Adviser warns on new self-employed support criteria

Adviser warns on new self-employed support criteria
Credit: Luke MacGregor

An adviser has sounded warning bells over the government’s tougher restrictions for the self-employed support scheme, urging workers to ensure they are up to date with the changes.

To qualify for the third grant of the self-employment income support scheme, applicants must be able to prove they are either still trading and impacted by the pandemic, or that the business had been trading but was forced to stop due to the coronavirus.

Claimants also need to declare that they intend to continue to trade and that they “reasonably believe” there will be a “significant reduction” in their trading profits.

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Previously, self-employed workers just had to prove they had been “adversely affected” as a result of the pandemic.

According to financial advice firm Old Mill, the ‘significant reduction in trading profits’ test was going to be applied to the accounting period as a whole, which means claimants may have to forecast their financial results in order to establish if they are eligible for the third grant.

Chris Bowles, director at Old Mill, said: “While it can be difficult for hard-pressed owner-managers to keep abreast of the constant changes coming out of the Treasury, this tightening of the criteria is really important.

“Essentially, HM Revenue and Customs has introduced a test where a taxpayer needs to be comfortable that their profits in the year they’re claiming for will be significantly reduced from prior years.”

HMRC’s guidance also indicates that it expects claimants to make an “honest assessment” about whether they reasonably believe their business will have a significant reduction in profits.

Mr Bowles said: “This is becoming potentially a bit of a minefield and we strongly urge that claimants have a conversation with their adviser if they are in any doubt about the new rules.

"We can foresee that some taxpayers may inadvertently miss the fact that the new criteria is significantly different from those that applied to the earlier grants.”

‘Gaps of support’

Although chancellor Rishi Sunak last month (November 2) extended the SEISS grants in line with the extension of the Coronavirus Job Retention Scheme, the support for self-employed in the face of the ongoing crisis has been continually branded inadequate.

Newly self-employed workers alongside limited company directors have so far fallen outside of the government’s measures, and as the eligibility criteria for the grants have only been tightened, many self-employed are still missing out.

Figures from the Office of National Statistics recently found there was a 174,000 fall in self-employment to 4.53m in the three months to September and the number of people who changed from self-employed to employed in Q2 and Q3 was the highest on record.

Experts said this could be down to the difference in the level of Covid support provided for the self-employed.

Meanwhile Derek Cribb, chief executive officer of the Association of Independent Professionals and the Self-Employed, said “glaring gaps in support” were leading to a long-term decline in the sector.