On 25 March the Coronavirus Act 2020 received Royal Assent. It is a bumper piece of legislation, running to 348 pages and covering a wide range of areas (many excluding Scotland because of its devolved powers), including:
Statutory Sick Pay (SSP) modifications, such as the funding of the employer’s liabilities;
Suspension of the rules that abate or suspend NHS pensions on an individual’s return to work;
Postponements of elections (and referendums…);
Up-rating of working tax credit;
Protection to 30 September from eviction for residential tenancies; and
Protection to 30 June from forfeiture for commercial tenancies.
The explanatory notes for the original Bill (introduced on 19 March ) are here.
On 26 March, Rishi Sunak made his third post-Budget statement about Covid-19 support. The focus was a scheme directed at the self-employed (including members of partnerships) which had reportedly been delayed by the complexity of design and delivery. The main elements of the scheme, called the Self-employment Income Support Scheme (SEISS), are:
There will be a taxable cash grant based on 80% of average profits over the last three tax years, the last being 2018/19 (or shorter periods, e.g. one year, 2018/19, if three years are not available), subject to a maximum of £2,500 per month. A briefing note from the IFS suggests that the £2,500 figure (which also applies to the Job Retention Scheme) is the maximum payment, i.e. coverage is 80% of up to £37,500 of profits ([£37,500 x 80%] /12 = £2,500). While there is no example given, this conclusion (the maximum payment being £2,500) can also be implied from the words of the Government webpage.
The grant will initially be paid for a three month period but can be extended.
Those claiming the grant can continue to do business, which appears to mean that some could see their total income increase.
The scheme will only apply to those people:
For whom self-employment provides the majority of their income. It is unclear whether ‘income’ means earnings or total income;
Whose trading profits did not exceed £50,000 in 2018/19 or who had an average trading profit of less than £50,000 over the three tax years from 2016/17. Based on the words of the statement, the £50,000 maximum profit limit seems to be a “hard” one. In effect a “cliff-edge”. The scheme will, it seems, cover 95% of the self-employed; and
Who have submitted a 2019 tax return (covering 2018/19). However, anyone who missed the 31 January 2020 filing date will have four weeks (to 23 April) to submit a return if they wish to be included in the scheme.
The expected start date of payments (to be made directly by HMRC) is the beginning of June. The initial sum will be three months’ cumulative payments. In the interim the self-employed can claim Universal Credit, which, according to the Chancellor, could give a self-employed person with a non-working partner and two children, living in the social rented sector, support of up to £1,800 per month.
HMRC will use existing information to check potential eligibility and invite applications via “a simple online form” once the scheme is operational. While there is a gov.uk webpage headed “Claim a grant through the coronavirus (COVID-19) Self-employment Income Support Scheme”, this states “You cannot apply for this scheme yet. HMRC will contact you if you are eligible for the scheme and invite you to apply online”. What the Government is trying to avoid is HMRC being swamped with queries and suffering the same fate as the DWP’s Universal Credit system (where some callers were told they were at position 90,000 in the queue). In other words “don’t call us…we’ll call you”.
Individuals who started self-employment after 5 April 2019 and therefore did not file a 2019 return detailing self-employed earnings will not benefit from the scheme and will have to rely on Universal Credit.
Similarly, individuals who are sometimes labelled self-employed by the media but who operate through personal service companies of which they are directors are not covered by the scheme. The Treasury press release spells out this point, which was not mentioned by the Chancellor. It says such individuals “will be covered for their salary [our emphasis] by the Coronavirus Job Retention Scheme if they are operating PAYE schemes”. No dividends then…
One interesting side comment made by the Chancellor was that “…in devising this scheme … it is now much harder to justify the inconsistent contributions between people of different employment statuses”. The implication is that National Insurance contributions will have to rise for the self-employed, an idea Mr Sunak did not deny in press questioning after his statement.
Updated government Covid-19 guidance on business support is here and for employees is here.
This package is better than many had been expected, but the delayed starting date for payments will still leave many of the self-employed having to claim Universal Credit in the short term.
As with all relatively short statements of this nature, it is likely (inevitable) that there will be some questions and a need for greater detail. That will hopefully be forthcoming ahead of June.
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