COVID-19: Statutory self-employment pay scheme - Updated: 29 September 2020
Coronavirus: Statutory self-employment pay scheme
At a glance
Support for the self-employed during the Coronavirus crisis:
Claims for the first three months commenced on 13 May 2020, with the first payments arriving from 25 May 2020 and within 6 working days of claims being made.
The deadline for claiming under the first round was 13 July 2020. Claims for the second round of grants at the lower rate may be made from 17 August with a deadline of 19 October 2020. See How to claim under the SEISS.
Note that: Company directors are employees for PAYE purposes and not self-employed, see COVID-19: Company directors
If you fail to qualify for the SEISS, it may be possible to apply for funding via the Coronavirus Discretionary Grant Fund. This is administered by Local Authorities and currently is only open for applications between 29 May and 9am 15 June 2020.
SEISS Grant Extension
You can claim one or both of the initial grants, only if your business is 'adversely' affected by the Coronavirus.' To claim the second grant your business must have been adversely affected on or after 14 July 2020.
Your business may be adversely affected if any of the following apply:
Restrictions on trading:
Restrictions on you personally:
You have been ill or self-isolating or shielding.
You have had to care for others and this disrupted your work.
HMRC provides examples of situations were a business affected here.
You should keep records to show that you have been adversely affected to include:
The same conditions apply to both rounds of grant funding. These conditions relate to eligibilty for the grants and not to the amounts you will receive if you do qualify, details of which are set out at 'How will the grant be calculated?' below.
You are self-employed and you:
Additionally, more than half of your total income comes from self-employment.
One of the following conditions A to C must be met to be eligible for the scheme:
From July 2020: proposed modified extra condition for parents, including adoptive ones, who took time out of trading to care for their children within the first 12 months of the birth of the child or within 12 months of an adoption placement:
Loan charge payers
The qualifying profits conditions are modified for persons who are subject to the loan charge:
A person is subject to the loan charge if:
(a) on 26 March 2020 the person is chargeable to income tax on any amount by reason of Schedule 11 or 12 to the Finance (No. 2) Act 2017 (loan charge) as enacted as at that date, or
(b) the person would be so chargeable but for entering into a contract settlement on or after 20 December 2019.
If you are a Loan Charge payer, one of the following conditions D or E must be met.
D. If you were not trading in 2016-17, your trading profits/partnership trading profits are between £0 - £50,000 for 2017- 18 and those trading profits are more than half of your total taxable income for that year, or
E. Your average trading profits/partnership trading profits for the two years 2017-18, and 2016-17 are between £0 - £50,000 and your average trading profits for those years are more than half of your total taxable average income for those same years.
In addition (for loan charge payers only) you do not have to file your 2018/2019 Self Assessment tax return by 23 April 2020 as the 30 September 2020 loan charge settlement deadline still applies.
Non-UK residents and non-domiciled individuals claiming the remittance basis:
Must self certify that their UK trading profits are at least equal to their other worldwide income.
Scottish taxpayers: newly self-employed
If you are not eligible for the SEISS because you are newly self employed you may be eligible for the Scotland's: Newly Self-Employed Hardship Fund.
New parents - added 26/6
Who is self-employed?
What is trading income?
Trading income is your trading income less allowable expenses, less capital allowances and current year losses.
Carried forward losses from another year are not deducted.
A 'trade' includes a trade, profession or vocation chargeable to income tax.
What is total income?
Total income means the total of:
It does not include losses. ADDED 20/7/20
Farmers, market gardeners and authors: averaging
If you started trading between the years 2016 to 2019, HMRC will only use those years for which you filed a Self Assessment tax return.
HMRC give the following example (14 April 2020):
So even if you made a loss in the tax year 2018 to 2019, you would still be eligible for the grant because your average trading profit for the three tax years:
Making a claim
1. HMRC's online eligibility checker checks what has been reported under self assessment.
2. HMRC's SEISS claims portal went live on 13 May 2020.
3. Claims for the first three months of the grant must be made by 13 July 2020.
4. Claims for the second and final three months commencing in August 2020 and must be made on or before 19 October 2020.
How is the grant being calculated?
The amount of SEISS payment for the first three month period is the lower of:
a) £7,500 (1st grant) and
b) (Average* trading profit/12) x 80% x 3
This means that you need to have made a past average profit of £37,500 in order to expect to receive the full £7,500.
The amount of the SEISS payment for the second and final three month period is the lower of:
a) £6,570 (2nd grant) and
b) (Average* trading profit/12) x 70% x 3
This means that you need to have made a slightly higher past average profit, of £37,543, in order to expect to receive the full £6,570.
*To work out the average HMRC will add together the total trading profit for the three tax years, or less, if you have been trading a shorter time and then divide by three or the number of months and use this to calculate a monthly amount.
On 14 April 2020 HMRC provided additional guidance and examples as to how they will work out trading income for the purposes of the scheme.
If your total trading income (turnover) in each of the tax years 2016 to 2017, 2017 to 2018 and 2018 to 2019 was £20,000 and you claimed the £1,000 trading allowance each year:
This is worked out as:
Your average trading profit would be £19,000.
Example 2: You have more than one trade in the same tax year
We will add together all profits and losses for all these trades to work out your trading profit.
If you only traded in the tax year 2018 to 2019 and made a £60,000 profit for your first trade, and then a £20,000 loss for your second trade, your trading profit for that year would be:
Trade 1 £60,000 profit deduct trade 2 £20,000 loss = £40,000
Example 3: You have traded for more than one year
To work out your average trading profit we will add together all profits and losses for all tax years you’ve had continuous trade.
If you made:
Your average trading profit for the three tax years would be £30,000.
If you did not trade in tax year 2016 to 2017 but made:
Your average trading profit for the two tax years would be £35,000.
Grants under the extended scheme
The first grant under the extended scheme will be based on 20% of average monthly trading profits, capped at £1,875. It is expected that average trading profits will be calculated in the same way as for the initial two grants but this has not yet been confirmed by the government.
Details of how the second grant for February to April 2021 will be calculated have not yet been made available.
If you are a self-employed farmer, market gardener, creative author or artist claiming Averaging relief HMRC will use the amount of profit before the impact of the averaging claims to work out:
I think I have been paid too much, what should I do? UPDATED 29 JULY 2020
You must tell HMRC if you think your grant has been overpaid or that you should not have claimed, as if you do not you may be charged a penalty up to 100% of the grant amount. You can do this online here.
If you received the grant:
However if you did not know you were ineligible for the grant when you received it, HMRC will only charge a penalty if you have not repaid the grant by 31 January 2022. ADDED 6/8
The Finance Act 2020 includes details of the powers HMRC will have to deal with incorrect claims. They will be able to:
The draft legislation also sets out that the circumstances in which a person is not entitled to a coronavirus support payment include where they cease to be entitled to it after they have received it because of a change of circumstances.
Members of partnerships
Tax and benefit implications
The grants are subject to tax and NIC as self employed income. The legislation for the tax treatment of the grants is included in clause 19 schedule 1 of Finance Bill 2020 which provides that:
HMRC have not provided any guidance as to whether the grants will be subject to VAT or count towards turnover for VAT registration limits. Normal principles are expected to apply to mean:
If you did not submit your Income Tax Self Assessment tax return for the tax year 2018-19 by 31 January 2020, you must have done so by 23 April 2020.
HMRC are using data on 2018/19 returns already submitted to identify those eligible and will risk-assess any late returns filed before the 23 April 2020 deadline in the usual way.
The Coronavirus Job Retention scheme for employees applies to furloughed workers laid off during the crisis and has a cap of £2,500 per month to the end of August reducing to £2,187.50 for September.
FAQs: HMRC guidance
HMRC published 'How different circumstances affect the Self-Employment Income Support Scheme'
This answers FAQs covering the following topics
HMRC's online checker became available on 4 May 2020.
Additional support for small business
On 1 May 2020 HM Treasury published The Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (Self-Employment Income Support Scheme) Direction this confirms the detail of the scheme.
On 1 July 2020 HM treasury published The Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (Self-Employment Income Support Scheme Extension) Direction confirming details of the extension of the scheme
House of Commons Briefing paper 23 June 2020: Coronavirus: Self Employment Income Support Scheme
|2016 to 2017||2017 to 2018||2018 to 2019||Total for the 3 tax years|
|Trading profit are more than half of your total income||Yes||Yes||No||Yes|
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