22nd April 2020Support for self-employed individuals: your questions answered

The Government has only recently issued its help package for the self-employed during the impact of Covid-19 and many questions remain outstanding.

Our Partners have answered some key questions for anyone who is self-employed and is looking for clarification on how to navigate the government guidance and what the best action to take is during this period of uncertainty.

Please don’t hesitate to get in touch with Jamie Morrison or Tim Walford-Fitzgerald directly should you need any support or guidance during this time.

How will HMRC verify income for the last three years and how will they decide if your income has been impacted? I have been self-employed for three years, but had no income at all one year as I was on maternity leave. Will this be counted in the three year average?

HMRC has the numbers from the tax returns from 2016-2019 and will contact tax payers directly. If you have filled in the self-employment or partnership pages on your tax return that effectively means you are trading as a self-employed individual so you will qualify for this scheme. If your average profits for the three years are over then you are not entitled to support.

HMRC intend to offer the scheme to all eligible taxpayers, rather than it be means-tested against savings and other assets. While we do not have full details of the scheme at this stage, there has been no indication of any exemptions and therefore we expect that maternity leave years and time not earning due to illness will be counted.

I am a sole trader but I also make a small bit of income from three buy to lets and have a small amount PAYE from teaching. Having a mix of income, will I still be able to claim for the self-employed grant?

The key is to assess how much the net rental profit or alternative sources of income contribute to your total income. If the total alternative sources of income equals more than half of your total income, then you will not qualify for the Self-Employment Income Support Scheme (SEISS).

Is there any support available for directors of a limited company or owner-managed businesses?

There has been a lot of lobbying in the sector, and we hope the Government addresses this specifically. At the moment, the SEISS does not apply to directors or owners. The only scheme that helps them in respect to their earnings is the CJRS, under which they could furlough themselves but only in respect of any salary taken (i.e. excluding dividend income).

I became self-employed in January 2019 – where does that leave me in terms of applying for the grant? Is there any help for self-employed businesses that started in this tax year?

Where you haven’t been trading for three years, such as if you have two years of trading for example, HMRC will look at the income over those two years. If you’ve just been trading for 2018/19, they will just look at this.

There is no help for businesses that started from April 2019 onwards. If you became self-employed in Jan 19, your 18/19 tax return would ordinarily have included profits under the opening year rules for Jan 19-Apr 19. In this case, it is a matter of assessing whether more than half of your income has come from self-employment or not. If you do not qualify under these criteria, you will fall outside of the scheme.

My wife is a 25% shareholder in my limited company and is paid a small amount as a company secretary – do we both qualify for the support scheme?

Yes, both husband and wife qualify for separate claims under the CJRS in respect of any salary paid to them.

I am a sole trader and I make about -k a year. I employ my wife for admin support. Everything has stopped at the moment. What help can I get from the government?

As your profits are over a year you aren’t eligible for the SEISS but I assume that your wife isn’t doing anything for your business. If she is furloughed you can still pay her up to 80% of her normal wages, up to per month, and reclaim the costs- including pension and National Insurance contributions- from the government under CJRS. It may feel a little strange writing formally to your wife but it is a condition of claiming the grant. The two schemes are looked at separately, so you can still claim for employee costs, even if your business doesn’t qualify for the self-employed scheme.