The government has unveiled a range of support measures for self-employed construction workers during the coronavirus crisis. Karen Davidson explains.
Self Employed Income Support Scheme (SEISS)
The scheme will provide support to self-employed taxpayers who receive most of their income from self-employment and who have been adversely affected by COVID-19. It will provide a taxable grant equal to 80% of the average monthly profits over the last three years up to a cap of £2,500 per month. It will be available for an initial three months, likely starting in June 2020, but may be extended. The taxpayer must continue to do business.
The scheme will be targeted at those taxpayers with trading profits less than £50,000 in 2018-19 or an average profit of less than £50,000 for 2016-17, 2017-18 and 2018-19. It is not available to those individuals who were not trading in the 2018-19 period.
The SEISS is expected to be available from June. HMRC will identify taxpayers who are eligible and contact them directly with guidance on how to make an application.
In the meantime, self-employed construction workers should consider seeking assistance under the Coronavirus Business Interruption Loan Scheme (see below) or consider whether a claim should be made for Universal Credit. It is understood that the Department for Work and Pensions would be able to provide advance payments of Universal Credit while their applications were being processed.
Taxpayers who have not yet submitted their 2018/19 income tax self-assessment return for the year to 5 April 2019, which was due on 31 January 2020, will have four weeks from 26 March 2020 to submit it in order to access the scheme.
The SEISS will not be available to those operating through personal service companies, although support may be available to your personal service company under the Coronavirus Job Retention Scheme in relation to the amounts which would otherwise have been paid by your personal service company as salary (but not dividends).
The proposed changes to IR35 in the private sector will be delayed until April 2021.
Coronavirus Business Interruption Loan Scheme
UK-based businesses with a turnover of no more than £45m per year are eligible for the Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank. These loans are up to £5m and are interest free for the first twelve months. The scheme will launch in the week commencing 23 March 2020 and will be available through all major banks – further details are on the British Business Bank website.
You should contact your bank or finance provider (not British Business Bank) and discuss business plans and other requirements.
VAT payments deferred for three months
All VAT registered businesses benefit from VAT payments being deferred for three months starting from 20 March 2020 until 30 June 2020, though VAT returns still have to be submitted on time. Refunds and repayments will be processed by HMRC as usual.
There is no need to apply for this, but if you pay by direct debit, cancel your direct debit or the VAT will still be collected. Cancel direct debits as soon as possible if you have a 31 March return date but do remember to reinstate for VAT payments after 1 July 2020.
You have until the end of the 2020-21 financial year to pay the VAT deferred.
If you have a VAT payment that was due on or before 19 March 2020 and you have not made payment, this payment will still be due and you should pay this to avoid surcharges.
Income tax self-assessment payments deferred
Payments due on 31 July 2020 may be deferred until 31 January 2021. This means that if you are due to pay a second instalment of income tax on 31 July 2020, it can be deferred. You do not have to be self-employed to benefit from the deferral.
There is no need to apply, but if you have a direct debit in place, cancel it or payment may be taken automatically.
Deferral is optional, and you can pay the income tax due on 31 July 2020.
Self-assessment returns still require to be submitted by the normal filing dates. You may wish to consider filing early to crystallise any refunds due if relevant.
HMRC may negotiate time to pay arrangements for tax and have set up a COVID-19 specific hotline, 0800 0159 559. The line can be very busy, but persevere. It is useful to have cash flow forecasts and budgets ready to hand and worth ensuring that tax filings are up to date.
If you have filed an income tax return and the amount overdue is less than £10,000 you may be able to arrange to pay in instalments through your online self-assessment account.
Business (non-domestic) Rates
Depending on the type of business and its location, specific COVID-19 related business rates relief may be available.
Karen Davidson is a tax partner at Brodies LLP.