It is our assumption that the scheme will also include partners in partnerships and LLPs as they also pay self-employed National Insurance contributions, although he did not specifically say that.
The headline is that the scheme will pay up to £2,500 per month to qualifying individuals, based on 80% of their average profits from their business over the last three years. Only those with average profits over three years below £50,000 per annum will qualify, or alternatively profits of less than £50,000 in 2018-19 alone. In addition, to qualify, more than half of the individual’s income in that period must derive from self-employment.
The government believes that 95% of the self-employed population will be eligible.
In order to qualify, the individual must have reported some figures on a 2018-19 tax return, so if they have been trading less than 3 years, the average will simply be based on however many years there are. Those who are late filing their 2018-19 tax returns will be given 4 weeks to file it so that they can then qualify for the scheme.
It sounds obvious, but a further requirement is that the individual remains self-employed today. So a question HMRC will ask when applying is “are you still self-employed now?” as the information they are using is already a year old.
Payments are unlikely to be made from the scheme until June – the government is trying to get things in place sooner but do not want to promise something they may not be able to deliver. However the June payment will then be three months all at once (March, April and May). At that stage we expect the government will take a view as to whether to continue the scheme depending on the virus situation at that stage.
For those who have only started to work from themselves since April 2019, and therefore won’t have filed a tax return yet, it seems the scheme is not available, so this is very unfortunate for those who have only recently taken that big step. They will have to fall back on the other forms of support, such as the Business Interruption Loan Scheme and Universal Credit. On the latter, there is currently a 5 week wait for payments, but when pressed, the Chancellor divulged that applicants can get an advance payment “within days”.
At this stage detailed information is awaited, but there are other questions that remain unanswered – for example, eligible individuals will be contacted by HMRC and invited to complete and online form, but how will that contact happen? If by email, how can we tell the difference between the genuine article and one of the now numerous fraudulent emails doing the rounds?
In the meantime, local authorities have also been given extra funds to help with those struggling with, for example, council tax. In addition, the details of the small business grants have started to appear on some local council websites, although again the advice we are seeing is that eligible businesses will be contacted directly and invited to apply.
As ever, we are watching for more updates and will share further information as we get it.
James Geary is Head of Corporate Tax is happy to answer any questions you may have – you can contact him or any of the Tax team on Tax@randall-payne.co.uk or call 01242 776000 during office hours. Please leave a message if you receive the answerphone and we’ll ask the relevant person to call you back as soon as they are able to do so.