Coronavirus -Self-employment Income Support Scheme – How HMRC Will Calculate Total Income and Trading Profits for the Scheme

HMRC have now announced how they will calculate self employed tax payers’ total income and trading profits for the Coronavirus Self Employment Income Support Scheme.

Eligibility

To qualify for CSEISS your trading profits must be no more than £50,000 and more than half of your total income for either:

• the tax year 2018 to 2019
• the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019

In addition you must have traded during 2019/2020 and be intending to continue trading in 2020/2021.

Total income

This will be calculated by reference to:-

• income from earnings
• trading profits
• property income
• dividends
• savings income
• pension income
• miscellaneous income (including social security income)

Trading profits

HMRC will use the figures reported on your tax returns for your turnover/sales and any miscellaneous business income and will then deduct all allowable business expenses and capital expenditure incurred or trading allowance and flat rate expenses relief claimed.

This will mean that they will use the taxable business profit as reported on your tax return for the calculation. 

They will not deduct any trading losses carried forward from previous years or your personal allowance to calculate the trading profits figure.

If you have traded for more than one year, they will add together the profits and losses for the tax years that you have traded continuously for and divide this by the number of years.

If you have more than one trade in the same tax year, they will add together the profit and/or losses for all of the trades to work out your total trading profit for the year.

Please also refer to our earlier blog for more detailed information about the scheme.

https://jsca.co.uk/government-announces-support-for-the-self-employed/

There are worked examples of the calculations on the HMRC website:-

https://www.gov.uk/guidance/how-hmrc-works-out-total-income-and-trading-profits-for-the-self-employment-income-support-scheme

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

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