Support for newly self-employed - better late than never, but review your entitlement carefully warns CIOT
The Chartered Institute of Taxation has welcomed today’s announcement by the Chancellor that those who commenced self-employment in the 2019-20 tax year can benefit from the fourth and fifth Self-Employment Income Support Scheme grants, but alerts potential claimants to new rules and HMRC compliance activity in relation to claims. The Institute also regrets that the government hasn’t gone further to fill some of the other gaps in support.
CIOT Head of Technical, Richard Wild, said:
“The Chancellor is right to extend this scheme to those who became self-employed in the year before the pandemic. Excluding them was always rather rough justice. It’s a case of better late than never.”
Today’s announcement confirms that newly self-employed individuals, who commenced self-employment in 2019-20, who filed their self-assessment return by midnight on 2 March 2021, and meet the other qualifying criteria for the scheme, will be able to claim the fourth and fifth grants. It will not be possible to make a retrospective claim for the first, second or third grants.
Grants for those already in self-employment will now be based on the four years to 2019-20, which could impact on the quantum of, or eligibility for, the fourth and fifth grants.
Richard Wild continued:
“Potential claimants should be aware of two important factors within today’s announcements.
“First, the fifth grant will vary depending upon the extent that a reduction in turnover can be demonstrated, and the extent of that reduction. There is no detail yet regarding the period over which turnover will be evaluated, and it would be advisable for business owners to start recording their weekly or monthly turnover if they aren’t already doing so.
“Secondly, HMRC announced new measures enabling HMRC to recover grants where an individual was entitled to the grant at the time of claim, but subsequently ceases to be entitled to all or part of it.1 This seems to be part of a £100m investment in HMRC to combat fraud within the COVID-19 support packages. Again there is scant detail at the moment, but it remains vital that business owners retain evidence which demonstrates that they made a valid grant claim.”
Notwithstanding significant pressure from a variety of sources, the Chancellor did not extend SEISS or CJRS to fill the remaining gaps in the schemes.
Richard Wild continued:
“It is disappointing that the Chancellor has not felt it appropriate to fill some of the other gaps in support,2 which may leave many individuals with no regular income for well over a year.
“As far back as last spring the government was presented with suggestions as to how these gaps could be filled. Indeed, we have offered to work alongside HMRC and HMT to review the proposals objectively, and assist with their further development with a view to implementation at the earliest opportunity.3
“But the government seems to have concluded that the risk of fraud, together with the necessary resourcing requirements to provide more targeted grants, outweighs the need to provide comparable support across the board.”
2. Those excluded from support under the CJRS or SEISS include:
- Self-employed individuals with trading profits over £50,000
- Self-employed individuals whose self-employed income was less than half their total income
- Limited Company Directors paying themselves a combination of salary and dividends (though a CJRS claim may have been possible)
- Freelancers and those on short terms contracts
- Those with tax return ‘anomalies’, such as completing the wrong pages or the return, or submitting the 2018-19 return after 23 April 2020.
3. See the joint CIOT, ICAEW and ACCA letter to the Treasury Committee which can be found here.
Further information on the fourth and fifth grants can be found in the HMRC policy paper Self-Employment Income Support Scheme fourth grant - GOV.UK (www.gov.uk)