24 April

HMRC Clarifies Income and Trading profit the Calculation for self-employed support

     HMRC Clarifies Income and Trading profit the

        Calculation for self-employed support

HMRC will assess eligibility for the grant based on total income and trading profits and the guide details how this is calculated.

To be eligible for the scheme applicants must have trading profits of no more than £50,000 which makes up more than half of their total income for either the tax year 2018/19 or the average of the tax years 2016/17, 2017/18, and 2018/19. HMRC will use the figures provided on tax returns for the total trading income (turnover), then deduct any allowable business expenses and capital expenditure.

Allowable expenses include office costs, such as stationery or phone bills; travel costs including fuel, parking, train or bus fares; clothing expenses such as uniforms; staff costs including salaries or subcontractor costs; a stock or raw materials; financial costs such as insurance or bank charges; costs of business premises; advertising and marketing costs; and training courses related to the business. It also includes any business expenses deducted through the trading allowance; capital allowances used to buy assets used in the business; qualifying care relief; and flat-rate expenses.

HMRC says it will not make deductions from trading profits for any losses carried forward from previous years, or for an individual’s personal allowance. If an individual has more than one trade in the same tax year, HMRC says it will add together all profits and losses for all these trades to work out the trading profit.

Total income is the total of income from earnings, trading profits, property income, dividends, savings income, pension income and miscellaneous income including social security income.

If even if an applicant made a loss in the tax year 2018/19, they would still be eligible for the grant if their average trading profit for the three tax years met the criteria.