CORONAVIRUS: Support for the Self-Employed

by TLS Council Member, Alastair Logan OBE

HMRC have issued guidance on how the trading income and profits will be calculated 

  • Trading profits will be calculated by deducting allowable business expenses from the trading income reported on the tax returns.
  • Deductible expenses include purchase of stock and raw materials, office and premise costs, travel, clothing, staff (including subcontractors), insurance, marketing and training courses.
  • In addition, capital allowances, flat rate expenses, qualifying care relief and business expenses deducted through the trading allowance will be deducted.
  • No deduction will be made for losses carried forward from previous years or personal allowance.
  • Where more than one trade is undertaken, the profits and losses of all trades will be combined.
  • Average profit will be calculated by adding together the profits for each year and dividing by the number of years.

To be eligible, trading profits must be no more than £50,000 and more than half of total income for either: 

  • the tax year 2018 to 2019; or
  • the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019

Total income is the total of: 

  • income from earnings
  • trading profits
  • property income
  • dividends
  • savings income
  • pension income
  • miscellaneous income (including social security income)

Additional guidance and examples can be found at:

HMRC have also issued further guidance for specific situation:

  • If you’re self-employed and have received payment for work or services in the form of a loan or other form of credit covered by the loan charge, you may be able to claim the grant. The amount of the grant will be based on the average of the tax years 2016-17 and 2017-18 (or 2017-18 if you were not self-employed in the tax year 2016-17). The tax return for 2018-19 does not need to be submitted by 23 April 2020 but should be filed by 30 September 2020.
  • For farmers claiming farmers’ averaging relief, profit before the impact of the averaging claims will be used.
  • If Self-Assessment tax returns have not been submitted for all 3 years, average will be based on the continuous period of self-employment. Therefore, if there was no return for 2017-18, the claim will be based solely on 2018-19 even if there was a return for 2016-17.

Re-cap, the previous measures introduced were as follows:

  • A Statutory Sick Pay relief package for SMEs
  • A 12-month business rates holiday for all retail, hospitality and leisure businesses in England
  • Small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
  • Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
  • The Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank
  • A new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge Coronavirus disruption to their cash flows through loans
  • The HMRC Time To Pay Scheme
  • Coronavirus Job Retention Scheme
  • Deferring VAT and Income Tax payment
  • Protection from eviction
  • ‘Empty’ business rates relief
  • Self-employment Income Support Scheme
  • Employee expenses
  • Insolvency rules
  • Workplace pensions
  • Employee expenses – Cars
  • Coronavirus Large Business Interruption Loan Scheme

Friday, 17th April, 2020