Self Employment Income Support - Landlords are Ineligible

Posted 07/04/2020

HMRC is currently working through submitted taxpayer income self assessment tax returns to pull out the average of a sole trade’s profits over the last three years; this covers tax returns submitted for the dates 2016/17 through to 2018/19. Up to 80% of this calculation will be payable in June, for a total of three months (March, April and June) of up to £2,500 a month. Taxpayers cannot apply for this, as it is an automatic process, and can only wait for HMRC to get in touch regarding income support. The medium of contact is not disclosed but it likely that taxpayers will receive a postal letter rather than an email or a text.

There are rules in place as to whom this support will be available to, as mentioned in a previous article. Trades that commenced after the 6th April 2019 will not be legible for the support, trades that earn over £50,000 in profit are ineligible and individuals who earn less than 50% of their income through their sole trade (such as earnings through a PAYE job) will also be excluded.

Landlords will also find themselves excluded from the income support, even if rental earnings account for a majority of their income. Renting out building space is not classified as a trade, though renting is a business but it is defined differently from an actual trade. Rental income and expense figures are entered on different pages in the tax return than those of a trade so that the rental numbers and the trade numbers do not affect each other i.e a rent expense cannot be set off against the trade income. The sale of a rented building comes with its own reliefs and allowances to set off against capital income tax, which trades do not have access to. The time the building was rented out and the time it was lived in as a primary home contribute towards the reliefs so it is easy to see why the reliefs are not used for trades which can stop trading and may not have any capital tax to declare to HMRC.

Furthermore, rental payments are still expected by many landlords to be paid on time. Some landlords may have voluntarily organized a plan with their tenants for financial support for the upcoming months.

It is important to note that a trade that has ceased permanently and not as a result of the COVID-19 pandemic will not be considered for the income support. This means that the taxpayer may have to confirm that they were trading in the 2019/20 tax year, and that they intend to continue their trade once it is safe for businesses to reopen.

For those unable to claim the income support because they fail to match the criteria set out by HMRC, the Universal Credit can be applied for. Savings should not exceed £16,000, and the minimum income floor is being adjusted for the period of caution with the Corona Virus. Once applied for online, individuals will need to have their identities checked and a phone interview with a job coach who will explain the monthly commitments expected from each individual.

Tags: Landlords, Corona Virus, Corvid-19, HMRC, Income support