HMRC have now issued guidance on how the self-employment income support scheme will work. A link to the HMRC guidance, including examples, is at the end of this post, however, here are some key points:
- Eligibility for the grant will be based upon total income and trading profits, where trading profits must be no more than £50,000 and more than half of the total income for either:
- the tax year ended 5th April 2019 or
- the average of the tax years ended 5th April 2017, 2018 and 2019
- The guidance says that HMRC will use the total trading income and then deduct any allowable business expenses together with capital expenditure (so capital allowances and flat rate expenses in the main). However for most people the figure that may be found on the self-employment page in box 31 of the 2019 tax return (Total taxable profits from this business) will be the figure used.
- If you have more than one trade, all the profits and losses will be added together to work out the trading profit
- If you have traded for three or more years, the average annual trading profit will be the trading profits added together for the tax years ended 5th April 2019, 2018 and 2017 divided by 3
- If you have traded for fewer than three years, the average is taken for the years that you have traded.
- Losses in any one year will not be treated as zero as had previously been thought, but added in to come up with a total income for the three years. For example, if you made £60,000 profit in 2017, £60,000 profit in 2018 and £30,000 loss in 2019 the total trading profit will be £60,000+£60,000-£30,000 = £90,000. This would then be divided by 3 to give an average trading profit of £30,000.
- Total income is the total of:
- income from earnings
- trading profits
- property income
- savings income
- pension income
- miscellaneous income (including social security income)
The full guidance may be found at https://www.gov.uk/guidance/how-hmrc-works-out-total-income-and-trading-profits-for-the-self-employment-income-support-scheme