Last week, HMRC sent out notices regarding the Self-employed Income Support Scheme (SEISS), allowing self-employed workers to claim a grant of up to £2,500 a month. Is it enough?
HMRC has accelerated the launch of the SEISS, ahead of schedule, as Government races to provide a lifeline to the self-employed.
Through the scheme, self-employed workers can claim a taxable grant of 80% of their average monthly trading profits, capped at £7,500 and paid in a single instalment covering three months. It’s subject to income tax and self-employed National Insurance.
Three accountants in practice give us their views on whether the scheme is up to scratch, and how the self-employed are likely to be affected by the lockdown in the medium term.
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SEISS is generous – but many will miss out
James Abbott, director, Abbott Moore
I think SEISS is certainly helpful. Because it’s based upon you being adversely affected by COVID, you qualify, and in that case, it’s particularly generous.
Take an example of someone that would normally expect profits of £49,000, they’ve missed a couple of weeks of work and they expect their profits to drop by £3,000, they would still qualify for the grant in full.
The issues that we do have with it is the fact that agents, on behalf of their clients, can’t make the application. The second thing is that, because more than half of your profits have to come from self-employment, if they don’t you don’t qualify. What we’re finding is that, where you have a lot of gig economy workers now, who have a portfolio career with several sources of income at one time, if you’ve got self-employment running alongside a buy-to-let portfolio or dividends from a limited company, you could potentially find that you’re below that 50%, and all of a sudden, even though it’s a significant proportion of your income, you don’t get the support.
This is what’s happening with a lot of government measures: there is criteria laid down that covers the 80%, but we’ve got quite a few clients that don’t fit within any of the boxes. You can understand why the government’s done it that way, but there is a pocket of the business community that don’t quite fit into any of them.
Next steps: Advising clients on how to manage their cashflows, reviewing every month, and identifying if there are any schemes that they might qualify for.
Verdict: As a scheme in itself, SEISS is very generous, but its criteria limits how many people can take advantage of it
Self-employed should focus on liquidity, not grants
David Frederick, AAT Vice President, managing partner, Marcus Bishop Associate
SEISS was always going to have winners and losers, because one cannot satisfy everybody. That is a fact when we are dealing with the perennial economic problem of scarcity of resources.
The scheme that was delivered is not the best, but it does go some way to address some of the players in the self- employment market.
However, the jury is out on whether it covers 95% of the self-employed as the government states, or 62% according to The Institute of Fiscal Studies. The real truth, I expect, lies somewhere in between.
I have been reminding clients the age-old importance of liquidity. The need to know how fast your sales revenue will come in and how long before you have to pay your creditors. Hence helping clients, to embrace the importance of cash flow reporting. The focus is about developing a going concern, not just for the next twelve months, but until the owner decides it is time to leave the market.
Next steps: Continue to advise clients on cashflow and liquidity
Verdict: The focus of all accountants and clients should be away from compliance and towards good financial management – that will help more than government schemes
Farmers and landlords need to be included
Samantha Perkin, director, Zamu
It seems very easy to get it to work. I’ve done the eligibility check for all of my clients, now. HMRC’s information was all clear and correct, which means that if a client isn’t eligible, I can explain to them why.
And if they are eligible, I can give them an idea of what they can expect to get.
For a simple self-employed person, it will work quickly and effectively and they will get their money fairly quickly as well.
Where it’s proving problematic is with people who aren’t eligible but feel that they should be. Farmers, for example – the only support that’s available at the moment is for dairy farmers, but all farmers are struggling. Beef farmers are particularly hard hit.
Furnished holiday lets and property owners are not eligible but are also struggling, and while they can get a holiday from their loan payments, it’s not always working as effectively as it should. I have quite a few landlord clients who are facing real difficulties. This won’t help them at all because officially they aren’t self-employed.
They’ve definitely done what they can for those in the middle, that fit into neat categories, but there are a lot of people around the edges that have been missed.
Next Steps: I’ll keep looking for options for my clients, and helping them manage their cash as best as they can. A lot of it comes down to emotional support.
Verdict: Entire professions, such as farmers, are getting nothing from any of the schemes. Something needs to be done or our food industry will collapse.
How to claim under the SEISS scheme
Mark Rowland is a journalist and former editor of Accounting Technician and 20 magazine.