in the 2019/20 tax year.
- Intend to continue trading in the 2020/21 tax year.
To work out your eligibility HMRC will first look at your 2018 to 2019 Self-Assessment tax return. Your trading profits must be no more than £50,000 and at least equal to your non-trading income.
If you’re not eligible based on the 2018 to 2019 Self-Assessment tax return, HMRC will then look at the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019.
Click here to know how HMRC will work out your trading profits for eligibility.
If you’re a member of a partnership
Each partner in your partnership will need to make a claim based on their own circumstances.
HMRC will work out your eligibility based on your share of the partnership’s trading profits.
If the partnership rules require the grant to be paid into the partnership pot, the partnership should give the full grant back to you. This should be treated as the partnership’s income in the same way as any other income.
If your business made an overall loss over the last three tax years (2016/17, 2017/18 and 2018/19) then you don’t qualify for the Self-Employment Support Scheme. However, you may be eligible to claim Universal Credit at £94.25 per week.
If you have started trading between 2016-19, HMRC will only use the years for which you filed a Self- assessment tax return when determining your eligibility for the scheme.
What details will you need to make the claim?
You will require the following information:
- Self-Assessment Unique Taxpayer Reference (UTR).
- National Insurance number.
- Government Gateway user ID and password – if you do not have a user ID, you can create one when you make your claim.
- UK bank details (only provide bank account details where a Bacs payment can be accepted) including:
1 - Bank account number
2 - Sort code
3 - Name on the account
4 - Your address linked to your bank account
How to claim
Even if you did not make a claim for the First Grant, if you are eligible, you can make claim for the Second Grant on or before 19 October 2020.
You must do it yourself, your tax agent or advisor cannot make the claim on your behalf.
The online service for the second and final grant is now available.
Make your claim from the date HMRC gave you. If you have not received a date from HMRC and think you’re eligible, you can use the online service to check. If you’re eligible, HMRC will give you a date you can make your claim from.
HMRC will check your claim and pay your grant into your bank account in the next 6 working days. They will send an email when your payment is on its way.
You should receive the payment within 10 working days after you have made your claim. If it takes more than 10 working days then you can contact HMRC.
Is there any Payback?
There is no payback even if your business recovers after you’ve claimed, your eligibility will not be affected. However, you must keep evidence to confirm your business was adversely affected at the time you made your claim.
But in the following circumstances there will be payback:
- You were not eligible for the grant.
- You received more than we said you were entitled to.
You must tell HMRC if any of the stated is applicable to you.
If you fail to inform HMRC, then they may impose penalty.
When you must tell HMRC depends on the date you received your grant.
If you received the grant:
- Before 22 July 2020 you must tell HMRC on or before 20 October 2020.
- On or after 22 July 2020 you must tell HMRC within 90 days of receiving the grant.
There are certain factors that can affect your claim, therefore it is worthwhile to take advice from your tax agent or advisor, who has done your Self - Assessment tax return. As this grant is taxable therefore you must consult your tax services advisor. However, please remember that you must make the claim yourself.