The Association of Taxation Technicians (ATT) is calling on the Government to find ways to help those in self-employment and others who will otherwise not qualify for the measures it has announced.
On 26 March 2020, the Chancellor announced a new Self-Employed Income Support Scheme to provide a cash grant to those self-employed individuals (including partners in a trading partnership) who have suffered a loss of trading income due to COVID-19. Under the scheme, eligible self-employed individuals can claim support worth up to 80 per cent of their income for a three-month period (subject to a cap of £2,500 per month) as a single lump sum, expected to be paid in June 2020.1
Jeremy Coker, President of the ATT, said:
“We welcome the new scheme and the support that the Government has offered to the millions of self-employed people who are vital to the UK economy. Government officials have clearly been working outstandingly hard in recent days to pull this package together and have even more work to do in the coming weeks to design and implement the system which will enable eligible individuals to claim this valuable assistance.
“While it is a broad scheme, the qualifying conditions mean there are some groups who will not benefit. It is important those groups are aware so that they can start to seek help in terms of other support such as universal credit and other welfare schemes."2
As we understand it, individuals who do not appear to qualify under the current scheme include:
- Anyone who became self-employed on or after 6 April 2019 and will not therefore have declared self-employment on a 2018-19 tax return. The Association of Taxation Technicians suggests that one possible solution to this might be to extend the scheme to enable them to submit a tax return for 2019-20 very soon after the tax year ends and take this year into account under the scheme.
- Self-employed individuals with trading profits of over £50,000.3 This is in contrast to the Job Retention Scheme where higher earners who are furloughed can still receive support, capped at £2,500 per month.
- Anyone who did not file a tax return for 2018-19 but otherwise meets the conditions of being self-employed. Fortunately, the Government has given this group an extra four weeks until 23 April 2020 to submit a return. Anyone who got the majority of their income in 2018-19 from self-employment but thought they did not need to file – perhaps because their income was under the personal allowance – should now look again as to whether they could and should have filed for 2018-19 in order to be eligible for support through this scheme. They should do this as soon as possible as if they have not already registered for self-assessment they may struggle to do this - and submit a return - in the time allowed.
Another group who are not technically self-employed, even if they might think of themselves that way, are individuals who have their own company and have taken their income from the company as a small salary and the rest as dividends. They may not be able to claim support for the loss of salary under the Job Retention Scheme for themselves (even if it applies to their employees)4 as it is not clear how the sole director of a company can furlough themselves. Even if it is permitted for this group to benefit from the Job Retention Scheme, this will only allow a claim for the salary element which is usually modest. Since dividend income is not classed as self-employment income for the purposes of the Self-Employed Income Support Scheme there will be no additional support and such individuals will get much less than they might have hoped for.
Jeremy Coker continued:
“While we appreciate that the Government’s priority has to be getting support to the largest number of people in the quickest manner possible, in the coming weeks we would like to see the Government find ways to help those in self-employment and owners of small companies -who will otherwise not qualify for appropriate and much needed support.”
Notes for editors
1. Guidance on the Self-employed Income Protection scheme can be found here.
2. The Low Incomes Tax Reform Group (LITRG) provides guidance on benefits and tax credits and also has specific guidance on COVID-19.
3. The conditions to qualify include that the individual has self-employed trading profits of less than £50,000 and that they must receive more than half of their income from self-employment. To test the £50,000 limit the following conditions must be met:
a. The individual has trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
b. The individual has average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of their average taxable income in the same period. (The average is adjusted if the individual started trading after 6 April 2016.)
4. Guidance on the Job Retention Scheme for employers can be found here.