Further clarification issued on eligibility for second round of Self-Employment Income Support Scheme

Further clarification issued on eligibility for second round of Self-Employment Income Support Scheme

HM Revenue & Customs (HMRC) has issued further details of eligibility for the second round of the Self-Employment Income Support Scheme (SEISS), which will provide taxable grants to self-employed individuals.

The grants will be 70 per cent of average monthly trading profits, capped at £6,570 and paid in a single instalment.

HMRC has now clarified that in order to qualify for the second grant, a self-employed individual must confirm that their trading has been adversely affected by the coronavirus outbreak on or after 14 July 2020.

This means it is possible for a self-employed individual not to have qualified for the first round of funding by virtue of not having been adversely affected, but to qualify for the second round because they have subsequently been adversely affected. This might be in circumstances where they become unwell with Coronavirus in July and are then unable to trade as a consequence.

However, this also means that some self-employed individuals who were able to confirm that their business was adversely affected for the first round of funding may find that this is no longer the case and so do not qualify for the second round of funding.

The criteria to qualify for the scheme otherwise remain unchanged and apply to self-employed individuals and members of partnerships:

  • you traded in the tax year 2018 to 2019 and submitted your Self Assessment tax return on or before 23 April 2020 for that year
  • you traded in the tax year 2019 to 2020
  • you intend to continue to trade in the tax year 2020 to 2021
  • you carry on a trade which has been adversely affected by coronavirus

Applications for the current round of funding, worth 80 per cent of monthly trading profits and capped at £7,500 in total remain open here until 13 July 2020.

Meanwhile, details of the second round of funding will be published at a later date.

HM Revenue & Customs publishes detailed guidance on calculating furlough claims from July onwards

HM Revenue & Customs publishes detailed guidance on calculating furlough claims from July onwards

HM Revenue & Customs has published detailed guidance on the operation of the Coronavirus Job Retention Scheme (CJRS) from 1 July 2020 onwards, including examples of how to calculate claims for the new flexible furlough option.

The CJRS currently provides grants to employers covering 80 per cent of the usual wages of furloughed employees – who remain on the payroll but must not carry out any work – up to a cap of £2,500 a month as well as employer National Insurance Contributions (NICS) and pension contributions.

However, from 1 July employers will be able to make new flexible furlough agreements with employees that enable them to return to work on a part-time basis, while the employer will still be able to claim a CJRS grant for the hours not worked. Only employees who have been furloughed for a full three-week period up to this point will still be eligible to be furloughed.

From 1 August, CJRS grants will cease to cover the costs of employer NICs and pension contributions in respect of furlough pay.

Then, in September, the value of CJRS grants will reduce to 70 per cent of furloughed employees’ usual wages, with employers required to top-up the remaining 10 per cent so that furloughed employees still receive 80 per cent of their usual wages, capped at £2,500 a month.

Finally, October will see the value of CJRS grants fall to 60 per cent of furloughed employees’ usual wages, with employers having to contribute the remaining 20 per cent.

Employers are responsible for calculating the correct amounts to claim from the scheme, with HMRC expected to take a hard line on errors that are not corrected quickly.

The new guidance walks employers through the various calculations needed to work out the amounts they need to claim in respect of furloughed employees in different circumstances over the remaining months of the scheme.

This includes information about:

  • Calculating flexible furlough claims;
  • calculating employer NICs and pension contributions on hours worked and furlough hours;
  • dealing with considerations around the National Living Wage (NLW) and National Minimum Wage (NMW);
  • employees returning from parental leave;
  • employees returning from Statutory Sick Pay (SSP) and
  • the reduction in the value of the main grant in September and October.

To help employers deal with the potentially wide range of permutations, HMRC has published example calculations dealing with different situations.

Where employers find that they have overclaimed, they can report this as part of their next claim, which will be adjusted down to take the previous overpayment into account. HMRC says it is working on a mechanism to deal with circumstances where an employer has overclaimed but does not wish to make further claims. In the event of underclaims, employers should contact HMRC directly.

As part of the changes to the scheme, HMRC has also confirmed that claims for periods ending up to 30 June must be made by 31 July, while claims periods from 1 July onwards must begin and end in the same calendar month and last at least seven days. If an employee is furloughed in June and continues to be furloughed for their full hours in July, separate claims will need to be submitted, even if this differs from an employer’s own pay periods.

Self-Employment Income Support Scheme (SEISS) extended

Self-Employment Income Support Scheme (SEISS) extended

The Chancellor has confirmed the extension of the Self-Employment Income Support Scheme (SEISS), with the announcement of a second and final grant to support the income of self-employed individuals during the Coronavirus outbreak.

The first and current round of grants under the scheme allows self-employed individuals to claim a taxable grant worth 80 per cent of three months’ average monthly trading profits, capped at a total of £7,500 and paid in a single instalment. This round will close on 13 July 2020.

Claims for the second grant will be available in August 2020. The amount paid is to be reduced to 70 per cent of three months’ average trading profits and will be capped at £6,570 in total. As per the first round, the grant will be paid in a single instalment.

Individuals do not need to have claimed the first grant to be able to claim the second.

Unlike the Coronavirus Job Retention Scheme (CJRS) for employees, self-employed individuals may continue working, begin a new trade or start a new employment whilst in receipt of a grant.

The full criteria for qualification for the scheme remain unchanged. Applicants must:

  • Be self-employed or a partner in a partnership;
  • Have lost trading/partnership trading profits due to COVID-19;
  • Filed a tax return for 2018-19, by March 2020, that includes either self-employed or trading partnership profits;
  • Have traded in 2019-20; be currently trading at the point of application (or would be except for COVID-19) and intend to continue to trade in the tax year 2020 to 2021; and
  • Had trading profits of less than £50,000, that makes up more than half of their total taxable income in 2018/19

The scheme is not available to people working through their own limited companies.

Further details about how to apply for the second and final grant will be announced on 12 June 2020.

Chancellor unveils changes to furlough scheme

Chancellor unveils changes to furlough scheme

The Chancellor, Rishi Sunak, has announced a series of changes to the Coronavirus Job Retention Scheme (CJRS) from  1st July 2020 that will see furloughed employees able to return to work part-time, but with the value of Government support reducing gradually.

The scheme will close to new entrants from 1 July 2020, however as there is a three week minimum furlough requirement, then it means that any new period of furlough must have started by the 10 June to ensure that employees will then qualify by 1 July 2020. The changes have effectively put a limit to the number of staff that can be included on a claim and this scheme will close at the end of October 2020.

A system of ‘flexible furloughing’ will come into effect from 1 July 2020 , allowing employers to bring back furloughed employees to work on a part time basis. The employer would be required to pay for the cost of the time staff are working and the grant would be for the time furloughed..

Employers will need to reach new flexible furlough agreements with any furloughed employees brought back on a part-time basis.

From 1 August, CJRS grants will cease to cover Employer NICs and pension contributions, with this cost passing to employers. The grant will continue to cover 80 per cent of furloughed employee’s usual wages, up to a cap of £2,500 a month.

However, from 1 September, the value of the grant will fall to 70 per cent of a furloughed employee’s usual wages, capped at £2,187.50 a month. Employers will be expected to contribute the remaining 10 per cent plus NICs and pension contributions to reach a combined total payment to the employee of 80 per cent of their usual wages, up to a cap of £2,500 a month.

October will see the value of the Government contribution fall again to 60 per cent, capped at £1,875 a month, with employers expected to contribute 20 per cent of a furloughed employee’s usual wages plus NICs and pension contributions to reach the total of 80 per cent, capped at £2,500 a month.

Full details of how the scheme will operate from this point are expected to be announced on 12 June 2020.

The announcement comes days after the Chancellor issued a new directive to HMRC, updating the record-keeping requirements of the scheme.

Under these requirements, the written agreement that the furloughed employee will, under the current terms of the scheme, cease all work must be retained until 30 June 2025 and:

  • State the main terms and conditions;
  • Be incorporated either expressly or implicitly in the contract of employment; and
  • Be either made or confirmed in writing.

It is widely expected that HMRC will audit use of the scheme retrospectively over the coming months and years, with potentially hefty penalties for those found to have acted improperly.