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April 15th 2020

Coronavirus Self Employed Income Support Scheme - how "trading profits" will be defined

Guidance has now been issued on how HMRC intends to calculate a taxpayer's "trading profits", for the purpose of the Coronavirus Self Employed Income Support Scheme (CSEISS).

The guidance is significant because it provides self employed taxpayers who are eligible for support with more certainty about the amount of grant they might expect to receive.

How "trading profits" will be calculated

HMRC say they will use the figures on your tax returns for your total trading income (turnover), then deduct any allowable business expenses and capital expenditure.

Allowable expenses include:

  • office costs, for example stationery or phone bills
  • travel costs, for example fuel, parking, train or bus fares
  • clothing expenses, for example uniforms
  • staff costs, for example salaries or subcontractor costs
  • things you buy to sell on, for example stock or raw materials
  • financial costs, for example insurance or bank charges
  • costs of your business premises, for example heating, lighting, business rates
  • advertising or marketing, for example website costs
  • training courses related to the business, for example refresher courses

They also include:

  • any business expenses deducted through the trading allowance
  • capital allowances used to buy assets used in the business
  • qualifying care relief
  • flat rate expenses

These will not be deducted from your trading profits:

  • any losses carried forward from previous years
  • the taxpayer's personal allowance

More than one trade?

Where the taxpayer has more than one trade in a tax year, all the profits (and losses) will be combined to work out a single profit (or loss).

Am I eligible?

To determine a taxpayer's eligibility under the CSEISS, there are two tests. If either test is met, the taxpayer may qualify for support, provided they were trading immediately prior to the Covid 19 outbreak and their business has been adversely affected as a result of the outbreak:

  • Test 1: trading profits in 2018/19 were no more than £50,000 and no more than half of the taxpayer's total income;
  • Test 2: average trading profits in 2016/17, 2017/18 and 2018/19 were no more than £50,000 and no more than half the taxpayer's "total income"

"Total income" for the purpose of both tests includes:

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

Further guidance

The full guidance can be found here.

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