In light of the ongoing threats to business posed by the COVID-19 crisis, we’ve prepared the following guidance to assist sole traders and limited companies. For more information on what measures are available to you now and in the future to protect you and your business, please follow one of the following two links that’s most relevant to you:
Sole traders – How to manage money risks when you’re a sole trader
Ltd companies – Managing and taking money out of your limited company
As well as updating our guidance, we’re also keeping up to date with the latest announcements over on our blog:
You may also want to keep up to date with the government’s own COVID-19 guidance and documentation via the gov.uk website
If you're unable to run your business during this time, you should talk to your accountant and to your bank as soon as possible. They know of, and have early access to, the finance options that will be most suitable, and fastest, to help your particular business.
Update: 29th May 2020
The government has announced that the self-employed income support scheme (SEISS) will be extended, to permit a second and final, taxable grant for those who are eligible.
Applications will be opening in August (no specified date or target date, as yet) and will cover the trading period from June to August, inclusive.
With one notable exception, it will run on exactly the same basis and criteria as before, paying out a single, taxable instalment covering 3 month's worth of trading profits, within 6 working days of applicants completing the claim. As before individuals will need to confirm that their business has been negatively impacted by Covid-19.
The exception is the extent of the grant, which has reduced.
In line with changes to the further extended and revised furlough scheme, the maximum that can now be claimed is 70% of average monthly trading profits (not 80% as before) and it will be subject to a total claim cap of £6,570 (not £7,500 as before).
It is still possible to apply for the first grant. The deadline for applications under the first scheme has been confirmed as 13 July. However, you do not need to have claimed the first grant, to be eligible to claim the second one.
The government has said that it intends to publish further guidance relating to the extended scheme on 12 June and we will continue to update our guide to take account of it and to support you.
Quick note from our expert partner, Aaron at Boffix accountants
People making a claim under the self-employed income support scheme must do so directly themselves. In other words, an accountant can’t submit claims on behalf of their clients (although they may be able to help prep an application).
Those making a claim will need to do so via the government’s HMRC gateway, using their HMRC account details, also known as your Government Gateway ID.
If you are eligible and have not already made a claim under the first scheme, head to the government’s HMRC services site and log in.
Update: 4th May 2020
The government have announced today that those people making a claim under the self-employed income support scheme must do so directly themselves. In other words, an accountant can not submit claims on behalf of their clients (although they may be able to help prep an application).
The claims service is due to open on 13th May, sooner than originally thought. When it does go live, those making a claim will need to do so via the government’s HMRC gateway, using their HMRC account details, also known as your Government Gateway ID.
In order to make your claim as quickly as possible, head to the government’s HMRC services site now and attempt to log in to make sure you have access. If not, setup is fairly straightforward, but may well delay your ability to make a prompt application once the scheme begins.
In this guide, we are focusing on your employment status for tax purposes. IR35 is legislation that was introduced to recoup tax revenue that is lost when freelancers and the self-employed fail to register as employees of another business. The HMRC can take a dim view of parties who fall foul of this legislation and they have the right to investigate and penalise freelancers and the self-employed as well as the companies they work for.
How do I know if I'm self-employed?
Often, the lines between being self-employed and an employee can be blurred. As such there’s no hard and fast definition of what makes someone self-employed. It’s more of a balancing act, tip the scales too far and HMRC may take the view that you’re an employee.
There are some general rules of thumb to help you determine whether you will qualify as self-employed:
Your right to appoint a substitute: If you have agreed to work for a client but you have the right to send someone else to carry it out in your place.
Being able to work for others: Unlike traditional employee/employer relationships that insist on exclusivity, self-employed individuals can work for as many clients as they want (just make sure this doesn’t lead to a deterioration in your services).
Equipment: An employee would expect their employer to provide all the equipment they needed to perform their role. On the other hand, a self-employed individual would be expected to provide much of their own kit.
Responsibility: A self-employed individual may be expected to take responsibility for their work and if necessary, make good any mistakes or errors at no additional cost.
If you’re still unsure, the HMRC have put this tool together to help you check your employment status for tax purposes.
How do I register as self-employed?
First and foremost, you must register with HMRC. The deadline for doing so is the 05 October following the end of the tax year. In other words, the 05 October in your business’s second tax year.
Your self-employed income is subject to tax and national insurance contributions (NIC), but crucially, no deductions of this type will have been made before this income is paid to you. As such, it’s up to you to report and make the necessary payments to HMRC, this is what’s known as self-assessment.
N.B. There are penalties and late-payment interest charged for businesses that fail to register on time. So you should make this a priority. If you’re a new business registering for the first time, you can do so online, by post or over the phone
You might also need to consider whether you will need to register for VAT (Value Added Tax). See our VAT guide for more information.
What happens after I register?
Your registration lets the HMRC know to issue you with a notice to complete a self-assessment tax return. This notification should be received shortly after the end of the tax year (April 5) either by post or electronically, depending on how you registered.
Likewise, your return may also be completed online via the HMRC, through the post with paper forms or by using a third party, like a tax accountant or a commercial software solution.
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