The “bounce back loan” initiative is a 100% government guaranteed bank loan that you can apply for between £2,000 and up to 25% of turnover or £50,000 maximum. Your turnover figure is fees before expenses which is found in box 15 on page SEF1 on your tax return or the FSE15 figure on your tax summary. If you have more than one trade and so more than one set of self-employment pages, don’t forget to add them together! A key difference to the previously announced business interruption loans is that you don’t need a separate business account and so this loan is now accessible for all sole traders! You will need the date that you started trading from, so have that to hand. It is repayable over 6 years at 2.5% interest and the government pays the interest and fees during the first 12 months. The loan can be repaid early without penalty. Banks offering the loans are found here: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/current-accredited-lenders-and-partners/
Government guidance: https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan
We have at last been given guidance on how to apply for the SEISS government grant. The bad news is that accountants are not able to apply on clients’ behalf.
The first step is to check if you are eligible for the grant: https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference
- First enter your Unique Taxpayer Reference (Schedule D number)
- Next enter your National Insurance number
- HMRC will then tell you if you are eligible to make a claim
- If yes, you will be invited to apply on a specified date between 13 and 18 May
- Make a diary note of the invitation!
- You will need a Government Gateway user ID and password to apply so log in now if you have one or create one via a link then offered. With your Gateway ID and password you can provide HMRC with your contact details including email address and UK mobile number (optional).
- Check your diary note of application date and time.
- Follow with a deep breathing exercise and/or strong cuppa!
The next step is to be ready at the appointed time
- Log in with your Gateway ID and password
- Have your bank details to hand
- HMRC will have calculated the amount to which you are entitled
- HMRC will verify your claim and pay the amount directly into your bank account within six working days.
These grants are recognised as income when claiming tax credits and Universal Credit.
We hope that you, family and friends are safe and well at this devastating time. Theatre, opera, comedy, TV and film have suffered closures, cancellations and postponements. Let’s hope for a full recovery and a cultural resurgence after the tough times have passed.
On 26 March the Chancellor finally made an announcement of how the self-employed would be helped during this Covid-19 outbreak in addition to the postponement of the second 2019/20 payment on account originally due by 31 July 2020 now payable 31 January 2021.
A taxable grant will be available if your profit from self-employment for 2018/19 or your average profit from self-employment from the last three years, is below £50,000 provided that your profit from self-employment is more than 50% of your taxable income. This recognises the fluctuating profits of performers! The amount will be 80% of the relevant tax years’ taxable profits per month for three months with a monthly cap of £2,500. This will be paid as one lump sum, by June. The government will contact eligible taxpayers in due course and payments will be made directly into your account. Do not be duped by scammers!
You will find your self-employment profit figure on your tax calculations. If you started your self-employment more recently, the average of the last two will be used or if 2018/19 is the only one, then that will be used. Unfortunately, if you started your self-employment in the current tax year, then you will be looking at Universal Credit.
The grant is taxable, so will need to be declared in your 2020/21 tax return.
If you are late filing your 2018/19 tax return, you have till 23 April to submit to avoid missing out altogether. Don’t delay if that applies to you!
Businesses with a dedicated business bank account can draw on a Business Interruption Loan from a bank if needed. Any additional support to directors of limited companies awaits clarification.
If you are VAT registered, payments of VAT due between 20 March and 30 June 2020 can be deferred up to 31 March 2021. If you have a direct debit set up to pay VAT and you want to make use of the payment holiday, you will need to cancel the direct debit (don’t leave it too close to the payment date though!) and then re-set it later to recommence the direct debits.
If you need to talk to HMRC about tax payments, HMRC has set up a coronavirus helpline: 0800 024 1222.
Below are some useful links:
Self-employment support scheme: https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme
Delay VAT payments: https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19
Universal Credit: https://www.gov.uk/universal-credit
Corona virus HMRC helpline: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/coronavirus-covid-19-helpline
There’s a lot to think about when you start a family and the rules surrounding maternity leave and child benefit are not particularly easy to follow so we’ve condensed some of the information for you. Unfortunately, paternity leave and shared parental leave is not currently available to self-employed parents so here’s how to make the most of what’s on offer.
Claiming Maternity Allowance (MA):
The first step is to get your MAT B1 form from your midwife. This won’t be given to you more than 20 weeks before the week when your baby is expected.
Secondly, have your latest accounts prepared and tax return filed at HMRC. Although the Class 2 NI isn’t due until 31st January following the tax year, it’s worth paying that portion of your tax bill early because when you apply for MA, your Class 2 NI contributions will be checked. If needed, you can contact HMRC on the national insurance enquiry line (0300 200 3500) and they will send you a letter telling you how to make early payment.
Next, you’ll need to fill in the back of your MAT B1 form and fill in form MA1:
It’s a whopper of a form but you’ll find not all of it is relevant to you. It then needs posting with the MAT B1 form to the address on the back page.
Hopefully you will then soon receive a text from the DWP stating “Your Maternity Allowance claim has been awarded” and a confirmatory letter.
Claiming Child Benefit
Don’t forget to claim Child Benefit after your child is born! If you or your partner earn between £50,000 and £60,000+ you may have to repay some/all of it via the High Income Child Benefit Charge (HICBC) in your/their tax return. If claiming Child Benefit, however, and your income and/or your partner’s subsequently dips, you don’t risk missing out as a claim can only be backdated by three months. In any case, do make sure you at least register so that you automatically getting qualifying years for your National Insurance record for state pension purposes, and to ensure that your child gets a NI number at 16.
You’ll need to fill in Form CH2 to claim: https://www.gov.uk/government/publications/child-benefit-claim-form-ch2.
This is the season of Late Filing Penalties. The £100 penalty is for missing the 31 January deadline for filing the 2018 Self-Assessment Tax Returns and HMRC has announced they have now been issued.
They are automatic penalties, but taxpayers have the right to appeal using “reasonable excuse”. The HMRC website gives its list of reasons which fit the criterion. We have appealed successfully for a client who was suffering from a blood disorder for example.
A recent tribunal case in the UK illustrates the difficulties in making a successful appeal against late filing penalties. As Robin Williamson reports in TAXline for March 2019:
Mr Pokorowski was a self-employed electrician who was in work until April 2014. Falling on hard times, he lost his work, his home, his savings and his belongings. He lived on the street until January 2017 when he moved into hostel accommodation. Later on, in 2017 he found work and acquired a permanent home in London.
On 6 April 2015, HMRC sent a notice to file a tax return for 2014/15 to his last known address (from which he had been evicted in 2014). Between February 2016 and February 2017 HMRC issued a series of late-filing penalty notices, comprising £1,600 in total. These were all sent to the same address.
Mr Pokorowski eventually filed his return on 8 July 2017 on paper. He appealed against the penalties on the grounds that as he was homeless and had lost his belongings and documents, he had a reasonable excuse for late filing, but HMRC resisted. He presented himself before the tribunal.
Judge Aleksander found that Mr Pokorowski had a reasonable excuse for his defaults and had remedied them without unreasonable delay once he was back in permanent accommodation and his excuse ceased.
Judge Aleksander’s conclusion was damning: “HMRC decision to pursue Mr Pokorowski for penalties in the circumstances of this appeal is a scandal. For HMRC to expect a homeless person to keep HMRC up-to-date with their address is ridiculous – and just needs to be stated to show its absurdity.”
The other example I have found recently comes from the US. Jason Rezaian, half-Iranian from California, decided to grow avocados in the land of his father. He was accused of being a CIA spy. His reward was nearly two years in an Iranian jail. Quite some time after his eventual release, he still suffers some after effects of the trauma made worse by the fact that the IRS insisted he pay penalties for the late filing of his tax returns for the period he spent in jail.
You couldn’t make it up!
His book is Prisoner: My 544 Days in an Iranian Prison by Jason Rezaian published by Harper Collins.
National insurance is usually seen as the dull sibling of Income Tax – a complicated fund-raiser for HM Treasury and HM Revenue and Customs. Complicated because it is divided into classes with starting points which are never memorable round figures.
The good news? Class 2 NI will not be abolished after all. Applying only to the self-employed, this class of NI is expressed as £2.95 a week or £153.40 a year. Class 2 buys entitlement to maternity benefit and the State Pension at a cost which was once described by Adam Havoc, Company Manager, as being “cheap as chips”. We would prefer to say excellent value for money!
Perhaps with both cost of collection, low revenue and simplification in mind, the Chancellor proposed to abolish Class 2s with effect from 6th April 2019. Its replacement was to be Class 3 for those whose profits are less than £6,205 pa. Class 3 is charged at £14.65 or £761.80 a year. That is 5 times the figure for Class 2! This proposal to hit the lowest earners the hardest was regressive in the extreme.
Forceful lobbying by Equity and, no doubt, other bodies has won through. We congratulate Alan Lean and his colleagues at Equity on their victory in ensuring that actors having a bad year (or more than one) can secure their continuing entitlements at a cost which is truly affordable. Bravo!