Coronavirus (COVID-19) Self-employment Income Support Scheme
The BID Team have received a number of enquiries from businesses looking for help understanding how the financial support that’s being made available will apply in a range of unique circumstances. In this update, I want to share details of the financial support for self-employed people that was announced on the 26th March, and then help put it in context of the other support, so you can see what options are available to you in your situation. It ties in with yesterday’s update about “Furloughing”, so you may want to have another look at that on the news page of our website. I’m writing this on the basis that the people reading are business owners. All the sources I’ve used for information are from official Government sites, and links to the source are provided for you. Please remember: The BID Team can’t give advice, but we are very useful when it comes to strategic copying and pasting. Let’s start with quoting directly from the government document about self-employment: https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme Coronavirus (COVID-19) Self-employment Income Support Scheme What is it? The (Self-employment Income Support) scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.” HA comment: Essentially, it offers self-employed people the same kind of support as employed people, whose employers can claim back up to 80% of any salary payments they make to their staff during the pandemic. Both schemes are capped at £2,500 per calendar month. Who can apply? You can apply to this scheme if you're self-employed or a member of a partnership and have lost income due to coronavirus, and you
have submitted your Income Tax Self-Assessment tax return for the tax year 2018-19
traded in the tax year 2019-20
are trading when you apply, or would be except for COVID-19
intend to continue to trade in the tax year 2020-21
have lost trading/partnership trading profits due to COVID-19
Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment. This is determined by at least one of the following conditions being true:
having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period
If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.
How to apply
You cannot apply for this scheme yet.
HMRC will contact you if you are eligible for the scheme and invite you to apply online.
Individuals do not need to contact HMRC now and doing so will only delay the urgent work being undertaken to introduce the scheme.
You will access this scheme only through GOV.UK. If someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a scam.
After you’ve applied
Once HMRC has received your claim and you are eligible for the grant, we will contact you to tell you how much you will get and the payment details.
If you claim tax credits, you’ll need to include the grant in your claim as income.
Putting this in context:
How do I know which scheme I should apply for?
Knowing which of the schemes to apply for – Self-Employment Income Support Scheme or Coronavirus Job Retention Scheme - comes down to the type of business you are set up as, and your employment status.
Am I self-employed?
A person is self-employed if they run their business for themselves and take responsibility for its success or failure.
Self-employed workers aren’t paid through PAYE, and they don’t have the employment rights and responsibilities of employees.
Someone can be both employed and self-employed at the same time, for example if they work for an employer during the day and run their own business in the evenings.
On a very straightforward level, if you are self-employed, you should apply for the Self-Employment Income Support Scheme. However, please read on just a little further as, it might be different for you, depending on how your business is set up.
I’m trying to keep this as simple as possible, and to give you starting points that you should explore further. Just to reiterate – I’m not qualified to give advice, so am just presenting you with information to help you reach your own best course of action.
If your business is set up with you as a “Sole Trader”
If you’re a sole trader, you run your own business as an individual and are self-employed.
You can keep all your business’s profits after you’ve paid tax on them. You’re personally responsible for any losses your business makes. You must also follow certain rules on running and naming your business.
If your business is set up with you operating as a sole trader, then you are self-employed and should apply for the Self-Employment Income Support Scheme when it becomes available.
If you are a sole trader, and you operate your business from a premises where you pay business rates, youwill alsoreceive any grants that your business is eligible for. The grants are based on your business premise's Rateable Value. The grant is to support your business, not you as an individual.
If you are a sole trader, and your business has been affected by Coronavirus, and you want to take on a temporary, employed job, I cannot see anything in the eligibility criteria that prevents you from taking a temporary, employed job. You will, however, need to report any additional income from that temporary employment in your next personal tax return.
If your business is set up as a “Partnership”
In a partnership, you and your business partner (or partners) personally share responsibility for your business. This includes:
• any losses your business makes
• bills for things you buy for your business, like stock or equipment
Partners share the business’s profits, and each partner pays tax on their share.
If your business is set up as a Partnership, then you are self-employed and every partner should apply for the Self-Employment Income Support Scheme when it becomes available.
If you are a set up as a Partnership, and you operate your business from a premises where you pay business rates, you will also receive any grants that your business is eligible for.
The grants are based on your business premise's Rateable Value. The grant is for your business, not you as individuals.
If you are set up as a Partnership, and your business has been affected by Coronavirus, and any of the partners want to take on a temporary, employed job, I cannot see anything in the eligibility criteria that prevents that. You will, however, make sure that any additional income from that temporary employment is reported in your individual personal tax return(s).
If your business is set up as a Limited Company
A limited company is a company ‘limited by shares’ or ‘limited by guarantee’.
Limited by shares
Limited by shares companies are usually businesses that make a profit. This means the company:
is legally separate from the people who run it
has separate finances from your personal ones
has shares and shareholders
can keep any profits it makes after paying tax
Limited by guarantee
Limited by guarantee companies are usually ‘not for profit’. This means the company:
is legally separate from the people who run it
has separate finances from your personal ones
has guarantors and a ‘guaranteed amount’
invests profits it makes back into the company
Why this is significant: HA note: The really important thing to recognise here is that you as a person – the business owner – is legally separate from “The Company”. My first business enterprise was a Bed and Breakfast, which was set up as a Partnership with my husband. We then closed the Partnership, and started a new business, which was set up as a Limited Company. My bookkeeper used to get cross that I couldn’t grasp the difference between the different business set ups, so explained it to me like this. She pointed at me, and she pointed at a large statue of a monkey on my shelf and said: “You are you, the monkey is the company. You work for the monkey. You are paid by the monkey. The monkey is your employer, you are the monkey’s employee. If the Company goes tits up, it’s the monkey that takes the fall, not you. I hope that helps. (Happy to share my bookkeeper’s details …) Back to the point: Director Company directors run limited companies on behalf of shareholders. Directors have different rights and responsibilities from employees and are classed as office holders for tax and National Insurance contribution purposes. Source: https://www.gov.uk/employment-status HA note: For the purposes of the Coronavirus Job Retention Scheme, the Institute of Chartered Accountants in England and Wales website state that: “Many owner managed company director/shareholders pay small salaries and the balance of income as dividends. However, the 80% reimbursement scheme does not extend to any dividends you might normally be paid by your company - only the salary is relevant to the scheme.” If your business is set up as a Limited Company, and you receive a salary for your role in the company, and if your role has been officially “furloughed”, then you should apply for the Coronavirus Job Retention Scheme when it becomes available. If you are a set up as a Limited Company, and you operate your business from a premises where you pay business rates, you will also receive any grants that your business is eligible for. The grants are based on your business premise's Rateable Value. The grant is for your business, not you as an individual. (The grant goes to the monkey) If you are set up as a Limited Company, and the role the company pays you to do has been furloughed, I cannot see anything in the eligibility criteria that prevents taking on a temporary employed job elsewhere. Remember – being furloughed means that you must not do any work for the company that has furloughed you. You must also make sure that any additional income from that temporary employment is reported in your individual personal tax return.
We’ll continue to update our website with information that affects your business, and alert you to anything new through our social media platforms. If you haven’t already, please start following us on Facebook: https://www.facebook.com/bognorregisBID Even though Clair and I are working from home, you can still contact us by email: firstname.lastname@example.org, by phone: 07917 692690 or through Zoom meeting software. The software is free to download and works across a wide range of platforms – phones, tablets, PC’s, Macs. If you’d like a virtual face to face, please invite: email@example.com
Kindest regards, Heather
Heather Allen, BR BID Co-Ordinator