The Self-Employed Income Support Scheme provides taxable grant payments to many self-employed workers who have been adversely affected by the Coronavirus outbreak.
There are five grant payments in total running up to September 21that a self-employed worker may have been / may be entitled to.
The first payment - that covered the months of March, April and May 2020 - has already been paid to those entitled as a lump sum. Payments were made between 13th and 25th May 2020. It was worth 80% of their average monthly profits over the last three years* up to a maximum of £2,500 a month.
The second payment - covered the three months of June, July and August 2020 - and was paid out towards the end of August 2020 (although applications can be made up to 19th October 2020). It is worth 70% of their average monthly profits over the last three years* up to a maximum of £2,190 a month.
The third payment - covered November 2020 to January 2021 and was based on 80% of average monthly profits, capped at £7500.
The fourth payment - covers February 2021 to April 2021 and and is based on 80% of average monthly profits, capped at £7500. The fourth payment has been extended to include those whose business started in 2019-20. It is expected that it can be claimed online from late April 2021.
The fifth payment - A fifth grant, covering the period from May 2021 to September 2021, works as follows:The scheme has been extended to include those whose business started in 2019-20.
Those whose turnover has fallen by 30% or more will receive the full grant worth 80% of three months’ average trading profits, capped at £7,500.
Those whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850.
It is expected that it can be claimed online from late July 2021.
More details of the extended scheme here.
*Where someone has not been in self-employment that long then a shorter period is used.
Impact on benefits
The grant payment is treated as earnings for benefit purposes.
For Universal Credit
It is treated as self employed income (a ‘receipt’) for the Monthly Assessment Period during which it is received.
So it will not result in any overpayment (ie no need to reassess entitlement for the 3 months for which it covers to include the payment received as income), but it will be included as a lump sum as income for the Assessment Period in which the claimant receives it.
If the claimant has been reporting a loss* every month up to then. then this can be offset against the grant and only the difference is treated as earnings.
But for some it means that the claimant's UC award reduces to nil and/or the 'surplus earning' rules could then apply.
NOTE: The Minimum Income Floor has been suspended until the end of July 2021 due to the Coronavirus outbreak therefore their UC award will be based on their actual income and allowable expenses (click here).
For Tax Credits
As it is taxable payment, it is treated as an income payment so forms part of the claimant's self-employed income for 2020/21 and can be offset by allowable expenses. So the grant payment only affects their Tax Credits if they expect their total profits for 2020/21 overall to be more than £2,500 greater than their profits for 2019/20.
For Housing Benefit
The payment is treated as income so it forms part of their self-employed income and can be offset by allowable expenses. If their projected income is now higher than the income the HB Office has been using then they should inform the HB Office who may adjust their ongoing HB award.
'No changes to HB regulations are required as the SEISS grant remains a payment of taxable income received from self-employment. The SEISS payment is part of the self-employed income assessment for the tax year in which it is received.'
The Housing Benefit Regulations have not been amended to cater for this grant, as confirmed in the DWP Bulletin mentioned above.
That bulletin says SEISS is counted as earnings for the tax year in which it is received, but this does not necessarily mean that it is spread over the entire tax year. The HB Regulations are very flexible and while you could make a case for taking the income into account over a whole year you could also justify spreading it over three months. All the Regulations require is that the HB Office estimate the claimant's earnings by reference to an "assessment period" of no more than one year. Some councils have said that they are taking no account of the SEISS grant in the current year - they will estimate next year's income (if the claimant is still on HB by then) based on this year's income and so the SEISS will not affect HB until next year. Other HB Offices have said they are taking it into account over three months starting from when it is received. It is difficult to say that either of those approaches is wrong. There does seem to be solid consensus that it would be incorrect to backdate the income over the three months for which it is notionally being paid - very few if any HB Offices are taking it into account retrospectively, as any changes to self-employed earnings are always picked up prospectively.
For Income-Related ESA, Income-Based JSA and Income Support
Each SEISS payment is treated as self-employed earnings over three months from the date of payment - confirmed in Guidance
For Contributory ESA / New-Style ESA
All the Guidance
says is that payments from the SEISS are considered to be earnings for Contributory ESA / New-Style ESA purposes.
For Contribution-Based JSA / New Style JSA
Where someone receives a SEISS payment they are considered to be working their normal hours, so if they were working 16 hours or more (or their partner was working 24 hours or more) a week before the Coronavirus outbreak affected their business then they would still be treated as working those hours and therefore considered to be engaged in remunerative work - and therefore not entitled to Contribution-Based JSA / New Style JSA. Confirmed in Guidance.
All the Guidance says is that payments from the SEISS are considered to be earnings for Carers Allowance purposes.