COVID-19: Self-Employment Income Support Scheme (SEISS)

05 May 2020

Details of the latest Government updates to SEISS released on 4 May 2020

What payments will be available from the SEISS?

Eligible self-employed individuals will be able to claim direct cash grants from HMRC. Grants will be:

  • Based on 80% of their average monthly trading profit over the last 3 years
  • Capped at £7,500 altogether
  • Taxable, so individuals will have to report them on their tax returns, but do not need to be repaid
  • Available initially for the 3 months to 31 May 2020 but this may be extended

Who may be eligible for the SEISS?

Individuals must already be in self-employment and their trade have been adversely affected by coronavirus. This could be because the individual:

  • Is shielding, self-isolating, or on sick leave or has care responsibilities due to coronavirus
  • Has had to scale down or temporarily stop trading due to supply chain interruption, having fewer customers / clients, or staff being unable to work

They must have traded in 2019/20 and be intending to continue to trade in 2020/21. Recipients of the grant can continue to work, start a new trade or take on employment or carry out voluntary work or duties as an armed forces reservist.

There will be a ‘means tested’ limit of £50,000 of trading profits below which individuals will be eligible.

HMRC will first look at the individual’s tax return for 2018/19 to see if trading profits were no more than £50,000 and at least equal to the individual’s non-trading income for that year.

If the individual is not eligible based on 2018/19 alone, HMRC will then look at average trading profits and non-trading income over 2016/17, 2017/18 and 2018/19, as relevant.

The 2018/19 tax return must have been filed on or before 23 April 2020. Amendments after 6pm on 26 March 2020 to returns that had already been submitted will not be taken into account.

What about Personal Service Companies (PSCs)? And partnerships?

PSCs, where there is typically a single director / shareholder, are not be covered by the SEISS. However, these individuals may be eligible for the Coronavirus Job Retention Scheme where they pay themselves a salary under a PAYE scheme with HMRC. Dividend payments are not be covered by either scheme.

The SEISS does cover members of partnerships.

When will SEISS grants be available? How will claims be made?

HMRC has begun contacting individuals who may be eligible for SEISS.

HMRC has launched an online tool which individuals (or their tax agent / adviser) can use to check if they are eligible to make a claim. Eligible individuals will be asked to add their contact details so that HMRC can notify them when the claims service itself becomes available. Individuals who are deemed not be eligible after using the online tool can ask HMRC to review this.

The online service to make claims will be available from 13 May 2020. HMRC will tell eligible individuals the date from which they can make their claims. Individuals must make the claims themselves and they will need the following information:

  • Self Assessment UTR – also needed for the online tool to check eligibility
  • National Insurance number – also needed for the online tool to check eligibility
  • Government Gateway user ID and password
  • Bank account number and sort code

Individuals will have to confirm that their business has been adversely affected by coronavirus. HMRC has said it will check claims and take appropriate action to withhold or recover payments found to be dishonest or inaccurate.

Once claims are made, HMRC has said that payments will be received within 6 working days. These will be backdated to 1 March 2020 and paid out in a single instalment covering 3 months. Grants will be paid in cash directly into individuals’ bank accounts

How do HMRC calculate trading profits and non-trading income?

Trading profits are those which are shown on the individual’s HMRC tax calculation as profits from self-employment or partnerships. Total trading profit is after deductions for allowable items such as expenses, capital allowances, and flat-rate expenses.

Any losses carried forward from previous years and the individual’s personal allowance will not be deducted from trading profits.

There are specific provisions in the guidance for individuals who have:

  • Claimed the trading allowance
  • More than one trade in the tax year
  • Traded for all 3 tax years
  • Continuous periods of self-employment for 2 tax years
  • Traded in 2 tax years but not continuously

Non-trading income includes:

  • Income from earnings
  • Property income
  • Dividends 
  • Savings income
  • Pension income
  • Other income sources, including taxable social security income

Special circumstances

Individuals who have received payment in the form of loans or other credit covered by the loan charge may be able to claim under the SEISS. Their trading profits will be based on either the average of the 2 tax years 2016/17 and 2017/18, or 2017/18 alone if they were not self-employed in 2016/17. The deadline for these individuals to file their 2018/19 tax return is 30 September 2020.

For individuals claiming averaging relief, HMRC will use the amount of profit before the impact of this relief in determining eligibility and grants under the SEISS.

Self-employed individuals who are not resident in the UK or who are resident and have chosen the remittance basis may be eligible for SEISS grants. They will have to confirm to HMRC that their UK trading profits are at least equal to their other worldwide income.

SEISS grants do not count as access to public funds and they can be claimed by individuals on all categories of work visa.

Individuals who are above the state aid limits or who operate a trade through a trust cannot claim the SEISS grant.

What if I’m not eligible?

Individuals who aren’t eligible for the SEISS may still be able to claim other forms of support such as Universal Credit or the Coronavirus Business Interruption Loan Scheme (CBILS). Individuals who are eligible may also be able to claim this support in the period before the SEISS is up and running. Grant payments will be treated as part of self-employment income and so may affect the amount of Universal Credit individuals receive. Universal Credit claims for earlier periods will not be affected.

Self-assessment income tax payments (the second payment on account for 2019/20 due on 31 July 2020) are also being deferred until 31 January 2021.

Contacts

If you would like to discuss the SEISS further, please get in touch with your usual MHA MacIntyre Hudson contact or one of our specialists:

Richard Maitland – Partner, Human Capital Advisory – 07711 373 584 /  richard.maitland@mhllp.co.uk

James Kipping – Tax Partner – 07725 006 098 / james.kipping@mhllp.co.uk

Important note

This general guidance is based on the information available as at 4 May 2020. It is therefore subject to change based on further information and details of the SEISS being issued by HMRC. It should not be relied on as advice in relation to individuals’ specific circumstances.