UPDATE - SOLE TRADER or PARTNERSHIPS
Hi there,
I hope that you and yours are continuing to keep safe and healthy. You will by now have probably read that the Chancellor announced yesterday evening support for those of you who are self employed. Not all the detail has been published yet, and as we keep saying the devil is in the detail, but here is our understanding of what the government said and our action plan. There is a lot of information here, so for ease of reading, we have broken this down into three sections.
If you are freelance and trade as either a sole trader or as part of a partnership, please read section one.
If you are freelance and trade through a Limited Company please skip to section two.
Once you have read your relevant section, please then read section three that details our action plan.
SECTION 1- For those of you who are SOLE TRADER or PARTNERSHIPS
The measures announced yesterday are as follows and ONLY apply to sole traders/partnerships, NOT Limited Companies
You qualify for financial support if:
· Crucially, you became self employed before 6th April 2019
· Trading profits were (per individual if a partnership) below £50,000 in 2018/19 tax year OR below £50,000, on average, over the three years of 2016/17, 2017/18 and 2018/19 tax year
· And at least half of your taxable income must come from self employment
Remember that profit is not income. We calculate your profit by deducting your business expenses from the invoices you have raised in the year. Therefore even if you invoice more than £50,000 per year, it means you could still qualify for the support – as we claim expenses for you (e.g. travel etc etc) that will reduce your profit.
If you meet the below £50,000 profit threshold criteria
If your trading profit was between £37,500 to £49,999- You will get a maximum of £2,500 per month
If your trading profit was up to £37,500- You will get proportionately less- being 80% of your average trading profit
What do you need to do?
· You do not need to do anything - HMRC will automatically contact you over the coming few weeks and ask that you complete an online form. This form, once submitted, will then kick start the process.
PLEASE READ OUR HMRC SCAMS EMAIL FIRST IF YOU HAVEN’T DONE SO ALREADY.
· Expect to receive a (taxable) one-off payment from HMRC by 30th June, covering the period 1st March – 31st May 2020.
· June is a long way away, and so it is important that you see our action points at the bottom of this email that will help you survive until then.
· As mentioned above, this payment will equate to three months worth of 80% of your average monthly profit or the £2,500 x3.
· Your 2018/19 Tax Return needed to be submitted by 31st January 2020. If you have not yet submitted your 2018/19 Tax Return, it is vital that you submit it to HMRC before THIS DATE or you will get NOTHING.
IMPORTANT- IF YOU ARE OFFERED ANY SELF EMPLOYED WORK FROM TODAY ONWARDS, IT WILL NOT AFFECT THE GRANT PAYABLE TO YOU EVEN IF YOU TAKE THE WORK
If your profits are over the £50,000 threshold
Disappointingly as it currently stands, you will not qualify for the potential £2,500 grant per month outlined above. We understand that this will be particularly difficult to accept and if you would like to talk about your options in greater detail, please contact us.
What should you do now?
· Urgently review our action plan at the bottom of this email.
We will continue to focus on helping you review your options fully, such as immediate cash flow and whether you should take advantage of any of the deferrals, reliefs or loans available to you in order to keep cash in your pocket at this time.
SOLE TRADERS/PARTNERSHIPS - SUMMARY
· If you have only registered for self employment from 6th April 2019: You are not eligible for this support package
· If you have profits of over £50,000 on average over last three tax years: You are not eligible for this support package
· If you have profits of under £50,000 and meet the other criteria set out by HMRC: You ARE eligible for this support package
SECTION 2- For those of you who are LIMITED COMPANIES:
Sadly the measures announced yesterday for self employed did NOT include owner-managed businesses, i.e. where you are both the director and employee of your Limited Company
Yesterdays £50,000 trading profits does not apply to you – The Chancellor has now made clear his position for those that run their own company will be treated as employees, not self employed.
Disappointingly the announcement yesterday offered very little in terms of guidance and support for our owner-managed businesses, even though most are impacted financially due to the outbreak of COVID-19.
At this stage it is still unclear, but there may be a possibility you would be eligible for the Job Retention Scheme as an employee. We will continue to monitor this and should you be eligible, we will contact you to let you know what you must do next.
Every passing day there will be updates made by the government and we will be across them when they happen, letting you know the outcome.
If you are struggling financially, please read the below section.
SECTION 3- Regardless of your trading status, this is what you should do NOW should you feel that the financial package you are eligible for is not sufficient to cover your household costs:
1) Urgently review what benefits your household may be entitled to- starting with Universal Credit which could be worth at least another £94.25 per week to you
· Very helpful ‘benefits calculator’ from Money Saving Expert that can give you an indication within 5-10 mins as to what you could be eligible for – listed below:
Universal Credit
· As the name suggests, the Government have tried to incorporate multiple benefits into one. Therefore it is likely better to apply for this benefit, and from there will then also know if able to claim for any others listed above.
· Can be applied for regardless of if you are a company director or sole trader/partnership.
· If you are co-habiting, both partners must apply as the benefit is based on the household, and not individually.
· For those with over £16,000 in household personal savings, you are NOT eligible.
· Link to apply- https://www.gov.uk/apply-universal-credit
· Note that though there may be a longer average waiting time for payment (up to 5 weeks in some cases), advance payments can be, and should be, made within a few days of application (as per the Chancellor today).
· There are a number of benefits that you could also be eligible for, including:
- Support for Mortgage Interest - Government pays element or all of your mortgage interest when you are out of work. Fully repayable to Government when you sell your property and there is a small amount of interest incurred on loan, but helps short term cash.
- Employment & Support Allowance - Benefit paid if not working due to long term sickness, and is instead of SSP
- Statutory Sick Pay - Paid by employer (for example, your own limited company) and remember, the first fourteen days of SSP, worth £188, is fully repayable to your company by the Government (will take a while to be repaid but later better than never)
2) Remember that you are able to DEFER UPCOMING TAX AND VAT BILLS
- If you have a VAT payment due to be made between now and 30th June – this can be deferred up to 5thApril 2021
- If you have a July 2021 personal tax payment to make- this is automatically deferred to January 2021
- If you have an upcoming corporation tax payment to make- this can also be deferred by three months upon request
3) If you are a HOMEOWNER - contact your mortgage lender as you should be eligible to apply for a three month payment holiday
4) If you PRIVATELY RENT- know that you will NOT be evicted within the next three months if you are unable to make the payments. Most landlords and management companies will try their hardest to accommodate you due to the extraordinary circumstances
5) If you are a LANDLORD- if your tenant is not able to make payments to you at present, you are eligible for a three month buy-to-let mortgage payment holiday
6) Contact your local council and utility providers – we have heard that on the whole they are accommodating and open to a payment plan or payment holiday
7) If you have a season ticket or advance rail ticket – contact the operator as you are eligible for a REFUND on the unused portion of the ticket
8) If you have children – make sure you check your CHILD BENEFIT position as per our previous email
9) If you have an overdraft facility and credit cards – know that many banks are offering more favourable overdraft terms, and there are still many credit cards that can be applied for (if needed) that offer interest free purchases and balance transfers over ‘X’ period of months
10) Consider applying for the Coronavirus Business Interruption Loan
- Link to apply here: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/
- This is an interest free loan for 12 months and offered by many lenders
- MAKE SURE TO TELL US IF YOU ARE PLANNING ON APPLYING FOR THIS LOAN. THIS COULD BE VERY USEFUL TO YOU, BUT IT IS IMPORTANT THAT YOU ARE AWARE OF BOTH THE BENEFITS AND DRAWBACKS TO THIS FINANCE COMMITMENT
11) SPEAK TO US!!!!! This is exactly what we are here for. Your world (and ours) has been turned upside down in less than two weeks, and you are in absolute information overload. Please get in touch to arrange a time to chat through your specific circumstances- we will do as much as we can to help, including speaking to HMRC on your behalf
The action points above are not specifically aimed at helping you in the long term - they are there to help solve practical cash-flow issues that you currently have, or soon will be facing. Your immediate task, with us by your side, is to keep the lights on until the dust settles. It is Blue Skies’ task to look forward for you, and continue to keep you up to date with anything at all that could impact you.
Many of you, understandably, will be feeling let down by the Government, especially those who have paid their way (and some) over the many, many years. It is clear from the announcement that the measure to support the self employed (i.e. sole traders and partnerships) was one to cater to the masses, and for all intents and purposes has, at present, neglected those of you who earn over £50,000 or are directors of a Limited Company with a tax efficient salary. For those of you that have not received the news that you were expecting or hoping for- rest assured that WE ARE FIGHTING FOR YOU. Blue Skies cannot directly change the Governments stance on these measures, but by continuing to work closely with unions such as BECTU, PACT, and various other industry and small business players, we will strenuously be campaigning for parity for freelancers and to ensure that your voice is heard amongst all of the noise.
This is becoming an increasingly difficult time for all of us, and we should expect this to get worse before it gets better. Many of your friends, colleagues and family may not know all of the options available to them and could be feeling as overwhelmed as you may be. As we have said previously, please feel free to copy & paste/forward any of the above to them, or direct them to our blog - https://www.blue-skies.tv/blue-skies-blog , that has the previous two emails that we sent to you. Now is the time for us all to come together, and Blue Skies are happy to give some time free of charge to any of those that you care about that you feel need to have a chat with somebody. On that same strength, please do not forget that mental health resources are available to you (see our blog/previous emails) and we at Blue Skies are here for you and simply a phone call away.
With our thoughts and best wishes to all during this difficult time,
Team Blue Skies