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On Thursday 26 March 2020, Chancellor Rishi Sunak gave a summary of the measures to be put in place for those who are self-employed or a member of a partnership and have lost income due to the coronavirus.

The measures will help millions of eligible self-employed workers by allowing them, or those who are members of a partnership, to claim a cash grant to assist them during the coronavirus outbreak through the Coronavirus (COVID-19) Self-employment Income Support the scheme.

What is the Scheme?

Essentially, the Scheme will allow those eligible to claim a taxable grant, worth up to 80% of their average monthly income, up to a maximum of £2,500 (in line with the Job Retention Scheme for employees).

The grant will be paid in one lump sum and will be determined by calculating the average income of those eligible over the last three years (if a self-employed worker only started trading over the last three years, HMRC will base their calculations for the years they filed a tax return).

Who qualifies for the Scheme?

Those who are self-employed, or members of a partnership can apply for the Scheme if they meet the following criteria:

  • they have self-employed trading or partnership profits of less than £50,000, are trading when they apply (or would have been if COVID-19 had not prevented this) and will continue trading;
  • more than half of their income comes from self-employment; if they have a second job which earns them more income than their self-employed job, they cannot apply for the Scheme;
  • they have submitted a tax return for 2019.

Please note that if you’re self-employed and did not submit your tax return by the 31 January 2020 (the due date), and it is still outstanding, you must submit your return by 23 April 2020 in order to be eligible to apply to the Scheme.

Those who are self-employed can apply for the Scheme and still continue to work if they are able to do so; this is different to furlough leave where employees cannot continue to work as discussed in our previous blog.

Whilst the Chancellor said the Scheme would benefit 95% of those currently self-employed, some look set to miss out including those who only recently became self-employed.

What happens next?

If you are self-employed and you qualify for the Scheme, HMRC will contact you directly and will ask you to fill out an online form. Once this has been dealt with, HMRC will contact you to inform you how much you will receive, and this will be paid straight into your bank account in one lump sum.

The Scheme will be available to the self-employed in the UK for at least 3 months (and could be extended further) and covers the months of March – May, however, it is anticipated that payments will not start to be received until June. This delay could therefore create some uncertainty over the next coming months as to how the self-employed deal with any potential cash-flow issues they are experiencing due to the coronavirus until the Scheme is fully underway and operational.

The Chancellor also indicated that in the future there are likely to be reforms to the current tax system in an attempt to level the playing field between employed and self-employed workers.

Other business support?

As well as this Scheme and the Job Retention Scheme for employees, this unprecedented lifeline package for businesses includes more generous universal credit rules, the deferral of income tax instalments from 31st July 2020 to 1st January 2021 and the availability of business support loans.

If you need help or advice in relation to the Scheme or the other support measures being offered to businesses, our Corporate & Commercial Team are ready and waiting to help. For more information please contact Edward Barnes on 01244 354829 or at edward.barnes@dtmlegal.com.

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