The window for claiming the second grant under the self-employed income support scheme opened on 17 August and closes on 19 October. Traders do not have to have claimed the first grant to qualify for the second but their business must have been adversely affected by COVID-19 on or after 14 July 2020 to qualify.
The scheme to help the self-employed through the current financial crisis is designed to be on a par with support for employees. The self-employed can, however, continue trading throughout this period.
The support will be paid directly to those eligible as either one or two taxable grants. The scheme covers a maximum of six months, in two payments, with the first being made in June and the second from August.
Who is eligible for support?
The second grant of the scheme is open to those who are self-employed, including partners in partnership, and who:
- carry on a trade that has been adversely affected by COVID-19 on or after 14 July 2020;
- have trading profits, or average trading profits, under £50,000 before offset of any prior year losses;
- have over 50% of their taxable income from self-employment;
- submitted a 2018/19 income tax return by 23 April 2020, as HMRC will use self-employment data from that year’s returns to assess eligibility;
- traded in the 2018/19 and 2019/20 tax years;
- are trading at the time of application or would still be trading but for the effects of the pandemic; and
- intend to continue trading in 2020/21.
The first two conditions must be met in either the 2018/19 tax year or as an average over the past three tax years (2016/17, 2017/18, and 2018/19) - or two if they began trading in 2017/18. Parents of a new child who took time away from trading in 2018/19 can base their eligibility on 2017/18 or the 2017/18 and 2016/17 average. They will also be treated as trading in 2019/20 if still on parental leave in that period.
Those who started trading in 2019/20 are excluded from the scheme, which was done intentionally as a measure to minimise fraudulent claims.
The eligibility rules are the same for each of the two grants but not having claimed the first grant does not prevent the individual from claiming the second one. This will be most common where the business was not adversely impacted until after the deadline to claim the first grant.
Non-UK residents are eligible for the grant, provided that their UK trading profits are at least equal to their other worldwide income.
HMRC has published on the www.gov.uk website examples of those it would count as adversely affected for the purpose of eligibility.
How much will the support be?
Each grant covers three months’ worth of average monthly profits. The first taxable grant was set at up to 80% of these profits and is capped at £7,500 in total. The second is set at up to 70%, capped proportionately at £6,570 in total. Each is be paid as a lump sum; the first in June, the second from August.
The average monthly profits will be calculated over three tax years: 2016/17, 2017/18 and 2018/19, where applicable.
How can the self-employed make claims?
HMRC has contacted those who are eligible for the scheme and invited them to make a claim. These can be made online.
The deadline to claim the first grant was 13 July. Applications for the second opened on 17 August and will close on 19 October. All applications are made online.
What happens if an excessive claim is made?
If traders receive a grant they were not eligible to claim or an excessive grant that they have not yet repaid, they should notify HMRC. The deadline for notification is the later of 20 October or 90 days from receipt of the grant. HMRC may issue an assessment for the overpaid amount, in which case the trader will have 30 days from the date of assessment to repay the amount.
If a trader fails to notify HMRC on time, no penalty will be charged if the grant is repaid by the repayment deadlines. These are 31 January 2022 for those who claimed the grant believing they were eligible or the end of the notification period for anyone who knowingly claimed a grant for which they were ineligible. The penalty can otherwise be up to 100% of the excess grant.
Government legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. Clients should always seek appropriate tax advice from their financial adviser before making financial decisions.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Ref: 124820lw / NTNPW0920104
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.