The self-employed were given both good and bad news yesterday when the Chancellor announced measures to help them in the face of the coronavirus pandemic.
People who work for themselves – such as freelancers and contractors – and those in a partnership will be able to claim 80% of their profits if the outbreak has affected them.
But not everyone will be eligible and for those that are, they will need to wait until June before being paid.
Self-employed support measures
The following measures were announced by the Chancellor:
- For those eligible, there will be a taxable grant available of 80% of your average trading profits based on the past 3 years of accounts
- If you don’t have 3 years worth of accounts it will be based on the average trading profits over the periods you do have, providing you have submitted a self-assessment for the 2019 year
- To qualify, more than half of your income in these periods must come from self-employment
- There is a limit of £2,500 per month
- The measure is initially for 3 months but can be extended
- Those eligible will have average trading profits of less than £50,000
- You can continue to do business and still apply for the grant
- HMRC will use existing information to check eligibility and will invite applications
- The grant will be a lump sum covering the 3 months to May and will be backdated to 1 March
- If you haven’t submitted your tax return for 2019 (due 31 Jan 20) there’s a 4-week extension so that you are also eligible for the scheme.
Update on Start-Ups
Last night the government’s announcement implied that if you’re a startup and have never submitted a self-assessment then, unfortunately, you won’t be eligible.
However, the government guidance is now that if you have traded in 2019-20, are 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 to 2021 then you will now be eligible.
HMRC will have strict measures in place to avoid fraudulent claims.
For owner-managed businesses
There is currently a lot of confusion surrounding owner-managed businesses, so here are our guidelines:
- If you are the owner of a business and you are not a limited company you are classed as self-employed. Hence you will fall under this new Self Employment Income Support Scheme.
- If you are the director or a limited company, even if you are the only person in the business, and are paying yourself a salary through a PAYE scheme then you will probably be eligible for the Coronavirus Job Retention Scheme (we will be publishing another blog about this scheme shortly).
For those who are not eligible
If the majority of your income doesn’t come from your freelance or contractual work, unfortunately, you will not be eligible. For those who fall into those categories, you will need to claim Universal Credit. You may be able to get an advance payment if you do this, although eligibility criteria apply.
What else is available?
The measures introduced by the Chancellor are in addition to other support announced last week.
Self-employed workers are allowed to apply to delay tax payments that are due in July. These payments would need to be paid in January 2021, but it may provide a stopgap until then.
If you are VAT registered you can defer this next quarter’s VAT payment until the end of your financial year. If you haven’t done so already cancel your direct debit to HMRC so they cannot collect it automatically but remember to reinstate it later.
You can ask your bank for help, particularly with an overdraft facility or the Business Interruption Loan.
Contact your mortgage company to defer your payments for 3 months without it affecting your credit rating. It is also worth checking Universal Credit to see if you are eligible.
What can I do?
Our advice would be to make a cashflow forecast. Preparing a forecast will allow you to figure out what money is coming in and going out.
Even if your work has completely dried up, it is worth preparing a cashflow forecast as there may be payments for work already carried out that you’ve missed.
If that’s the case, make sure you chase any payments that are outstanding. Every penny helps and if you have carried out work you are entitled to payment. Your outgoings will probably reduce too.
Where to get help
Guidon Group is always ready to help with advice and our response is rapid. Updates are being posted on our social media channels daily and on our website, you’ll find all our blogs giving helpful information. Plus we’re available via phone on 01642 927265 and e-mail [email protected] or use our contact page.
If you still need more information about small business support you can contact
Government Business Support
Call: 0300 456 3565
Lines are very busy though and there is usually a waiting time.