PHTM COVID-19 FINANCE UPDATE
HMRC INVITES SELF-EMPLOYED TO GET READY TO MAKE THEIR CLAIMS
This week, HM Revenue and Customs (HMRC) will start contacting around three and a half million customers who may be eligible for the government’s Self-Employment Income Support Scheme (SEISS) to explain the application process and help them get ready to make a claim.
The claims service opens on Wednesday 13 May and is being deliv- ered ahead of schedule, with payments reaching bank accounts by 25 May, or six working days after the claim is made.
The scheme will benefit self-employed individuals or those in a part- nership whose business has been adversely affected by coron- avirus, covering most people who get at least half of their income from self-employment. SEISS is a temporary scheme that will en- able those eligible to claim a taxable grant worth 80% of their av- erage trading profits up to a maximum of £7,500 (equivalent to three months’ profits) in a single instalment.
HMRC is using information that customers have provided in their 2018-19 tax return – and returns for 2016-17 and 2017-18 where needed – to determine their eligibility and is contacting customers who may be eligible via email, SMS or letter. We’ve also opened an online checker today (4 May) which will let customers check their eligibility for themselves, as well as giving them a date on which they can apply.
Customers are eligible if their business has been adversely affected by coronavirus, they traded in 2019-20, intend to continue trading and they:
• Earn at least half of their income through self-employment; • Have trading profits of no more than £50,000 per year; and • Traded in the tax year 2018 to 2019 and submitted their Self Assessment tax return on or before 23 April 2020 for that year.
Where individuals are ineligible for the scheme, HMRC will direct them to guidance setting out the conditions to help them under- stand why they are ineligible, and advice about other support that might be available to them such as: income tax deferrals, rental sup- port, Universal Credit, access to mortgage holidays and the various business support schemes the government has introduced to pro- tect businesses during this time.
How HMRC works out total income and trading profits for the Self-employment Income Support Scheme.
Find out how HMRC will work out your income and profits if you’re self-employed or a member of a partnership in the UK and have lost profits due to coronavirus.
TRADING PROFITS
HMRC will use the figures on your tax returns for your total trading income (turnover), then deduct any allowable business expenses and capital expenditure. Allowable expenses include: • office costs, for example stationery or phone bills • travel costs, for example fuel, parking, train or bus fares • clothing expenses, for example uniforms
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• staff costs, for example salaries or subcontractor costs • things you buy to sell on, for example stock or raw materials • financial costs, for example insurance or bank charges • costs of your business premises, for example heating, lighting, business rates • advertising or marketing, for example website costs • training courses related to your business, for example refresher courses
It also includes: • any business expenses deducted through the trading allowance • capital allowances, used to buy assets used in your business • qualifying care relief • flat rate expenses HMRC will not deduct from your trading profits: • any losses carried forward from previous years • your personal allowance
EXAMPLE 1 If your total trading income (turnover) in each of the tax years 2016 to 2017, 2017 to 2018 and 2018 to 2019 was £20,000, and you claimed the £1,000 trading allowance each year. This is worked out as: 1. £20,000 deduct the trading allowance of £1,000 = £19,000 2. Multiply £19,000 by 3 = £57,000 3. Divide £57,000 by 3 = £19,000 Your average trading profit would be £19,000.
If you have more than one trade in the same tax year, HMRC will add together all profits and losses for all these trades to work out your trading profit.
EXAMPLE 2 If you made: • £60,000 profit in tax year 2016 to 2017 • £60,000 profit in tax year 2017 to 2018 • £30,000 loss in tax year 2018 to 2019 1. Add £60,000 and £60,000 then deduct £30,000 loss = £90,000 2. Then divide £90,000 by 3 Your average trading profit would be £30,000.
Further examples are on the Government website:
https://www.gov.uk/guidance/claim-a-grant-through-the- coronavirus-covid-19-self-employment-income-support-scheme
HOWEVER, PLEASE NOTE:
• Accountants at the moment, will not be able to make the claim on your behalf.
• To make a claim you must have a government gateway account. click link below for full details:
https://www.gov.uk/guidance/claim-a-grant-through-the-corona virus-covid-19-self-employment-income-support-scheme#claim
DON’T DELAY - IF YOU ARE IN ANY DOUBT THEN SPEAK TO YOUR ACCOUNTANT
MAY 2020
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