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The Next Step – Support Measures for Self-Employed Businesses

On Thursday, 26 March 2020, the Chancellor of the Exchequer published details of his latest intervention in the government’s response to the COVID-19 pandemic by unveiling a much anticipated package of support for self-employed businesses.

The Self-employment Income Support Scheme (SISS ) is intended to align the support available for the self-employed with that already available for employees (via their employers) under the Coronavirus Job Retention Scheme (CJRS).  Taxable cash grants under SISS  are worth 80% of a business’ average monthly trading profits, up to a maximum of £2,500 per month.

Eligible businesses are self-employed individuals or members of partnerships that:

  • have trading profits in 2018-19 of less than £50,000 (provided those profits also constitute more than half of total taxable income), or

  • have average trading profits across the three years 2016-17 to 2018-19 (pro-rated if necessary) of less than £50,000

provided that, in either case, those profits constitute more than half of the self-employed person’s total taxable income.

Importantly, those who pay themselves a salary and dividends through a company are not covered by the scheme, and will need to consider if support is available under the CJRS (if they operate PAYE).

In addition, the business will need to:

  • have submitted an Income Tax Self-Assessment tax return for the tax year 2018-19 (or will do so before 23 April 2020)

  • have traded during 2019-20

  • be trading at the point of application (or would be but for COVID-19)

  • intend to continue to trade in 2020-21 (or would except for COVID-19), and

  • have lost trading profits as a result of COVID-19

Just like the CJRS, the SISS scheme is not yet available, and just like CJRS, HMRC will operate SISS, and are working urgently to get it introduced. However, the Chancellor announced that it may not be fully operational before 1 June 2020. Using the information collected from tax returns, HMRC will contact eligible self-employed business and invite them to apply. The application will be made online and, like the CJRS, the new scheme will run for three months (but may be extended).

Obviously there is a time-lag for those self-employed businesses that need urgent financial assistance and the availability of government grants under SEIPP. The Chancellor pointed businesses to other measures that are available, including:

  • lending under the Coronavirus Business Interruption Loan (CBIL) scheme

  • the deferment of any VAT due during the next three months until April 2020

  • the deferment of self-assessment income tax payments (otherwise due on 31 July) to 31 January 2021, and

  • the relaxation of restrictions on the availability of Universal Credit (UC) and other enhancements to the welfare system

In addition, the £50,000 threshold creates a cliff-edge; those realising slightly less, will benefit fully, whereas those that realise profits only marginally above, will get nothing (under SISS). Another point worth noting is that many self-employed businesses that benefit under the scheme may be able to continue to operate and continue to generate some income. That compares favourably with employees that have been made redundant by their employers as a result of COVID-19, who will not benefit from the CJRS at all.

Finally, this is a huge fiscal stimulus package, estimated by the Resolution Foundation to likely to be worth in the region of £10 billion. The sting in the tail may be the Chancellor’s (supposed) observation that “it is now much harder to justify the inconsistent contributions between people of different employment statuses. If we all want to benefit equally from state support, we must all pay in equally in future.” He may have insisted that it was merely an aside but expect tax policy on the treatment of employment and self-employment to be the subject of significant review and possible overhaul in the near future.

© Copyright 2020 Squire Patton Boggs (US) LLP

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About this Author

Robert O'Hare, Squire Patton Boggs Law Firm, Professional Support Lawyer
Professional Support Lawyer

Robert O’Hare is a professional support lawyer in the firm’s Tax Strategy & Benefits Practice Group. He is predominantly based in the London office.

Primarily a corporate tax specialist, Robert has wide-ranging experience of advising clients on the full range of corporate tax issues and has specialist knowledge of UK and cross-border corporate acquisitions, public market and financing transactions alongside both private equity and retail investment fund structuring. 

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