Yesterday evening the Chancellor announced the expected and unprecedented provisions to support the self-employed through the main period of the effects of the Coronavirus Pandemic. The intention of the new provisions are to provide some level of equalisation between employees covered by the Job Retention Scheme and the self-employed.

This move and the measures provided have to be welcomed as a major move to support the vast majority of self- employed individuals through the devastating affects on individuals income arising from the “lock down” provisions.

As will always be the case and as we see with most new provisions or legislation relating to tax and income, the provisions do not provide support for or cover everyone. Also, one major factor which will be relevant to a vast number of self-employed, which is the same issue facing many businesses looking to utilise the Job Retention Scheme for staff, is that there is no immediate cash support under the Self-Employment Income Support Scheme (SEISS) or under the Job Retention Scheme. Under the SEISS, the Chancellor has stated he expects payments to be being made under the scheme in June, with the end of April being the target date for payments under the Job Retention Scheme. Individuals and businesses affected are therefore expected to look at other support provisions to provide cashflow cover in the meantime.

Self-Employment Income Support Scheme (SEISS)

In terms of the key provisions, and the coverage provided by the SEISS, these are;

• The scheme covers individuals trading as a sole trader or a partner in a partnership based on the tax return status for a submitted Self-Assessment tax return for the tax year 2018-19. Note that provision has been made for individuals to submit late tax returns by 23 April 2020 to ensure they have a tax return lodged for 2018-19 to become eligible under the scheme
• You must be continuing to have been trading and are trading when an application is made, as well as intending to continue to trade
• You must have lost trading/partnership trading profits due to COVID-19
• Your self-employed trading profits must be less than £50,000, and more than half of your income must come from self-employment

The above criteria will cover the vast majority of individuals falling into the self-employed bracket. The Chancellor quoted this as covering 95% of the self-employed. Some matters of note coming from the criteria are;

• Anyone earning over £50,000 as a self-employed person receives no support under this scheme
• Anyone who has recently become self-employed and therefore has not submitted a 2018-19 tax return will not be eligible. The Chancellor referred to individuals not covered needing to look at other provisions such as Universal Credit
• The criteria does not capture individuals who trade through a Limited Company who are classed as employed by their company. It would capture partners in a Limited Liability Partnership as well as a general Partnership
• No detail has been provided as to how it is shown or decided whether you have lost trading profits due to COVID-19

With regard to a Director/Shareholder with their own company, there is reference to this in the sentence “If you’re a director of your own company and paid through PAYE you may be able to get support using the Job Retention Scheme.” This reference has no detail behind it, and refers through to the general Job Retention Scheme rules. These rules do not succinctly fit with a Director scenario in that a furloughed employee for whom a claim is being made is not allowed to do any work. It is still unclear whether a Director can class themselves as not doing any work for the company, although this reference may suggest HMRC will allow such claims. This may become clearer when the details on the portal and the information requirements are released.

With regard to the amounts covered by the SEISS, this gives a taxable grant of 80% of the average profits across the last 3 completed tax years up to a maximum of £2,500 per month. If 3 years of returns have not been submitted, the ones submitted will be used. Initially 3 months will be paid in one instalment. The Chancellor did state that he would consider whether additional payments are needed in the future if the effects of COVID-19 may require it.

In terms of applying, HMRC will contact relevant individuals and invite you to apply online.

The published information is accessible through this link https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

Job Retention Scheme

Some further detail has also been released in relation to the Job Retention Scheme, although the information published did not state whether the detail is just guidance or whether legislation will be enacted to include these provisions.

Some key observations which many of you have been asking about are;

• Fees and commissions are not included in the assessment of the wage cost to be repaid, although employers NIC and auto enrolment pension contributions are added to the wage and on top of the £2,500 cap
• An employer can choose to top up to 100%, but does not have to (subject to employment law and renegotiating any contractual entitlements)
• Claims can be made for employees on agency contracts and flexible or zero hours contracts
• For employees whose pay varies, the employer can claim for the higher of (i) the same month’s earning from the previous year (e.g. earnings from March 2019); or (ii) average monthly earnings in the 2019-20 tax year
• To be eligible, the employee must have been on the payroll on 28 February 2020. If they were hired later, they are not eligible. Anybody who was on the payroll on 28 Feb and has since been made redundant can be rehired and put on the scheme
• Furlough leave must be taken in minimum blocks of three weeks to be eligible for funding
• There is nothing in the guidance which prohibits rotating furlough leave amongst employees, provided each employee is off for a period of at least three weeks
• The employee must not be working at all. If they work for even an hour, they are not eligible. However, they are able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer
• Employers can only claim once every three weeks, i.e. they cannot get weekly reimbursement. Claims can be backdated to 1 March 2020
• The guidance suggests just core information on number of employees being furloughed, the claim period and amount claimed is needed to make the claim. It is specifically stated “HMRC will retain the right to retrospectively audit all aspects of your claim”
• Claims should be made in accordance with actual payroll amounts at the point at which you run your payroll, or in advance of an imminent payroll
• Claims paid out will be done via a BACS payment to a specified UK bank account

The full guidance can be viewed at https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Summary

So in summary, we do appear to have largely clear guidance on the position for the self-employed, and some further clarity on the Job Retention Scheme. The guidance issued does not specifically clarify the position for Director/Shareholders in their own limited company, and so it would appear the assessment would be the same as for other employees, i.e. do you fit the furlough requirements of not working at all for a minimum of 3 weeks. Clearly this still leaves an unusual position regarding the supposed need to have provided formal notification of being furloughed and met with employment contracts and employment law.

As already mentioned, cashflow will remain a key consideration for many businesses and individuals. As a quick reminder, the main provisions providing cashflow support are as follows;
• Deferring VAT and income tax payments
• Rates reliefs for eligible businesses
• HMRC Time to Pay Scheme
• Funding facilities from lenders which should be assessed before utilising the below
• The Coronavirus Business Interruption Loan Scheme (CBILS)

As provided in a previous daily update, businesses should consider the business checklist we have sent round in a previous daily updates alongside of the above possibilities to support cashflow.

Clearly this still remains a very difficult time for many businesses and individuals. We are here to help, advice and support. Please remember that we can assist with obtaining and dealing with the above cashflow measures, assisting with an assessment of your businesses position, preparing forecasts and break even analysis, and also in relation to the submissions for the Job Retention Scheme and SEISS when these are available to be processed. Please do get in contact with queries on the above or to discuss the areas where we can help.

Andrew Baggott
Managing Partner