Now that new announcements have dried up (for a little at least), we’ve put together a round-up of the help available for sole traders and partners in partnerships (you can see our equivalent for limited company owners – the same in many respects – here).
Self-Employment Income Support Scheme
We’ve emailed clients about this scheme in detail already, but in short anyone who was a sole trader or partner in a partnership in 2018-19, got most of their income that way, and had profits of less than £50,000 will be eligible for a grant. That’s as long as they’re still a sole trader or partner, and as long as their business has been affected by coronavirus. The grant will be based on 80% of average profits, capped at £2,500 a month, initially paid for three months. It'll be taxable, just as the profit would have been.
Even if you do qualify, HMRC's aim is to start to get money to people at the end of June, and the process will involve *them* contacting *you* on the basis of the information they hold about your income, not the other way round. So there's a cashflow gap to bridge, and there's nothing you can do to speed the process along.
VAT and Tax deferrals
The vast majority of our clients are great at saving for VAT and personal tax as they go, and the tax payment deferral measures should mean that you can safely dip into your tax savings for a while if you need to. If you want to do that, then:
- VAT payments for the quarters ending in February, March or April can be delayed until early 2021 (though if you’ve a direct debit in place with HMRC for your VAT it’s important that you cancel it – they’ll take the VAT on time otherwise).
- You can delay your July 2020 personal self-assessment payment until January 2021.
Deferring PAYE payments if you have employees
The VAT and self-assessment deferments above are automatic and you don’t have to apply for them. There aren’t any formal general agreements that PAYE can be delayed. But HMRC have set up a special helpline for businesses that need to discuss deferring other payments.
It might take a long time to get through, although a client called them one day last week at 8.15am and she was through within five minutes, so aiming for the start or end of the day is probably sensible. It sounds as if generally HMRC are very open to agreeing more generous payment terms.
Grants
- Rates-related grants - If you formally rent premises subject to Business Rates, you should be eligible for a grant if either (a) you currently benefit from Small Business Rate Relief (remembering that you will qualify even if SBRR means you pay no business rates all), or (b) you’re in the retail, hospitality, nursery or leisure sectors.
- Job Retention Scheme - If you employ staff but don’t currently have work for them, you can use the JRS to claim a grant to cover 80% of their wages.
- Statutory Sick Pay – some years ago HMRC stopped reimbursing employers for SSP they paid to staff – but they will now reimburse it if it’s coronavirus-related. Not right away, though, there’s no mechanism for doing so right now, so you’ll need to fund the (modest) cashflow to begin with.
- A self-employed person can’t get SSP, but if you’re unable to work because of coronavirus, or you’re having to self-isolate and cannot work from home, you may be able to claim ESA, albeit it’s not a lot of money and has similar conditions as Universal Credit.
Other things to consider
- Check your business insurance policy, in case you have Business Interruption cover.
- Speak to your landlord (for both your home if you rent, and your business premises) to see if you can delay payments, get a discount, or a rent-free period. Some landlords are open to this.
- Consider talking to your lender to arrange a mortgage payment holiday.
- Talk to your bank to see if you can arrange a business or personal overdraft facility.
- If a loan would be more appropriate, consider asking your bank about the government-backed Business Interruption Loan Scheme.
- If you want to take another job during this period, that’s absolutely fine – there’s nothing to stop you from having a job as well as being self-employed.
- Universal Credit may be available to you – you’ll need to check online to see whether you meet the criteria, but it’s potentially worth a look.
- Some clients are finding opportunities to use their skills to provide different services, or to deliver their services in new ways, or to find new customers to target. It could be worth asking yourself whether you can adapt your business model to find opportunities in the current circumstances – we’re seeing a number of clients doing this successfully.
- Remember also that it’s fine to dip into your savings. While it’s natural to want to preserve them, one of the great benefits of having savings is to help you survive an unexpected loss of income. With interest rates on cash savings being low, it’s unlikely to cost much in terms of lost interest, and you can look to rebuild savings once things return to normal. You’ll need to check the rules for withdrawals from your particular account, but even some ISAs now allow you to withdraw cash and replace it later in the same tax year.
Hopefully there are some helpful pointers here, and we’ll of course let you know as and when any new measures are announced.
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