VAT Deferral and Employment support allowance

A Ray of Hope for COVID-19 affected Self-employed people

The Government has announced an unprecedented package of support for businesses and individuals affected by Covid-19. The draft legislation Coronavirus Bill 2019-21 include an amendment to support self-employed people a statutory self-employment pay.

The draft amended legislation is:

“Statutory self-employment pay

  • (1) The Secretary of State must, by regulations, introduce a scheme of Statutory SelfEmployment Pay.
  • (2) The scheme must make provision for payments to be made out of public funds to individuals who are
  • (a) self-employed, or
  • (b) freelancers.
  • (3) The payments to be made in subsection (2) are to be set so that the net monthly earnings of an individual specified in subsection (2) do not fall below—
  • (i) 80 per cent of their monthly net earnings, averaged over the last three years, or
  • (ii) £2,917
  • whichever is lower.

  • (4) No payment to be made under subsection (2) shall exceed £2,917 per month.
  • (5) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of either House of Parliament.

The purpose of this amendment is to make the Government ‘top up’ self-employed workers’ earnings to the lower of 80% of their net monthly earnings averaged over three years, or £2,917 a month.

The passage of the Bill may result in other amendments or even removal of the above.

Other support available

Employment Support Allowance
Self-employed people unable to work because they are directly affected by Covid-19 or selfisolating will be eligible for Contributory Employment and Support Allowance. This is now payable from the first day of sickness, rather than the eighth. Eligible claimants under 25 will be entitled to £57.90 per week, and over 25s £73.10 per week.

VAT Deferral

All UK VAT registered businesses, including charities, can defer VAT payments due with their VAT returns between 20 March 2020 until 30 June 2020. No UK VAT registered business will have to make a VAT payment alongside their VAT return to HMRC in that period. Normal VAT payment

due during this period are 7 April, 7 May or 7 June 2020 or the monthly payments due on each of these dates.

This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.

The deferral is only for the VAT payment, businesses are supposed to file the VAT returns by normal due dates. Smaller companies with direct debits to pay VAT to HMRC will also need to cancel these immediately otherwise the money will be deducted automatically. The Treasury said it could not cancel them unilaterally.

Income tax deferral

For Income Tax Self-Assessment, payments due on the 31st of July 2020 will be deferred until the 31st of January 2021.

This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.

HMRC have also scaled up their Time to Pay offer to all firms and individuals who are in temporary financial distress as a result of Covid-19 and have outstanding tax liabilities.

Useful links (regularly updated):
COVID-19 support for business
COVID-19 guidance for employees

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