Answers to frequently asked questions to offer guidance in responding to the coronavirus disease, COVID-19
Q: What support was available under the Self-employment Income Support Scheme and when do claims end?
The Self-employment Income Support Scheme (SEIS scheme) operated between March 2020 and the end of September 2021. It enabled self-employed people or members of partnerships who lost income due to the pandemic to obtain financial help.
Applicants had to show reduced demand due to coronavirus, or that they had been trading but were temporarily unable to do so due to coronavirus. There were a total of five rounds of the scheme with subtle differences between the different phases, however under the fifth and final phase the details were as follows:
- The claim period was May-September 2021
- Claims could be made from the end of July until the end of September 2021
- The grant covered up to 80% of average profits or £7,500 if turnover has fallen by more than 30%. Alternatively, the grant covers up to 30% of trading profits (capped at £2,850) for those who haven’t been as affected.
- The SEIS scheme was only open to those self-employed people with 2019-20 yearly trading profits of £50,000 or less, and who receive at least half their income from self-employment. Claims could be made no later than 30 September 2021.
- For the fourth and fifth rounds the self-employed person must have submitted their 2019/20 tax return by 2 March 2021.(For earlier rounds the 2018/19 year's Self-Assessment tax return had to be submitted on or before 23 April 2020.)
- Taxpayers must have declared that they intended to continue to trade, and reasonably believed there was a significant reduction in trading profits due to reduced business activity, or inability to trade due to coronavirus between May and September 2021.
- The turnover in the pandemic year from April 2020 to April 2021 is compared to the previous year's turnover. For most self-employed people this reference year is based on the turnover reported in 2019-20. However, where the self-employed are not eligible based on 2019-20, HMRC will look at 2018-19.
- Previous SEISS grants, and local authority or other COVID-19 grants are not included in the turnover figure. Self-employed people needed evidence to demonstrate the impact of the virus, resulting in reduced business activity and details of business turnover, to work out the grant amount.
- HMRC compared turnover figures and decided if the self-employed person could claim the higher or lower grant amount.
- To have claimed the fifth grant applicants must have traded in the tax years 2019/20 and 2020-21.
- Previous self-employed claimants who had claimed any of the first four grants could apply again, plus all the self-employed people who could only show self-employed status from their tax returns for the 2019/20 financial year (as long as they filed their tax return by 2 March 2021).
- The significant reduction in trading profits may not show until the 2021/22 tax return depending on the accounting period.
The grant was based upon loss of income, in the year April 2020 to April 2021, as follows:
- Those whose turnover has dropped by at least 30% could apply for grants of up to 80% of 3 months’ average trading profits, up to a value of £7,500.
- Those whose turnover has reduced by less than 30% could apply for up to 30% of 3 months’ average trading profits (capped at £2,850).
Self-Assessment tax returns
The self-employed grant is taxable and subject to self-employed NI contributions (Class 4 NICs), so should be reported on tax returns as follows:
- First, second or third grants are included in 2020/21 Self Assessment tax return, due by 31 January 2022.
- Fourth and fifth grants are included in 2021/22 Self Assessment tax returns, due by 31 January 2023.
Differences with the Coronavirus Job Retention Scheme
The self-employed scheme and Coronavirus Job Retention Scheme were different. The Coronavirus Job Retention Scheme had used various qualifying dates and criteria, for example employees had to be on an employer’s PAYE payroll by 30 October 2020. Self-employed individuals did not need to have claimed previously to claim the fifth grant but did need to have been eligible for the first and second grants to claim the third grant.
Furloughed employees were not allowed to work for their employer during the earlier phases of furlough. By contrast, the self-employed were able to work, start a new trade or take on other employment including voluntary work during their claim periods. So the self-employed could claim income support payments and continue working for their business in contrast to furlough.
Company directors are employees for PAYE purposes and not self-employed, so if they were furloughed this would be under the Coronavirus Job Retention Scheme.
Self-employed people who earned more than £50,000 p.a. did not qualify.
Because the self-employed person must make more than half of their income from self-employment, employees who work for an employer but have some separate self-employed work on the side which is less than half their income will not be eligible.
Income was calculated by taking the average income over the relevant three or four years. Income is based on PAYE salary not dividends, which do not count towards the average income.
HMRC guidance on 'adversely affected' business includes scaling down or ceasing working or incurring additional costs, but could also include situations when:
- the supply chain has been interrupted
- the business has fewer or no customers
- staff are unable to work
- one or more contracts have been cancelled.
Claims could not be made just because of a reduction in profits or demand due to self-isolation, or caring for someone else required to self-isolate as a result of travelling to the UK.
From July 2020 parents who took time off to care for their children within the first 12 months of the birth or adoption of the child can use their 2017/18 (or 2016/17 and 2017/18) self-assessment returns as the basis for their eligibility for the self-employed scheme if their trading profits dipped in 2018/19 due to parenting.
Q: Are self-employed people, eligible for other help or loans now the Self-employed Income Support Scheme (SEISS) has ended?
Now that the Self-employed Income Support Scheme (SEISS) has ended self-employed people have limited remaining help available. Even if they have to self-isolate or stop work, limited sick pay protections are available as they are not eligible for statutory sick pay. However, other benefits may be available including employment support allowance and Universal Credit.Recovery loan scheme
A new recovery loan scheme was introduced from 6 April 2021 and will run until the end of 2021. It replaces Bounce Back Loans, the Coronavirus Business Interruption Loans Scheme, and the Coronavirus Large Business Interruption Loans Scheme. UK-based businesses that had support under the previous COVID-19 guaranteed loan schemes are eligible to access finance under the new scheme provided all other eligibility criteria are met.
Recovery loans are therefore the main remaining scheme for businesses of any size and enable loans from £25,000 to £10million until the end of 2021. Companies need to show that their business has been impacted by the pandemic and is viable or would be viable were it not for the pandemic. The UK Government will provide a guarantee to lenders of 80% of the finance supplied.
The main types of finance available are:
- Overdrafts of between £25,001 and £10 million per business are available for up to 3 years
- Term loans of between £25,001 and £10 million per business are available for up to 6 years
- Invoice finance of between £1,000 and £10 million per business is available for up to 3 years
- Asset finance of between £1,000 and £10 million per business is available for up to 6 years
Businesses in collective insolvency proceedings are not eligible. Personal guarantees will be taken on facilities over £250,000, but should not be taken on facilities up to that amount. A borrower’s principal private residence cannot be taken as security.
As well as eligibility for loans self-employed workers may have legal rights regarding businesses they work with, depending upon the terms of the agreement with the client and how the arrangements operate in practice. Some workers who are deemed to be self-employed may in fact be protected as employees.
The Kickstart Scheme funds new six month paid job placements to create jobs for 16 to 24-year-olds on Universal Credit who would otherwise be at risk of long-term unemployment. Employers can currently start job placements up until the end of December 2021, and funding is available until 30 June 2022 with the possibility of an extension.
The scheme covers England, Scotland, and Wales (with funding for a similar scheme in Northern Ireland). The scheme applies to businesses of all sizes and across all sectors but must not replace existing or planned vacancies or cause existing employees or contractors to lose or reduce their employment.
The UK Government covers the cost of 25 hours work a week at the relevant National Minimum or Living Wage in addition to pension and NI contributions. Employers also get £1,500 per placement for wraparound support.
The job placements must:
- last six months
- cover at least 25 hours per week (employers can top-up wages if the role is over this)
- include support for young people to get work after they finish the scheme if they are not taken on longer term.
There is no obligation to provide a full-time role for the young person once the placement has ended.
- SMEs who employed less than 250 people as of 28 February 2020 could reclaim Statutory Sick Pay (SSP) paid for sickness absence due to coronavirus. The refund covered up to two weeks’ SSP per employee who was off work because of coronavirus. This applied from the first day their employee is off work rather than day three. This ability to recoup statutory sick pay costs finished at the end of September 2021 and any outstanding claims must be made by 31 December 2021. The full cost of SSP returns to being met by the employer. It appears that employers must continue to pay SSP from the first day an employee is unable to work rather than on day three as before the pandemic, making SSP more expensive than before.
- Temporary rates of 5% VAT in hospitality and tourism businesses finished on 30 September 2021. This was followed by a 12.5% rate of VAT until 31 March 2022.
- The self-employed and other taxpayers with income tax liabilities of up to £30,000 can use a "time to pay" facility to spread taxes due in January 2021 over an additional 12 months.
- The UK Government announced in the March 2020 budget that the self-employed will be able to claim employment support allowance from the first day of their self-isolation or illness rather than day eight. For those affected by coronavirus the allowance is payable from day one rather than waiting, this applies until 12 November 2021. However, it is only paid to those who are too sick to work and who meet certain conditions and those who are likely to benefit are fairly limited.
- The UK Government also temporarily changed Universal Credit so that the minimum income ‘floor’ of how much the self-employed person would normally expect to earn in a month, is ignored when calculating entitlement. This means some individuals will be able to claim over the telephone or online for time they spend off work due to sickness. In effect, instead of sick pay the self-employed could obtain support through the benefits system by raising Universal Credit so that the self-employed receive a similar amount to statutory sick pay. This suspension of the minimum floor applied until the end of July 2021 but since August 2021 it is gradually being phased back in, leaving jobcentre work coaches discretion not to apply it if the claimant’s earnings are affected by coronavirus.
The UK Government established a £500m fund to support economically vulnerable people to be allocated by local authorities. The coronavirus grant schemes managed by local authorities have been closing but some help remains. More information can be found on the UK Government website where there is a Business Support Finder to check eligibility.
Wales, Scotland and Northern Ireland
The separate nations have power to decide any extra support for businesses in their areas. Although most schemes are now ending some remain, as outlined below.
Extensive support has been made available in Scotland with many sector-specific provisions. The remaining support includes one-off restart grants for business in the retail, hospitality and leisure sector to support the costs associated with the expense of reopening. Other measures include extending rates relief for retail, hospitality, leisure and aviation businesses for the whole of 2021/22. A complete list of remaining support is available on the Scottish government website.
The Welsh Government has a package of support, including 100% business rate relief for retail, leisure and hospitality businesses with rateable values up to £500,000 applicable for the whole of 2021-22. Commercial tenants who cannot pay their rent are protected from eviction until 25 March 2022. Entrepreneurship grants and loans support are available for new businesses and micro-businesses who have been trading for less than two years to help start and grow a business.
For businesses in Northern Ireland, the business support still available includes apprenticeship incentive schemes and payments to support the retention and recruitment of apprentices. A 12-month holiday from business rates applies for the full 2021-22 financial year for specific sectors approved by the NI Executive. Other support includes a creative individuals’ recovery programme.
DISCLAIMER: The materials provided here are for general information purposes and do not constitute legal or other professional advice. While the information is considered to be true and correct at the date of publication, changes in circumstances may impact the accuracy and validity of the information. The CIPD is not responsible for any errors or omissions, or for any action or decision taken as a result of using the guidance. You should consult the government website for the very latest information or contact a professional adviser for legal or other advice where appropriate.
If you have other queries about COVID-19 not covered above, please contact the CIPD member employment law helpline on 03330 431 217 or visit the Community pages
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