Your questions answered: SEISS
5th May 2020
Last month Ceri Stoner and Seth Roe of Wiggin LLP invited you to ask questions on the Government's Self-Employed Income Support Scheme. Here are their answers to the issues you raised.
On Tuesday 21 April, 2020 Ceri and Seth did a presentation explaining the Self-Employed Income Support Scheme (SEISS): Media lawyers explain Government coronavirus support. Since then the Government has updated its guidance.
How the HMRC guidance has changed since April 2020
Since the webinar on 21 April 2020, the Government has announced that HM Revenue and Customs (HMRC) will begin contacting customers who may be eligible for the Self-employed Income Support Scheme (SEISS) from Monday 4 May. It has also published a Treasury Direction and updated its SEISS guidance, which can be accessed here.
As a reminder, those who are eligible will be able to claim a taxable grant worth 80% of their average trading profits up to a maximum of £7,500 (equivalent to three months’ profits), paid in a single instalment. The claims service will open on 13 May and HMRC have indicated that those eligible will have the money paid into their bank account by 25 May, or within six working days of completing a claim.
HMRC is also now inviting customers, or their agents, to go online and check their eligibility for SEISS. This can be done here
Following the April presentation, freelancers wrote to Ceri and Seth with other questions about the SEISS. Here the media lawyers respond to your other most popular queries.
Ceri and Seth say: "The eligibility criteria of the SEISS results in certain freelancers falling outside of the rules and being unable to access the scheme. Most questions we received relating to the SEISS are focused on these shortcomings. The below seeks to address the underlying issues and suggest a fair and pragmatic solution. We have also included some links to guidance wherever possible. Whilst the government’s publications to date do not answer all of the questions raised in connection with the SEISS, the latest updates to the guidance evidence that they are listening to feedback provided to date. We will continue to raise the remaining issues with the Government and HMRC.
"We understand that ScreenSkills will be continuing to provide ongoing support in the matter and, in particular, has asked us to provide an update on the rules in due course."
Are freelancers who move regularly between pay-as-you-earn (PAYE) and self-employed engagements eligible for SEISS?
Individuals who do not earn the majority of their income from their self-employed activities have been omitted from claiming SEISS. This has raised substantial concerns particularly in the TV and film industries, where there is a significant number of freelancers who work in this way and therefore fall the outside of the scheme.
For those freelancers who have other employment as a director or employee paid through PAYE, that employer may be able to access Government support using the Job Retention Scheme (JRS) and this should be considered as an alternative or additional support scheme. Those who will be worse affected however are those individuals who fall outside the increasingly complex eligibility criteria of the JRS and therefore currently have access to neither scheme.
We have suggested to the Government that a pro-rata allowance is permitted, at the very least in cases where individuals do not have any benefit under the JRS. In the meantime, we would suggest that other forms of support are explored, including those outlined in the webinar.
Are freelancers earning in excess of £50,000 per annum eligible for SEISS?
Freelancers earning in excess of £50,000 per annum are excluded from SEISS and, despite HMRC providing some updated guidance on the subject (which can be found here), there remains some confusion around the calculation of trading profits and how the trading conditions will be monitored.
In terms of the types of income included in calculating trading profits, some questions have been raised in respect of income received from property lettings. The Government guidance states that total income will include the total of all:
- income from earnings
- trading profits
- property income
- savings income
- pension income
- miscellaneous income (including social security income)
Crucially, in order to be eligible to claim under the SEISS, individuals will also need to evidence to HMRC that their business has been adversely affected by Covid-19. HMRC have indicated that they will "use a risk-based approach to compliance", however, it is unclear what this means in practice and how claimants should demonstrate to HMRC that Covid-19 has adversely affected their income is unclear. Some clarity on this is essential and has been requested of the Government.
We would recommend that individuals use HMRC’s SEISS Calculator to assess their eligibility. In addition, we have suggested to the Government that further revisions of the guidance are required to provide the detail required for stakeholders to be clear as to the criteria itself and how it must be met in practice
What about freelancers working through limited companies (‘loan outs’)? Will they be eligible for SEISS?
Individuals engaging with clients via a loan out and who have extracted their profits solely by way of dividend will be eligible for SEISS provided they meet all the other eligibility criteria. HMRC has provided some guidance and examples on this, however, care will need to be taken – including in the calculation of trading income. The guidance should continue to be monitored since it is likely to continue to be refined.
Less fortunate are those freelancers running loan-out companies who extract their profits both by way of salary and dividends who are excluded altogether from the SEISS. The Government has sought to provide reassurance for these individuals by allowing them to ‘furlough’ up to 80% of their PAYE income via the Coronavirus Job Retention Scheme (CJRS) which provides up to £2,500 of ‘wages’ per month to employees. We appreciate that this is a difficult outcome for those who, acting within the law, withdrew the bulk of their business profits by way of profits rather than a minimal salary, since this effectively means reduced support (calculated by reference to their lower salaries).
We have suggested to the Government that freelancers operating loan-outs are permitted to benefit from the SEISS, regardless of whether they operate PAYE. These individuals would then be able to select whether to claim under this scheme (which would probably work for the majority) or the CJRS (which would not penalise those who had been taking higher salaries) but, of course, not both. This would seem a fairer outcome for many and make a real difference, especially if the current lockdown is extended.
Is SEISS available to freelancers with less than one year’s accounts?
Since the webinar on 21 April 2020, the goal posts have moved slightly. HMRC’s updated guidance (4 May 2020) states that: "individuals are eligible if their business has been adversely affected by coronavirus, they traded in the tax year 2019 to 2020, intend to continue trading, and they:
- earn at least half of their income through self-employment
- have trading profits of no more than £50,000 per year
- traded in the tax year 2018 to 2019 and submitted their Self-Assessment tax return on or before 23 April 2020 for that year
HMRC is using information that customers have provided in their 2018 to 2019 tax return – and returns for 2016 to 2017 and 2017 to 2018 where needed – to determine their eligibility and is contacting customers who may be eligible via email, text message or letter.
On this basis, it may be that for someone who started trading during the 2018/19 tax year, provided they have submitted their return by 23 April 2020, their income might be extrapolated by HMRC to provide an annual rate. It is not clear from the updated guidance whether this is indeed the case, however, with the scheme now open, hopefully more clarity will be forthcoming.
In any case, we recommend that freelancers check via HMRC’s new SEISS eligibility tool to see whether or not they may be eligible for the scheme.
We have requested that the Government re-consider whether there might be a better way to deal with the newly self-employed as we assume that the intention behind the policy cannot be to penalise new entrepreneurs.
Are other forms of assistance available to freelancers in addition to the SEISS?
The individual benefits available to individuals were touched upon in the webinar. The most notably of these is the availability of Universal Credit whilst waiting for the grant. If you do, you should record the grant as part of your self-employment income, and it may affect the amount of Universal Credit you get. This will not affect Universal Credit claims for earlier periods.
In addition, there are a number of support measures available that may benefit the freelancer’s business, including but not limited to:
- Financial facilities to temporarily support a company's liquidity: Small business grant funding of £10,000 for all businesses in receipt of small business rate relief or rural rate relief.
- HMRC Time To Pay Scheme: this allows firms to postpone VAT and tax payments (with agreement from HMRC).
- Emergency business loan schemes: for example:
- The Coronavirus Business Interruption Loan Scheme is offering loans of up to £5 million for SMEs through the British Business Bank. This provides lenders with an 80% government guarantee for loans made to SMEs’ and that covers SMEs’ interest payments and fees for up to 12 months.
- The UK Government has also announced £3,000 cash grants to all small businesses, which amounts to a total pay-out of £2 billion.
- New Bounce Back Loans: the Government has announced that small businesses will be able to apply for quick and easy-to-access loans from today. Businesses will be able to borrow between £2,000 and £50,000 with the cash arriving “within days.” Loans will be 100% government-backed for lenders, and businesses can apply online through a short form. More information is available here.
This FAQ was produced on 5 May 2020 and is for general information purposes for members of ScreenSkills only. It is not to be distributed more widely. It is not addressed to any specific parties and does not constitute advice (legal or otherwise) to any person. The application of the Treasury’s Direction and HMRC’s associated guidance relating to the Job Retention Scheme and Self-Employed Income Support Scheme can be complicated. Readers should be aware that these rules are subject to ongoing revisions by the UK government and HMRC and therefore cannot be considered as finalised at the time of writing these FAQs. ScreenSkills and Wiggin LLP do not accept any ongoing responsibility for updating these FAQs in line with the latest legislation, regulations, guidance or case law after the date of publication of these FAQs. Furthermore, please note that ScreenSkills and Wiggin LLP do not accept any liability in any circumstances to any other parties for any losses arising in relation to any actions, inactions or determinations made in relation to these FAQs. We recommend that anyone with any specific concerns or questions seek up to date advice in respect of their particular circumstances.
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