March 27, 2020

COVID-19 Self-Employed & 80% Scheme 27/03/2020

Self-Employed

Firstly, this excludes people working for themselves but doing so through a company in which they are the director and a shareholder, typically being paid £720 a month in salary with the remainder in dividends. These people are employees and may be able to receive help through the “80% scheme” (see below).

If you are self employed now and were self-employed before 6th April 2019 such that you completed a 2018/19 self assessment tax return you would appear to qualify for the self employed scheme announced by the government yesterday.

Our understanding

The full detail has not yet been published by the government, but it would appear that the help will be limited to £2,500 a month but actually based on the self employed income generated over the previous three years. HMRC will write to you to tell you if you qualify and may use the records they have to tell you how much you are entitled to. The payment is likely to be based on amount(s) appearing on your ‘profit from self-employment’ per the SA302.

Any monies paid to you are likely to be taxable (as your SA302 earnings would have been).

If you only became self-employed since 6th April 2019 or used to be self employed but since incorporated to form a limited company you are unlikely to qualify for any help other than perhaps the 80% scheme for employers (see below).

The scheme will be open to those with a trading profit of less than £50,000 in 2018-19, or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19. We advise that you look at your self assessment tax returns for 2016/17, 2017/18 and 2018/19 and work out the average of the self employed profit on them to give you an idea of what you might be entitled to. We also note that you must be self-employed now, when claiming and intend to be so into 2020-2021.

You are likely to be entitled to this scheme as long as your self employed profit makes up more than half of your income.

Please find below the link to the Self-Employment Income Support scheme which states you will get 80% of your average profit:

https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed. You can apply if ...

The Government has indicated that monies will be paid out from the beginning of June but you should not assume this target will be hit.

If you formed a company since 6 April 2019 please call us.

The 80% scheme

You will be familiar with an earlier announcement whereby the Government will contribute 80% of the gross pay of any employees that are unable to keep working at work or from home. At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.

It has been announced that this will be applied to directors too, so I should be possible to get 80% of the £720 (or whatever) salary your company is paying you. There will be a whole list of caveats though, which we will communicate to you as soon as we have them.

The below link has everything readily available and is fully comprehensive, please read carefully:

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. We expect the scheme to be up and running by the end of April.

If have any issues or questions regarding this, please give us a call.