Personal Tax & the Self-employed

French Duncan


 

This page was updated 1pm Wednesday 12th August, having been first written on Wednesday 25th March. Please check back regularly, or follow us on Twitter or LinkedIn to keep informed of all the changes.  For all our information around COVID-19 visit www.frenchduncan.co.uk/covid-19.

 

Self-employed & personal tax payers

The assistance available around the self employed, self assessment tax payers and individual support generally is moving quickly.  Below you will find summaries of the key areas of assistance available.

 

Self-employed income support scheme - SEISS:

This scheme was announced on 26th March to allow the self-employed to claim a taxable grant worth 80% of their trading profits up to a maximum of £2,500 per month for the next 3 months.

On 29th May an extension was announced, allowing people to claim a second and final SEISS claim in August which will be a taxable grant worth 70% of their average monthly trading profits for three months, paid out in a single instalment and capped at £6,570 in total. More details about the second instalment can be found below (jump down to that point by clicking here).

Key points to start with:

  1. We're aware there has been some confusion about dates for Self-Employment Income Support Scheme (SEISS). The date given by HMRC was the FIRST date you could apply, but not the ONLY date you could make a claim - you can still do so. We advise you check eligibility online at: https://lnkd.in/gNpcz2k & then submit your claim ASAP.
  2. Claims for the first instalment of the SEISS grant HAD TO BE MADE BEFORE 13 JULY. Now that date has passed, you will still be able to claim the second stage, but will NOT be able to retrospectively claim for the first.
  3. We are here to help, and if you've any questions or need some advice, current client or not, contact our Head of Personal Tax Hazel Burt. However, please note that SEISS grants must be claimed by you, the individual - we can help ensure you are ready but we are not allowed to claim on your behalf.
What is it?
  • A taxable grant will be available for self-employed people (including partners in a partnership).
  • The scheme is for sole traders and partners in partnerships, not employees or directors of limited companies.
  • It is worth 80% of the average of your profits of the three previous tax years, but capped at £2,500 per month (or £7,500 altogether).
  • The newly self-employed are unable to qualify if they do not have trading profits in any of the previous three tax years.

What are the details?

  • Trading profits need to be down due to COVID-19.
  • Your profits need to have been less than £50,000 in the 2018/19 tax year, or an average of less than £50,000 for the three tax years 2016-17, 2017-18 and 2018-19.
  • The business needs to have traded in 2019-20 and be currently trading when the application is made (or would be, except for COVID-19) and intend to continue to trade in the 2020-21 tax year. We anticipate that this will be covered further in the application form you will need to complete.
  • More than half of the claimants total income must be from self-employment either in 2018/19 or on the average of the last three years, 2016-17, 2017-18 and 2018-19.
  • If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.
  • To work out the average, HMRC will add together the trading profit for each of the 3 tax years then divide by 3. If you started trading during that period, they will use your actual period for the calculation of the average. This will give an annual average of your earnings. From this they work out the monthly amount. This is your average monthly earnings over the previous tax years.
  • The monthly grant will be 80% of these monthly average earnings, but subject to a maximum of £2,500 per month.
  • The grant will cover three months and be paid in a lump sum.
  • If necessary, the Government will extend the scheme beyond three months.

What about the extended / second SEISS grant, announced 29 May?

  • Eligible self-employed people will be able claim a second and final SEISS grant in August; this will be a taxable grant worth 70% of their average monthly trading profits for three months, paid out in a single instalment and capped at £6,570 in total.
  • Applications for this second and final SEISS grant will open on 17 August.
  • The eligibility criteria for the second grant it much the same as the first, as detailed above, however the key differences are as follows:
    • The taxable grant will be worth 70% of you average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.
    • Your business must have been adversely affected by coronavirus on or after 14 July 2020. Evidence should be kept to support your claim that your business has been adversely affected.
  • You do not need to have claimed the first grant to be eligible to receive the second grant. This is particularly helpful if your business has only been affected in the later stages.
  • The deadline to make the second claim is 19 October 2020. As with the first claim, it must be made by you as the taxpayer as opposed to your accountant or tax adviser.

What do I need to do?

  • Check if you are eligible to claim using HMRC’s online tool, available at: https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference
    • You will need your ten digit unique tax payer reference (UTR) found on your tax returns or HMRC statements; and
    • National Insurance number
    • HMRC will tell you if you are eligible and you will then be able to make the claim.
  • If you are told that you are not eligible you can ask HMRC to review this after you have used the on-line tool.
  • Make sure you have a Government Gateway user ID.
    • If you already have a Government Gateway user ID you can sign-in after checking eligibility and add details; or
    • Alternatively if you do not have an existing user ID and password you can create one when you check your eligibility.
  • To make the claim you will need:
    • Your UTR and National Insurance number
    • Your user ID and password
    • The bank account number and sort code for the account you want HMRC to pay the money into.
    • You will be told straight away if the grant is approved and HMRC should pay the grant into your bank within 6 working days.
  • Keep a record of the amount claimed, the claim reference and ensure that you retain proof that your business has been adversely affected by Coronavirus
  • On 12th June, HMRC published examples of how/when the ‘adversely affected’ criteria is met for both the first and second grant.  This table can be viewed by clicking here to go to the HMRC website.
  • The grant is part of your income and needs to be included in your 2020/21 tax return and as self-employed income for any universal credit or tax credit claims
  • Anyone who did not meet the 31 January 2020 tax return deadline for their tax return to 5 April 2019 had until 23 April 2020 to file this return, otherwise they will not be eligible for the scheme.
  • HMRC do not want you to contact them about the grant. HMRC are writing to the claimants they identify but you should check using the status tool and contact us if there is a query.
  • For those without internet access they are able to make the SEISS claim over the phone. The phone number is 0800 024 1222 and the individual will need their UTR and NI numbers to hand.

SEISS Key Dates reminder:

April We advise you submit your claim ASAP.
13 July Deadline for claiming first SEISS grant. 
17 August

Start date to claim second and final SEISS grant.

(You CAN claim second even if you haven't claimed first.)

19 October

Deadline to claim a second and final grant.

 

 

Newly Self-Employed Hardship Fund: (Scottish Government update of 15th & 21st April)

The Scottish Government announced that a further £100 million fund is also being made available to protect self-employed people and viable micro and SME businesses in distress due to COVID. This fund will be channelled through local authorities and enterprise agencies to target newly self-employed people and businesses, critically who are ineligible for other Scottish Government or UK Government schemes.  It appears that for the Self Employed, a total of £34 million will be allocated to the Newly Self-Employed Hardship Fund, managed by Local Authorities, which will be allocated to the newly self-employed facing hardship through £2,000 grants.

(The rest of the £100m is delivered through the £20 million Creative, Tourism & Hospitality Enterprises Hardship Fund, managed by the Enterprise Agencies in partnership with Creative Scotland and VisitScotland for creative, tourism and hospitality companies not in receipt of business rates relief, and £45 million Pivotal Enterprise Resilience Fund, managed by the Enterprise Agencies for vulnerable SME firms who are vital to the local or national economic foundations of Scotland.  For more on these see our COVID-19 Business Loans blog.)

Who is eligible?

  • It's a grant of £2,000 aimed at those who become self-employed after 6 April 2019 (i.e. did not file a tax return including self-employed income for 2018-19).
  • You must have over 50% of individual income shown to come from self-employment, and trading profits below £50,000 in financial year 2019-20.
  • You must also have lost business due to coronavirus, and therefore be experiencing financial difficulty. You must also be INELIGIBLE for other COVID-19 schemes (e.g. Business Interuption Loan Scheme, Job Retention Schemes, Small Business Grants etc.), and you must not receive working age benefits payments (Universal Credit etc.).
  • You must trade a self-employed, not as a limited company or partnership. and have taken steps to limit costs / expenditure, including through VAT deferral and a mortgage holiday.
  • Finally, you must also not have access to sufficient savings or other sources of income which can cover your basic needs.

How do I apply?

  • Firstly you will require:
    • Proof of identity, ideally photographic.
    • Proof of address.
    • Evidence of trading activity to March 2020, which seems to mean::
      • 1) You must have bank statements showing income / outgoings for January / February / March 2020, and
      • 2) then any two of:
        • Supplier / reseller trade account
        • Valid business insurance
        • HMRC UTR or copy of correspondence with HMRC
        • VAT registration number
        • Web links to active marketing materials (e.g. website, active business social media accounts)
        • Other evidence (e.g. supplier invoices).
  • Once you have all that, you can apply via your local authority - so visit their website to make the application.

 

Self-Assessment payment deferrals:

For self-assessment payments due on the 31 July 2020, these will be deferred until the 31 January 2021.

  • Initially HMRC stated that if you are self-employed you are eligible, but it now appears this is available to anyone with payments on account.
  • This is an automatic offer with no applications required.
  • No penalties or interest for late payment will be charged in the deferral period.
  • The deferment is optional, but HMRC urge you to pay your second payment on account due, 31 July 2020,  if you are in a position to do so.
  • This is all in addition to the time to pay offer currently operated by HMRC.

July 2020 Self-Assessment Payments on Account:

HMRC are issuing statements in relation to the second payment on account payable by 31 July 2020. If you are due to make a second payment on account towards your tax liability for the year to 5 April 2020, please remember that you can defer making the payment if cash flow is tight due to COVID-19. You won’t be charged interest or penalties as long as you pay before 31 January 2021. This means that there will a catch-up amount payable in 31 January 2021 and it is important to factor this in to your financial planning. You do not need to tell HMRC that you’re deferring your payment on account.

HMRC state that you can still make the payment by 31 July 2020 as normal if you’re able to do so.

 

Landlords (specifically, furnished holiday lets):

  • The Scottish Government on 30th March expanded the previously announced business Grant scheme support to also include some furnished holiday let landlords, including ‘caravans and self-catering accommodation that are the primary income for the ratepayer and let out for 140 days or more in 2019-20'.  For more information see our separate blog by clicking here.

 

B&B Operators:

  • The Scottish Government has now launched the B&B Hardship fund, specifically for allow 'serviced accommodation providers' who have not been able to access other support (e.g. because they don't have a business bank account) who can now claim a one-off payment of £3,000.  Further information can be found on the specific webpage by clicking here.

 

Working Tax Credits:

  • As part of a number of measures to support the country during the coronavirus (COVID-19) pandemic, Working Tax Credits payments will be increased by £20 per week from 6 April 2020 until 5 April 2021.
  • The amount a claimant or household will benefit from will depend on their circumstances, including their level of household income. But the increase could mean up to an extra £3,040 in the 2020 to 2021 tax year.
  • If you claim Working Tax Credits, you don’t have to take any action or contact HMRC - the increase in your payments will start from 6 April 2020.

 

Statutory Sick Pay & Universal Credit:

  • SSP will be payable from day 1 instead of day 4 for affected individuals.
  • People who are advised to self-isolate for COVID-19 will can obtain an isolation note to cover this. Do not go to your GP.
  • Those who are not eligible for SSP, e.g. self-employed earning below the £118/week, can now make a claim for Universal Credit or Contributory Employment and Support Allowance.
  • The self-employed cannot claim SSP however you may be eligible for Universal Credits and/or Employments and Support Allowance. See:
  • These may also apply if you are prevented from working because of a risk to public health.

 

Overclaimed COVID Grants:

It was announced on 31 July that the Finance Act 2020 has now received Royal Assent – but what does this mean for you?

In regards to COVID grants, such as Coronavirus Job Retention Scheme (CJRS), Self-Employed Income Support Scheme (SEISS) and Coronavirus Statutory Sick Pay Scheme, it means that HMRC now have the power to recover grant payments and charge penalties where the recipient was not entitled to receive them.

The new law states that the onus is on you as the taxpayer to notify HMRC of any overclaim. This must be done within 90 days of Royal Assent, giving a deadline of 20 October 2020 or within 90 days of receiving the grant, whichever is later.

Looking more specifically at SEISS grants, a false claim could be determined if:

  • Your trade was not adversely affected by coronavirus
  • Your trade did not continue in 2019-20
  • You had no intention to continue your trade in 2020-21.

If any of the above apply to you, you may need to notify HMRC that you made a claim in error.

What do I need to do?

  • Log in to HMRC using the Government Gateway user ID and password that you used when you made your claim
  • From here, you can notify HMRC of any erroneous claim
  • You can also notify them if you would like to make a voluntary repayment.

You will need your:

  • Government Gateway user ID and password that you used when you made your claim
  • grant claim reference
  • Self Assessment Unique Taxpayer Reference (UTR) number.

Once the form has been completed, HMRC will provide bank details to allow you to make the repayment. If the repayment isn’t made, and HMRC do not issue an assessment, the overclaimed amount must be reported on your Self Assessment tax return.

 

Other COVID-19 Information:

Full details of how we can help you around COVID-19 / Coronavirus is available on our special page (www.frenchduncan.co.uk/covid-19) which you can access by clicking here.

This page has links on it to our various other blog pages, for example on:

 

 

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