The details below are given in good faith based on the prevailing information as at 12.30pm on 27 Mar 2020.
This report should be one big flow chart, but in order to make it fully accessible, a numbered list is more straight forward. Please follow the instructions line by line, and follow “go to” instructions as soon as you meet them. Stop at the first mention of “stop” that you come across.
Update 15 April 2020 – owing to recent changes in HMRC guidance, lines 1000 and 1010 have been renumbered and repositioned as lines 1033 and 1034.
1020 Do you have limited liability protection because you operate as a limited company?
1030 Yes – go to 3020
1033 Did your freelance work commence on 6 Apr 2019 or later?
1034 Yes – go to 7000
1040 Has your self employment (or partnership) income declined directly as a result of the Covid-19 crisis?
1050 No – go to 7000
1060 Take care with this double barrelled question, and check your tax return if you are unsure . . .
1070(a) Are you a partner in a traditional partnership and have a page P1 on your last tax return?
1070(b) Are you a sole trader with self employed accounts and a page SE1 on your last tax return?
1080 If you answered “no” and “no” go to 7000
1090 Annual income includes all earnings, all investment income and rent received etc. Is your self employed profit (or partnership share) less than 50% of your annual income?
1100 Yes – go to 7000
1110 Has your self employed trade (or partnership) ceased in 2019/20?
1120 Yes – go to 7000
1130 Will you (or but for the effects of the Covid-19 crisis, would you) continue to trade in 2020/21?
1140 No – go to 7000
1150 Work out the annual average of your net profit between 6 Apr 2016 and 5 Apr 2019 (or pro rata annual profit for businesses that commenced between those two dates). Is your annual average net profit greater than £50,000?
1170 Yes – go to 7000
1180 No – go to 2000
2000 Based on your response, you are eligible for support under the 26 Mar 2020 measures “for the self employed”. HMRC has this info already (from your tax returns) and will contact you. They have asked that you do not contact them. The plan is set out here and grants are expected to be paid in June 2020.
2010 From 13 May 2020 claims can be made here. Look for the “Start Now” button in the middle of the page. There’s also a big warning saying “You must make the claim yourself. Your tax agent or adviser must not claim on your behalf as this will trigger a fraud alert, and you will have to contact HMRC. This will cause a significant delay to you receiving your payment.“. Moreover, you will need the start date that HMRC sent to you by email, SMS or letter. They definitely don’t want to let accountants get involved for some reason!
Update 15 April 2020 – owing to recent changes in HMRC guidance lines 3000 and 3010 have been renumbered and repositioned as lines 3033 and 3034.
3020 Do you have a proper contract of employment with your own company?
3030 No – go to 6000
3033 Does your company have a PAYE account with HMRC?
3034 No – go to 5000
3040 Has your company’s income declined directly as a result of the Covid-19 crisis?
3050 No – go to 5000
Update 15 April 2020 – owing to recent changes in HMRC guidance lines 3053 and 3054 have been added.
Update 17 April 2020 – HMRC guidance has changed (again) – different conditions for qualifying employees have been added to a new line 3053.
3053 Were you on your employer/company PAYE records on 28 Feb 2020? Friday 28 is the key date, even though there were 29 days in February in 2020. If you officially left before 28 Feb or officially started after 28 Feb, then you should answer no.
3053 Were you on your employer/company PAYE records on 19 Mar 2020? If you officially left before 19 Mar or officially started after 19 Mar, then you should answer no. If your first ever payslip from this employer is dated after 19 Mar 2020 then you should answer no. The criteria require that HMRC was notified of this employment via any payroll RTI submission by 19 Mar 2020 at the latest.
3054 No – go to 5000
3060 Have you been laid off with no work (officially termed “furloughed”) owing to the Covid-19 crisis?
3040 Yes – go to 4000
3050 No – go to 5000
4000 Based on your response, your employer is eligible for support under the 18 Mar 2020 “Job Retention Scheme” and ultimately you should receive some Government funded income through your employer’s payroll system. It is the responsibility of the employer to make a claim to HMRC using an online tool which they say is due to be available “at the end of April 2020”. More details are given here. Office holders should note that this applies only to salary and not to dividend income.
5000 No support under the 18 Mar 2020 “Coronavirus Job Retention Scheme”.
6000 As a director, your salary is usually paid to you for the responsibility involved in “holding the office of director” and not for “work done”. This causes two issues.
6010 A director cannot be furloughed according to the Companies Act 2006. The Act does not say that exactly, but the combination of rules means that a director is always active on company affairs. Update 11 April 2020 – HMRC guidance has been adjusted, go to 6080.
Update 11 April 2020 strike out lines 6020 through 6070
6020 Furthermore, a director is not an employee in a strict sense even though the words employee and employment are often used in everyday dialogue about directors. There is no definition of “employee” in Statute. Sometimes case law helps, but there is still no definition of “employee”.
6030 What is clear is that to qualify for support under the 18 Mar 2020 “Coronavirus Job Retention Scheme” the employee must be engaged to do work “under a contract of employment”. Unfortunately “holding the office of director” is not the same thing as “doing work” and you don’t need “a contract of employment” in order to hold an office.
6040 This Government web page has ignored these fine points of detail and professional bodies are seeking clarification from HMRC. To be honest, some of the dialogue on that page demonstrates clearly that the civil servants who authored it have no idea what the legal definition of “self employed” is!
6050 Arguably, this is just legalistic torture but the law is the key issue in all of our interactions with Government. It could be hoped that Rishi Sunak will soon be hauled back to announce further measures. The thing many people want to hear is something like “irrespective of the provisions of the Companies Act 2006, for the purposes of the Coronavirus Job Retention Scheme HMRC will permit directors without contracts of employment to be deemed as furloughed provided that all the other conditions of the Scheme are satisfied”.
6060 And then what would you get? Possibly your company will get 80% of your salary. And nothing extra on account of your dividend income. Go back now and look at line 4000 if you want to, but read the rules carefully, it’s about salary only.
6070 Unless Rishi Sunak suddenly reverses the Government’s attitude to freelancers who operate as small limited companies you currently stand to get nothing. Maybe there will be movement on directors’ salaries. A change of heart on dividend income is highly unlikely given that HMRC has previous form with the original IR35 legislation and later additions to those rules.
6080 Update 11 April 2020 – the desired text (at line 6050 above) has in effect been published here. Office holders may be entitled to claim JRS.
Update 15 April 2020 modify line 6090
6090 Go to 4000
6090 Go to 3033
7000 No support under the 26 Mar 2020 measures “for the self employed”.
We know where Boris Johnson lives if you want to write to him.