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Changes to guidance on the self-employment grant scheme

15/04/2020

On Tuesday 14 April the Government published updated guidance on the Coronavirus Self-Employment Income Support Scheme aimed to provide financial support to self-employed people whose business has been adversely affected by the Coronavirus outbreak. 

Our summary of the original guidance is set out on our website via the following link:

https://www.whittinghamriddell.co.uk/news/help-self-employed-during-coronavirus-outbreak

This note focuses on the key changes and updates that have been made to the original guidance. The current expectation is that HMRC will contact those taxpayers they believe are eligible for the scheme in mid-May while payments will be made in early June.

 

Undertaking work

Unlike the Job Retention Scheme for employees (under which furloughed employees are unable to continue to work for their original employer) the guidance clearly states that the self-employed can continue to work in their existing business while claiming under the scheme. It is also acceptable for the claimant to take on another employment or undertake voluntary work (which is broadly in line with the approach under the Job Retention Scheme). 

It is also made clear that where the self-employed person also has worked through another employer (including a directorship) there is no bar to the employer also seeking support under the Job Retention Scheme while the self-employed person is claiming under this scheme. 

 

Interaction with Universal Credit

The new guidance provides more detail on how the scheme will interact with the Universal Credit system. It makes it clear that self-employed people can make a claim for Universal Credit while they wait for the grant, but any grant received will be treated as part of your self-employment income and may affect the amount of Universal Credit you get. Any Universal Credit claims for earlier periods will not be affected.

 

Who can claim?

The eligibility criteria previously published remain broadly the same in the new guidance. There is however a clear statement that the self-employed person will need to confirm to HMRC that their business has been adversely affected by the Coronavirus. The guidance goes on to confirm that “HMRC will as usual use a risk-based approach to compliance.”

WR comment – while HMRC are likely to be resource-constrained in the short to medium term this is a clear statement that they will review at least some claims under the scheme to ensure that the business concerned has genuinely been adversely affected by the current outbreak.  If grants are received under the scheme it will be critical therefore to be able to demonstrate to HMRC that there has been a reduction in activity because of the current outbreak. Ensuring your accounting systems are robust and up to date will be a key factor in this.

 

Late filed and amended returns

While this is not a new requirement there is a restatement that a business will only qualify under the scheme if its 2018/19 self-assessment tax return has been filed by 23 April 2020. Any business filing its return after that date will not be able to claim. There is also a new statement that any amendments to submitted returns made after 26 March will not be taken into account when working out eligibility for or the amount of any grants

WR comment -  the 23 April is a hard deadline and it clear there will be no wriggle room for returns filed after this date.  If returns have been filed using estimated or provisional figures it is now too late to amend them. However, if returns do require amendment for final figures etc. we would strongly recommend these are still made before 23 April. 

In terms of HMRC compliance activity following issue of the grant then one easy area to review would be amended returns which, if filed before 26 March, would have reduced the amount of any grant available (say because they reflect lower profits than the provisional return). While it is too late to change the actual calculation now this would at least help to mitigate any penalty position which may be imposed where grant claims are reviewed and found to have been excessive.

 

Farmer’s Averaging

The new guidance confirms that for self-employed farmer claiming farmers’ averaging relief HMRC will use the amount of profit before the impact of the averaging claims to work out:

  • If the farmer can claim the grant, and
  • How much of that grant they will receive

 

How to claim

It is now clear that the payment of the grant will not be automatic as might have been implied from the previous guidance. Instead, HMRC will use the information they hold to contact those self-employed who they believe to be eligible and invite them to claim using an on-line service (with an alternative service available for those unable to claim online).  Further guidance will be provided in due course as to what steps the self-employed can take to make the process easier.

There is a clear statement that the self-employed should not contact the government in the meantime regarding the scheme as this will “delay the urgent work being undertaken to introduce the scheme.”  There is also a warning about the potential to fraudsters to purporting to contact the self-employed about the scheme. 

This warning is reproduced below:

You will only be able to claim using the GOV.UK online service. If you receive texts, calls or emails claiming to be from HMRC, offering financial help or a tax refund and asking you to click on a link or to give personal information, it is a scam.

WR Comment – the explicit statement requiring a claim to be made is a small but important change.  Requiring a claim to be made will make it far more straightforward for HMRC to subsequently review any given application under the scheme as, although based on HMRC information, the onus is now being placed on the taxpayer to confirm they are eligible for a grant.  As above, therefore, any claim will need to be robust and the claimant will need to be able to demonstrate they have taken reasonable care in determining whether they are eligible to claim.

Given the criteria for the scheme, it would be hoped that the vast majority of those eligible will be identified by HMRC  and contacted by them. However no system is ever going to be perfect and some may be missed – we assume there will be a mechanism for those who think they should be eligible but have not been contacted to get in touch with HMRC although there is no explicit statement to this effect at the moment. 

We will advise through a further alert once we have more detail of likely timings etc. of the process and what steps HMRC recommends to ease the process.

 

The full updated guidance can be found here:

https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme?utm_source=cc80dcbf-d5cb-4bb8-b56f-7209f8f0ddda&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

 

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