End of the Month Covid-19 Update

The long-awaited statement from the Chancellor, Rishi Sunak regarding COVID-19 support for the self-employed has been announced. The Chancellor said that the scheme will benefit some 95% of people whose main income source is derived from self-employment.

A list of the scheme features as announced, and published, are as follows:

• Those that qualify will receive a cash grant from HMRC based on 80% of profits, up to £2,500 per month,
• The initial grant will be for the three months, from 1 March through to the end of May 2020, but could be extended for a longer period.

To be eligible, the following conditions will be taken into account:

• Applicants must be self-employed or a member of a trading partnership,
• Have lost trading profits due to COVID-19,
• Have filed a tax return for 2018-19. Late filers will have four weeks from 26 March 2020 to do so,
• Have traded in 2019-20; be currently trading at the point of application (or would be except for COVID-19) and intend to continue to trade in the tax year 2020-21,
• Have trading profits of less than £50,000 and more than half of total income from self-employment. This can be with reference to at least one of the following conditions:
  • Your trading profits and total income in 2018-19,
  • Your average trading profits and total income across up to the three years between 2016-17, 2017-18, and 2018-19.

There is no need to apply to HMRC as they will contact you if you are eligible. HMRC will use existing data to make this judgement. The initial three-month grant will be paid directly to a nominated bank account in a single lump sum. The grants are expected to be paid out at the beginning of June. The reason for this delay is likely down to three main factors: the 4 weeks additional filing time for late filers, the requirement to set up a complex new system at the same time as the Coronavirus Job Retention Scheme and to reduce the risk of fraud.

It is assumed that those self-employed who have experienced a significant drop in income due to COVID-19 disruption will need to apply for Universal Credits or Business Continuity Loans to tide them over until June. This will be a challenging time for those affected as the demand for help will place significant challenges on the institutions charged with providing this support.

CORONAVIRUS JOB RETENTION SCHEME (CJRS) – update for director shareholders

There has been uncertainty as to the position of director/shareholders claiming under the CJRS as their income is usually taken from their company as a combination of a low salary and dividends. In the news story published following the Chancellor’s statement on 26 March (regarding the Self-employed scheme) is a telling paragraph. It says:

Those who pay themselves a salary and dividends through their own company are not covered by the scheme (the Self-employed Scheme) but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

This infers that directors will only be eligible for the CJRS based on their salary alone, and only if there is a proven PAYE record.

Further details of the CJRS are due to be published imminently and will be added to our newsfeed as soon as they are available.

I want to furlough my employees or some of my employees, what do I need to do?

Basically, at the moment you just need to write to your employees letting them know they are to be furloughed and from what date. From that date they must not work for you. Eventually we/you will need to report details of the furloughing to HMRC via a separate portal but that portal is still in development and expected by the end of April. Also consider whether you intend to pay your employees their normal wage or just the 80% which you will be reimbursed for eventually and keep us updated with details of that and any furloughing as part of your normal payroll communications with us.

How do I get the grants which have been promised?

Just wait is the answer, your local authority will be writing to you and the responsibility is theirs. We can do nothing to speed this process up I am afraid.

I’m self-employed and I have heard we may not receive anything until June what should I be doing?

HMRC has committed to assist you and will make a grant based on previously reported profits but the timescale of receiving those grants is yet to be confirmed. In the meantime, you are advised to investigate the universal credit options and if applicable see if there is any assistance available under the business interruption loan scheme.

I hope that answers some of your questions for now. Please do be patient with us as we also adjust to this lockdown. We are committed to providing you as close to normal service as we can but there are unavoidable delays due to remote working and the current increased level of communications we are receiving.

You are all important to us and we will respond to all communications in the order they are received.

All the very best.