Coronavirus – Self-Employed Support plus Job Retention Details
On 26th March, the Chancellor announced how the government plans to support self-employed individuals during this outbreak. For full details please see here.
There will be a direct grant of 80% of profits, up to £2,500 per month for at least three months. 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 your income in these periods must come from self-employment.
HMRC will use existing information to contact eligible tax-payers with a simple form, thought to confirm that you are still trading up to this period, that your business was affected by the coronavirus and similar fraud minimising questions. It is likely that this will not be done until June, but the grant from 1 March to 31 May will be paid in a single lump sum at this time.
Before grants are payable, self-employed people are advised to access other support such as local authority grants, business continuity loans (where they have a business bank account) and universal credit.
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 and should also consider the local authority grants, loans and universal credit. We are awaiting clarification on whether a single director-employee can furlough themselves. Individuals should also consider contacting mortgage or loan providers to request a payment break.
THE CORONAVIRUS JOB RETENTION SCHEME – FURLOUGHING WORKERS
More details of the scheme were also released last night here. It has provided answers to a number of questions which employers have been asking:
The minimum length of furlough period is 3 weeks.
While on furlough, the employee’s wage will be subject to the usual income tax and other deductions and should be processed through the payroll.
A furloughed worker can take part in volunteer work or training, as long as it does not provide services to or generate revenues for, or on behalf of the business.
The grant, to cover the lower of 80% of an employee’s regular wage or £2,500 per month, on top of this it will also cover the associated Employer National Insurance contribution and minimum automatic enrolment pension contributions on that subsidised wage (but not on any top up pay).
Fees, commission and bonuses should not be included in the calculation of wages, but if your employee has variable pay (e.g. zero hours contract) you can claim for the higher of the same month’s earnings in the previous year, or average monthly earnings from the 2019/20 tax year.
If you wish to provide your employee’s with details of the scheme from their perspective, these are available here.