Self-Employment Income Support Scheme – what you need to know

3rd April 2020

The wait is over and the Government have announced the Self-employment Income Support Scheme (SEISS) to help self-employed individuals and members of partnerships.

The SEISS has some similarities to the Coronavirus Job Retention Scheme (CJRS) as it offers support based on 80% of a person’s typical trading profits (averaged over three years to 2018/19), capped at £2,500 per month for three months, although there are also a number of differences.

The scheme is only open to those who started self-employment before 6 April 2019 so those who recently set up their own business will not be eligible.  HMRC will review existing information provided in tax returns to check whether an individual is eligible and will invite such individuals to apply online.  People should not contact HMRC but should wait to be invited.

The payment will be made as one lump sum in June to cover the three months of the scheme.  It will be taxable and should be included in the 2020/21 self assessment tax return which will be due for filing by 31 January 2022.

The scheme will apply to self-employed individuals or members of trading partnerships earning less than £50,000 per annum, whose self-employment income is greater than half their total income.  This test can either be met based on the 2018/19 tax return or based on an average of 2016/17, 2017/18 and 2018/19.

To be eligible, an individual must:

  • have submitted a 2018/19 self-assessment tax return (for those whose tax affairs are not up to date, this can still be done up to 23 April 2020);
  • have traded in 2019/20;
  • intend to continue to trade in 2020/21; and
  • have lost trading or partnership trading profits due to COVID-19.

The last bullet may be one that people have missed.  It is not known how HMRC will check this but you can be sure they will be able to.  For example, if you were to apply for a payment under SEISS and then report record or even increased trading profits in your 2020/21 self assessment tax return, it seems likely that there may be some way of the payment being clawed back.

In contrast to the CJRS, those claiming under the SEISS can continue to work.

Many will see this as a very generous scheme.  However, there are still some people who will “fall through the cracks”, including those who recently became self-employed and company owners who pay themselves through a combination of salaries and dividends.  Such company owners may consider themselves to be self-employed but will not be able to benefit from the SEISS.  They can claim under the CJRS but the amount claimable is likely to be low and would be at the cost of not being able to work on their business, so they are likely to be worse off than those trading as a sole trader or as a partnership.  Currently, the Government does not seem to have any plans to help such people.

Whilst generous, the SEISS is likely to come at a cost.  The Chancellor has made it clear that the days of the self-employed paying tax at lower rates than employees are soon to end, as he intends to start a discussion on the different tax treatment of the employed and the self-employed.  We will need to wait to see what this means in practice, once the current crisis is behind us.

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