A scheme has been announced to give self-employed individuals a direct cash grant of 80% of their profits, capped at £2,500 per month, which brings parity with the Coronavirus Job Retention Scheme under which the government has committed to pay up to £2,500 each month in wages of employed workers who are furloughed during the outbreak, but there are limitations.
In the latest step to protect individuals and businesses, Mr Sunak has set out plans that will see some, but not all, self-employed individuals receive up to £2,500 per month in grants for at least three months.
Those eligible will receive a cash grant worth 80% of their average monthly trading profit over the last three years, but it is only open to self-employed individuals with a trading profit of less than £50,000 in the year ended 5 April 2019, or an average trading profit of less than £50,000 for the three years ended 5 April 2019.
In addition, during the period(s) mentioned above, at least half of the individual’s income must have come from their self-employment, and the Scheme will not be open to those who are newly self-employed, (those whose business commenced after 5 April 2019) as they will not be able to provide the requisite evidence of trading profits from a past tax return. Individuals who have not yet filed their 2018/19 tax return will be given until 23 April 2020 (4 weeks from the announcement) to do so to make sure that they do not lose out.
To qualify, individuals will need to show that their trading profits have been adversely affected by COVID-19. Quite how HMRC will assess this has yet to be explained.
HMRC will identify qualifying self-employed individuals and should make contact directly by the beginning of June to advise how the grants can be claimed, which is likely to be via an online form, with grants being paid by way of direct bank credit. The grants will be paid from the beginning of June and will be paid in a single lump sum backdated to 1 March.
Details of how HMRC will contact self-employed individuals and how grant applications will be made have not yet been announced, but as soon as we know the mechanics of this scheme we will update our guidance accordingly. In the meantime, fraudsters will see the current uncertainty as an opportunity and we are aware that scams are already in operation. If you are approached by text, email, telephone, letter or otherwise to make an application we recommend that you check our guidance to confirm that this is a genuine approach by HMRC. If you are unsure, please contact us before responding in any way.
Unlike employees furloughed under the Coronavirus Job Retention Scheme, self-employed individuals can continue working when in receipt of their grants, but the grants are taxable (although not at source) in the same way as the earnings they are designed to replace.
We will keep you updated as further details emerge and we will be on hand to assist with providing data for applications in due course.
For the official guidance visit the Gov.uk website.