Here’s the news you have all been waiting for – measures to support the self-employed during the coronavirus pandemic.
But is it all it’s cracked up to be?
We have taken a closer look at who is eligible and how to apply for help so you don’t have to.
We have also updated our advice for those who run businesses after further details of the Coronavirus Job Retention Scheme were revealed.
Let’s start with the self-employed.
What help is there?
Self-employed workers can now apply for a grant worth 80% of their average monthly profits to help them cope with the financial impact of coronavirus, following an announcement from the chancellor last night.
Just like the help available for furloughed employed staff, the money will be up to a maximum of £2,500 a month.
However, employed workers will receive their monthly and as soon as April while the self-employed will be paid in a single lump sum that will not begin to arrive until the start of June at the earliest.
Why is it taking so long?
Understandably, the government had faced criticism for failing to provide support for the self-employed in its earlier package of economic measures.
And here at KBL we are acutely aware – thanks to handling the accounts of so many sole traders and freelancers – just how many people were desperate for news of a relief package.
It’s therefore a little bittersweet to be told that yes, there is help available, but you won’t get your hands on anything for two and a half months.
I could almost hear the collective sigh when that wait was mentioned.
However, there is good reason for the wait – mainly because the Treasury are is going to find this administratively very difficult.
The reason they can move so much faster for employees on a payroll is that those payrolls interact every month with HMRC. The proof of earnings is readily available.
What’s more a firm will just continue making its normal payments to staff and then get money back from a Treasury.
With the self-employed measures, the government sending money out to people, which it doesn't do very often.
Think of it this way, if you have ever had a tax refund, it tends to come months later and in the form of a cheque.
With self-employment, the government is trying to organise payments to potentially millions of people - that's going to take some time.
Who is eligible?
Self-employed people will be able to apply for a grant worth 80% of their average monthly profits over the last three years, up to £2,500 a month.
To be eligible, at least half your income needs to have come from self-employment as registered on the 2018-19 tax return filed in January - anyone who missed the filing deadline has four weeks from now to get it done and still qualify.
The scheme is open to those who earn under £50,000 a year - up to 3.8 million of the 5 million people registered as self-employed.
Unlike the employee scheme, the self-employed can continue to work as they receive support.
The money, backdated to March, will arrive directly into people's banks accounts from HMRC, but not until June.
The grants will be taxable and will need to be declared on tax returns by January 2022.
Who isn’t eligible?
Company owners who pay themselves a dividend are not covered and neither will you qualify if profits are over £50,000 p.a. on average for the three years.
The “trading profit” will be based on an average of your “trading profits” for the three tax years 2016/17, 2017/18 and 2018/19.
You do not need to have traded in all 3three years but you MUST have traded in 2019/20 and continue to trade in 2020/21.
Sadly, the scheme does not cover people who only became self-employed very recently - the chancellor said they would have to look to the benefits system for support.
One further thing to be aware of - the chancellor said he can no longer justify, after things get back to normal, that self-employed people pay less tax than the employed. But that is a worry for another day.
What about the employed?
The Government has also set out more details around its job retention scheme – which a lot of you have been clamouring for.
The scheme is not live yet – its expected at the end of April when an online portal will be available to employers on the HMRC website that will allow them to claim 80% of the wages for furloughed staff up to £2,500 a month.
To qualify furloughed staff must have been on the payroll on February 28th, 2020. They can be full time or part time employees, employees on emergency contracts, employees on flexible or zero-hours contracts and those made redundant since February 28th.
Furloughed employees cannot work while furloughed but their wage is subject to usual income tax and other deductions.
Employees cannot be furloughed if they were hired after February 28th or are on sick leave or self-isolating (when Statutory Sick Pay is paid).
To claim you need:
· An employee’s ePAYE reference number
· The number of employees being furloughed
· The claim period (start and end date)
· Account claimed (per minimum length of furloughing of three weeks)
· Your bank account number and sort code
· Your name and phone number
Please note that it falls down to the employer to work out the amount they are claiming and the HMRC retain the right to retrospectively audit all aspects of the claim.
You should also be aware that you can submit one claim at least every three weeks and claims can be backdated only as far as March 1st.
HMRC will pay money via BACs transfer.
Once the Government ends the scheme, employees can decide whether employees can return to their duties. If not, it may be necessary to consider termination of employment.
There are further elements of this scheme which will need to be explored on a case by case basis – such as those with varying pay each month and those returning from parental leave.
Anything else I should be aware of?
Yes.
The Chancellor announced a VAT payments deferral on 20 March to support businesses with cashflow during the COVID-19 pandemic.
It means that all businesses with a UK VAT registration have the option to defer VAT payments due between 20 March and 30 June. Businesses have until 31 March 2021 to pay any VAT deferred as a result of this announcement.
You do not need to inform HMRC if they wish to defer payment - you simply opt in by not making VAT payments due in this period. So now is the time to cancel any direct debits if this is how you normally pay.
Should you wish, you can continue to make payments as normal during the deferral period and whatever you choose to do, don’t forget that you must continue to submit VAT returns as normal.
We are here for you
As usual, we are here to answer questions and help you make the best of a very difficult situation. We will also strive to keep you informed as things change.
We have a list of clients wanting us to do all of the necessary paperwork they need to access the help they are entitled to. To be added to that list, please e-mail us today and let us know.