By Andrew Mitchell, Tax Partner, Armstrong Watson

THE Chancellor of the Exchequer announced on 26th March the Self Employed Income Support Scheme (SEISS) to help self employed individuals through the COVID-19 pandemic.

The statement came over a week after the announcement of the Job Retention Scheme to help employees, and the Chancellor admitted that it had been difficult to create a scheme that was in his words both deliverable and fair.

Key details are as follows:

• Support will be 80% of monthly profits, capped at £2500 per month.

• Individuals need to have been self employed before 5 April 2019 to be eligible.

• For those self employed on 6 April 2016 the award will be based on an average of the three years profits to 5th April 2019. For those who have started self employment since April 2017 the award will be based on the average profit in this period.

• If this figure is greater than £50,000 then no claim is possible.

• The figure used in the calculations is the taxable profit as submitted on your tax return. It ignores losses brought forward and your personal allowance. The profit is also before any adjustments are made for farmers’ averaging.

• A person needs to receive the majority of their income from self employed sources. This covers both sole trader businesses and partnerships.

• With the scheme not due to open until mid May, the first payment is unlikely to be received before June 2020.

• Tax returns for the year to 5th April 2019, which should have been filed by 31st January 2020, need to have been filed by 23 April in order to be eligible.

• Businesses operating via a limited company are not eligible under this scheme.

• It is not necessary for the business to have ceased trading but it is necessary for a business to have lost profits as a result of COVID-19.

• HMRC has said they will contact those they think are eligible and invite them to make a claim.

The scheme fails to help those who became self employed since 5 April 2019 as HMRC does not hold details of profits for this group as their first tax returns are up to 5 April 2020. This contrasts with employees where employers make Real Time Information submissions of PAYE data each month and HMRC hold up-to-date information. Those running Furnished holiday Cottages will also likely miss out, as under a quirk of the tax legislation, the income is taxed as property income rather than trading profits.

For any further information or clarification on HMRC business schemes or taxes, please contact Andrew Mitchell on 07818 415469 or email: