How freelancers can use the Self-Employment Income Support Scheme (SEISS)

As many freelancers now know, on March 26th 2020 the government announced the Self-Employment Income Support Scheme to provide 95% of self-employed people (or members of partnerships), the opportunity to claim a taxable grant if they have been negatively affected by the coronavirus pandemic.

Less well-known to freelancers are the key features of the SEISS; the guidance that goes with it; what the grants consist of and how the process to secure the grants works. So exclusively for FreelanceUK, I will cover all these aspects, writes Claire Brook, employment law partner at Aaron & Partners.

Change is a firm prospect

Before I dive in, please note that the help offered here is based on official guidelines about the SEISS issued on the 26th, and those guidelines may be subject to change. And change is more than feasible, given the growing concern about the freelance sole traders who ‘fall through the cracks’ – the 5% of the UK self-employed who aren’t covered by the SEISS.

The scheme’s key features

There are a number of restrictions on the SEISS regarding eligibility (see next section).
The grant is worth 80% of trading profits up to a maximum of £2,500 a month for three months which may be extended “if needed” (what the government means by “if needed” is yet to be defined).
Assuming you are able to do so, you can continue to trade as a freelancer while in receipt of the grant (unlike users of the Coronavirus Job Retention Scheme, which requires employees to be placed on ‘furlough’ and for them to be abide by a ‘no work’ rule).
Freelancers and self-employed people who qualify will face a delay as the grant will not be paid until June 2020.
The current guidance states that the grant will be paid in one lump sum to cover the three-month period (March – May).

SEISS guidance: in a nutshell

Self-employed individuals should not make initial enquiries about whether they qualify for SEISS with HMRC. In fact, you cannot apply yet or yourself. Rather, HMRC will inform you if you qualify for the scheme.

Secondly, there are a number of eligibility criteria to qualify for the grant.

You must have:

Submitted your income tax self-assessment tax return for the tax year 2018/19. N.B. you must do this by April 23rd 2020.
Traded in the tax year 2019/20
Continue to trade (or would continue to trade if it were not for COVID-19)
Intend to continue to trade in the tax year 2020-21
Have lost trading profits

In addition, to qualify for the SEISS, your self-employed trading profits must be less than £50,000 a year.

Furthermore, most of your income must come from self-employment – so one of the following statements must be true /applicable to you:

Trading profits/partnership trading profits in 2018/19 of less than £50,000 and these profits constitute more than half of your total taxable income; or
Average trading profits in 2016/17, 2017/18 and 2018/19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period.

If you started trading between 2016-2019, HMRC will only use those years for which you filed a self-assessment tax return.

What is the SEISS grant?

If HMRC confirms that you qualify for the grant, you will need to then apply for it.

On confirmation, you will receive a taxable grant which will be 80% of your average profits from the tax years (where applicable):

2016-2017
2017-2018
2018-2019

The average referred to will be calculated by dividing the total trading income profit from the above three tax years (where applicable) by three (where applicable). This will then be used to calculate the monthly amount.

The total payable will be capped at £2,500 per month for 3 months (to cover the period March – May 2020).
The grant will be paid in one instalment (it is anticipated this will be paid in June 2020), directly into your bank account.

What is the SEISS process?

Broadly, for mot self-employed freelancers, the process will be six-fold.

HMRC will contact you if you are eligible for the scheme.

You will then be invited to apply for the grant online. No further information on the time limit or application process is available – at this stage.

Once HMRC has received your application claim for a grant, HMRC will contact you to tell you how much you will get and the payment details.

If you claim tax credits, you will need to include the grant as income within your claim.

The guidance specifically requests that individuals do not contact HMRC to enquire further about this scheme at this time to avoid further delay to urgent work being undertaken to introduce the scheme.

The guidance also includes a reminder that you will only be able to access this scheme through the gov.uk website and that if you receive a call, text or email claiming to be from HMRC requesting your personal details and/or asking you to click on a link, then ignore it because the caller/sender is bogus and is trying to scam you.

Finally, what if you’re in other 5% -- those who aren’t eligible for the SEISS?

Given the strict criteria, there will be winners and losers within this scheme which may appear unfair.

If a sole income household has a self-employed individual whose trading profit was £50,000, that individual will not qualify. However compare this with a dual-income household, both members are self-employed, with profits of £49,999 each, who will both qualify.

Furthermore, those who set up their own new business since April 2019 and those individuals who have an equal mix of part time work and freelance/self-employed work, (not majority self- employment) will not qualify.

Meanwhile, those who are not eligible for the grant may still be able to access other government support including benefits and business support grants.