The Chancellor has now announced the support for the self-employed; providing a taxable grant based on 80% of the average trading profit over the last three years, up to £2,500 a month.
This brings parity with the Coronavirus Job Retention Scheme announced by the Chancellor last week, where the Government committed to pay £2,500 each month in wages to employed workers, who are furloughed during the outbreak.
The support will be provided for a minimum of 3 months covering March, April and May and a single lump sum payment will be paid at the beginning of June.
Before grants are made available the self-employed will still be able to access other available support including universal credits and business continuity loans where they have a business bank account. It is unknown at this stage if any such support will need to be re-paid, once the payment of the grant is made.
People will still be able to carry on doing business in addition to this grant, if it is safe to do so.
HMRC will use the average trading profits from tax returns for tax years 2016/17, 2017/18 and 2018/19 to determine the size of the grant. If three years’ worth of accounts and tax returns are not held, what accounts you do have will be reviewed.
Crucially, a tax return for the 2018/19 tax year must have been submitted with self-employed details disclosed in order to receive this grant. If you have not submitted your 2018/19 return you have four weeks from 26 March 2020, to file a tax return. Only those who are already in self-employment and meet the conditions will be eligible to apply.
In addition, 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.
To qualify, more than half of their income in these periods must come from self-employment.
Individuals do not need to contact HMRC as HMRC will be using existing information to check potential eligibility and invite applications once the scheme is operational.
Those who pay themselves a salary and dividends through their own company are not covered by the scheme, but may be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes and certain conditions are met. Therefore, those who extracted profits from their company as a combination of salary and dividends will only have the option to explore support in respect of the salary part of their remuneration at present.
Further details of the scheme will be shared by HMRC in the coming days, with answers to some of the finer details.