COVID-19: A Definitive Guide for The Self-Employed

These are strange and stressful times. As such, we are committed to providing you with the best possible support and latest advice on Government schemes available to help businesses through the Coronavirus crisis.

There are many sources of conflicting and confusing guidance on websites and Social Media.  This guide is to provide factual information to support the Self-Employed. We have focused on the guidance provided by UK Government, Welsh Government and ACAS.

There are more than five million self-employed people in the UK, accounting for over 15% of the workforce. The Government have announced a number of schemes to support the self-employed and this guide goes into each scheme in more detail.  It covers who is eligible and how to go about applying, along with any additional information required.

The schemes detailed in this guide are:

1. Defer Your Self-Assessment payment

2. Self-employment Income Support Scheme (SEISS)

3. Take a mortgage, loan, credit card payment holiday

4. Universal credit

5. Coronavirus Business Interruption Loan Scheme (CBILS)

6. Grants for Businesses that pay little or no business rates

1. Defer Your Self-Assessment Payment

If you’re due to pay a self-assessment payment on account by 31 July 2020 but the impact of the coronavirus causes you difficulty in making payment by that date, then you may defer payment until January 2021.

The deferment is optional and if you are still able to pay your second payment on account on 31st July you should do so.

This is an automatic offer with no applications required. No penalties or interest for late payment will be charged if you defer payment.

During the deferral period it is advisable to set up a budget payment plan to help you pay the deferred payment on account when it comes due.

HMRC has set up a phone helpline to support businesses and self-employed people concerned about not being able to pay their tax due to coronavirus (COVID-19).

The helpline allows any business or self-employed individual who is concerned about paying their tax due to coronavirus to get practical help and advice. Up to 2,000 experienced call handlers are available to support businesses and individuals when needed.

You can call the HMRC helpline for help and advice on 0800 024 1222.

Other useful links:

https://www.gov.uk/pay-self-assessment-tax-bill/pay-in-instalments

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-paying-tax-time-to-pay-service

2. Self-Employment Income Support Scheme (SEISS)

The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) who have lost income due to coronavirus (COVID-19).

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.

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 your income during these periods must come from self-employment.

To minimise fraud, only those who are already in self-employment and meet the above conditions will be eligible to apply. HMRC will identify eligible taxpayers and contact them directly with guidance on how to apply.

The income support scheme, which is being designed by HMRC from scratch, will cover the three months to May. Grants will be paid in a single lump sum instalment covering all 3 months and will start to be paid at the beginning of June.

You are advised not contact HMRC at the moment. HMRC will use 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 will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

Claim a grant through the Self-employment Income Support Scheme.

Key Points to Note

Who can Apply

You can apply if you’re a self-employed individual or a member of a partnership and you:

• have submitted your Income Tax Self-Assessment tax return for the tax year 2018-19
• traded in the tax year 2019-20
• are trading when you apply, or would be except for COVID-19
• intend to continue to trade in the tax year 2020-21
• have lost trading/partnership trading profits due to COVID-19
• your self-employed trading profits are less than £50,000
• more than half of your income come from self-employment.

If you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, you must do this by 23 April 2020.

How much you’ll get

You’ll get a taxable grant which will be 80% of the average profits from the tax years (where applicable):

• 2016 to 2017
• 2017 to 2018
• 2018 to 2019

To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable) and use this to calculate a monthly amount.

It will be up to a maximum of £2,500 per month for 3 months.

We’ll pay the grant directly into your bank account, in one instalment.

How to apply

You cannot apply for this scheme yet.  HMRC will contact you if you are eligible for the scheme and invite you to apply online.

Individuals do not need to contact HMRC now and doing so will only delay the urgent work being undertaken to introduce the scheme.

Warning!

There has been an increase in fraudulent activities.  If someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a scam!

3. Mortgage, Loan, Credit Card Payment Holiday

A ‘payment holiday’ means you agree with your lender that you will not have to make mortgage payments for a set amount of time. Payment holidays are designed to help you when you may experience payment difficulties – in this case because of the coronavirus situation.

It is important to remember that you still owe the amounts that you don't pay as a result of the payment holiday. Interest will continue to be charged on the amount you owe.

This means that, at the end of the payment holiday, you will have to make up the missed payments. There will be various options for doing this, for example by increasing your monthly payments slightly, or by adding a short extension to your term. Your lender will be able to explain to you what options it offers.

Applying for a payment holiday

You should contact your lender if you are experiencing or reasonably expect to experience payment difficulties because of circumstances related to coronavirus.

Do Not Cancel your direct debit

Some mortgage holders, frustrated at not being able to get through to their banks, are just cancelling their monthly payment. You should not cancel your direct debit without speaking to your lender first. Cancelling your direct debit is not a payment holiday and will be counted as a missed payment. This could show up in your credit file and may impact your ability to remortgage.

How long do I have to apply for a mortgage holiday?

If you are experiencing or reasonably expect to experience payment difficulties and may need a payment holiday, you should speak to your lender in good time before the next payment is due. Please be considerate of others when contacting your lender and allow those with much closer dates into the queue first.

You can apply for a payment holiday at any time before this guidance is reviewed in 3 months. The payment holiday will not start, however, until it has been agreed with your lender.

Contacting your lender at this time

Lenders have committed to responding as quickly as possible, but due to high levels of demand and staff having to work from home, service levels might be slower than usual.

You should speak to your lender in good time before the next payment is due.

Before calling:

• Ask yourself: Do I need to speak to my mortgage lender today?
• Consider: Can I do this through mobile online banking?
• Review: Is the answer already on my lender’s website?

If you are going to apply for a mortgage holiday, it's best to do it online where possible, as phone lines are likely to have huge backlogs.

4. Universal Credit

Universal Credit is a monthly payment to help with your living costs. You may be able to get it if you’re on a low income or out of work.

If you are self-employed and claiming Universal Credit, and are required to stay at home or are ill as a result of coronavirus, the Minimum Income Floor (an assumed level of income) will not be applied for the period of time whilst you are affected.

From 6 April the requirements of the Minimum Income Floor was temporarily relaxed. This change will apply to all Universal Credit claimants and will last for the duration of the outbreak. New claimants will not need to attend the job centre to demonstrate gainful self-employment.

Use this link to check your eligibility for Universal Credit

5. Coronavirus Business Interruption Loan Scheme (CBILS)

The Coronavirus Business Interruption Loan Scheme (CBILS) is available for SMEs through more than 40 accredited lenders across the UK.

Businesses are advised to approach their own provider first and the best way to do this is through the lender’s website. You may also consider approaching other lenders if they are unable to access the finance you need.

Whether you are eligible for CBILS is down to the discretion of the 40+ accredited CBILS lenders. These lenders range from high-street banks, to challenger banks, asset-based lenders and smaller specialist local lenders.

The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, subject to an overall cap per lender.

Any interest and fees will be paid by the Government for 12 months, meaning small businesses will benefit from no upfront costs and lower initial repayments.

Finance terms will be available up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.

Eligibility criteria

Smaller businesses from all sectors can apply for the full amount of the facility. To be eligible for a facility under CBILS, Your business must:

• Be UK-based in its business activity
• Have an annual turnover of no more than £45 million
• Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic

• Self-certify that it has been adversely impacted by the coronavirus (COVID-19).

Businesses from any sector can apply, except the following:

• Banks, insurers and reinsurers (but not insurance brokers)
• Public-sector bodies
• Further-education establishments, if they are grant-funded
• State-funded primary and secondary schools

6. Grants for Businesses that pay little or no business rates

The government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) and tapered relief. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.

Eligibility Criteria

You are eligible if:

• your business is based in England
• you are a small business and already receive SBBR and/or RRR
• you are a business that occupies property

How to access the scheme

You do not need to do anything. Your local authority will write to you if you are eligible for this grant. Guidance for local authorities on the scheme will be provided shortly.

Conclusion

These are the current schemes available to support the self-employed through the Coronavirus crisis.  We are continuing to keep this guide updated with the latest information as they are communicated by the Government in order to support the self-employed.

If you require any further information or support for you or your business, please get in touch.

We hope you found this guide useful.

Henry R Davis & Co

Chartered Accountants

Key websites:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19

https://businesswales.gov.wales/government-support-businesses

https://www.acas.org.uk/coronavirus

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