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Government announcement on self-employed support

The Chancellor Rishi Sunak has announced the details of the financial support package for self-employed workers adversely affected by the Covid-19 pandemic.

The key measure is a self-employed income support scheme which includes:

  • A taxable grant worth 80% of the average monthly profit over the last three years (one or two years will be reviewed for those who do not have three years of tax returns);
  • The grant will be capped at £2,500 per month;
  • The scheme will be available for three months and will be extended if necessary; and
  • Individuals claiming a grant can continue to do business (unlike employees who must not work when furloughed).

To be eligible for a grant under the scheme you must:

  • have trading profits of up to £50,000;
  • earn the majority of your income from self-employment; and
  • have submitted a Tax Return for 2019
  • have traded in the tax year 2019/20;
  • are trading when you apply for a grant, or would be except for Covid-19;
  • intend to continue to trade in the tax year 2020/2021; and
  • have lost trading/partnership profits due to Covid-19.

Self-employed individuals who have missed the January deadline for submitting their 2018/2019 tax return will now have until 23 April 2020 do so.

Those who have just recently become self-employed and do not have a 2019 tax return will unfortunately not be eligible for a grant under the scheme. Those who are eligible will be contacted directly by HMRC and  asked to fill out an online application. HMRC will pay applicants directly.

The Chancellor has confirmed that payments under the scheme will not be available immediately. It is expected that it will take no later than the beginning of June 2020 to access the scheme. This places the self-employed in a much more difficult position than many employees who will be furloughed under the employment retention scheme. Those employees will continue to receive a wage while earnings for self-employed workers have already reduced significantly and in some cases ceased entirely.

The support package has come less than one week after the unprecedented measures to support private sector wage costs were announced. The Government assured parity for the self-employed but as the week has progressed it was made clear that this would be difficult to achieve. The Association of Independent Professionals and the Self-Employed (IPSE) has worked closely with the Government on implementing the current self-employment income support scheme. IPSE has confirmed that it will continue to work on helping to extend measures to all freelancers in need as a result of Covid-19.

We cannot predict if the Government will respond to the pressure to provide further support to self-employed individuals. The comments from the Chancellor during his announcement on 26 March 2020 on the fairness and equality of taxation for employees and the self-employed may be indicative of a lack of appetite for going further. We will keep you updated if there are further announcements on this.

Although the current measures fall short of the level of assurance given to employees both in terms of eligibility for and immediacy of access to payments, they are a vast improvement on the support for self-employed workers that has been put in place until now. Current support includes:

  • Access to business interruption loans;
  • Small Business Grant Scheme funding for local authorities to support small businesses that pay little or no business rates;
  • Self-assessment tax payments that were due in July 2020 have been deferred until January 2021;
  • The introduction of Time to Pay arrangements under which deferrals for HMRC payments can be agreed;
  • VAT is deferred until the next quarter;
  • The minimum income floor for universal credit has been suspended which will allow self-employed workers to access the equivalent of Statutory Sick Pay (SSP); and
  • Universal credit and tax credit payments to increase by £1000 per year.

In the meantime we are here to help in any way we can so get in touch if you have any questions on this or any other work-related matter.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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