On The Spot Blogs
Coronavirus - A New World! - Grants For Sole Traders
The Chancellor today announced probably his final major finance coronavirus package.
The self employed find themselves in a new world requiring state support when they need very little in normal times. However, many remain excluded and will need to turn to other measures previously announced.
What Is The Grant Based On?
Your grant will be based on 80% of the average of your profits showing in your income tax returns for the 2019, 2018 and 2017 income tax years.
How Much Will I get?
You'll get up to £2,500 per month, so you may receive £7,500, assuming the grant runs for the 3 months March, April and May. This seems to be convert into a maximum annual average profit of £37,500.
How Does Other Income Affect This?
- If you've mostly been living on second property income, with a bit of sole trader income, you're not eligible.
- If you've earnt more from an employment alongside being self employed, you're not eligible.
Helpfully, it appears that you're still eligible if more than half your income in 2019 was from self employment trading income, but the previous two years it wasn't.
What If My Profits Were Over £50k?
If the average of your profits over the three tax years 2019, 2018 or 2017 is over £50k, you're not eligible, unless your recent 2019 profit is under £50k. The average of £50k exceeds the average of £37,500 anyway, so this seems to apply in practice to the profits of a partnership.
Can I Carry On Working In My Business?
Unlike furloughed employees, you can carry on running your business and in fact it is a condition of the grant. Your business needs to have been affected by the Coronavirus so that you've lost trading profits. We don't yet know how this will be proved.
Are Partnerships Included?
Yes, partners of trading partnerships will be included in the same way, as long as the partnership's profit is less than £50k.
What If I Set Up My Sole Trader Business After 6 April 2019?
It appears that you won't be eligible for any grants under this scheme.
What About Sole Director-Shareholder Limited Companies?
Limited companies can benefit from the previously announced furloughed package for employees. It appears that the government is happy for director salary, usually low, to be included. However, this may refer to companies with a few directors where there's not enough work for all of them.
We need confirmation where a sole director is carrying out basic director duties until the company's trade is restored.
How Do I Apply?
You need to wait until HMRC contacts you and 'invites' you to make an application.
When Will I Get It?
The payment will be made in one lump sum in June. Until then, you need to apply for Universal Credit. We don't yet know whether any Universal Credit payments made will be deducted from the lump sum paid later.
Where Does This End Up?
The Coronavirus has caused a lot of us to change our world view in all sorts of ways.
Today's announcement may prove to be the day the Chancellor was given permission to bring in higher taxes for sole traders in the future on the basis that state support requires funding somehow.