Non-trading income
This will be the amount recorded as ‘total income received’ on an individual’s online or paper tax calculation, less their trading income.
HMRC will calculate an individual’s non-trading income by combining all their income from earnings, property income, dividends, savings income, pension income, overseas income and miscellaneous income.
Eligibility
If an individual has traded for all three years, HMRC will initially look at their 2018-19 Self-Assessment tax return. Their trading profits must not exceed £50,000 and must be at least equal to their non-trading income.
If an individual is not eligible based on the 2018-19 Self-Assessment tax return, then HMRC will look at tax years 2016- 17, 2017-18 and 2018-19.
Example
2016 to 2017
2017 to 2018
Average for the 3 tax years
2018 to 2019
Total
-£10,000 - not eligible
Trading profit
£50,000
£50,000
£30,000
£90,000
Non-trading income
£15,000
£15,000
£15,000
N/A
£45,000
Eligibility using the tax year 2018 to 2019 only
N/A
N/A
No
N/A
No
Eligibility using the 3 tax years Yes So, even if a loss was recorded in tax year 2018-19, the individual would still be eligible because the average for the three tax years if £30,000, which is below £50,000, and the sum of the trading profits for the three tax years (£90,000) is at least equal to the sum of their non-trading income of £45,000 for those years. N/A N/A N/A Yes
How HMRC establishes partnership eligibility
If a partnership made £100,000 in trading profits in tax year 2018-19 and distributed its profits as follows:
Example
Trading profits received Non-trading income
Partner A £25,000
0
Partner B £75,000 0 Partner A would be eligible for the grant, as the trading profits received do not exceed £50,000.
Partner B would not be eligible for the grant, as the trading profits received exceed £50,000.
If partnership rules require Partner A to pay the grant into the partnership pot, the partnership must give the full grant back to Partner A.
How HMRC will calculate the grant
If an individual is eligible for the grant, and, for example, made an average trading profit of £42,00 over the three tax years, they would calculate the grant as per the following example.
Example
Average trading profit £42,000 Divide by 12 £3,500 Multiply by 3 £10,500 Work out 80% £8,400
As the maximum amount payable for this grant is £7,500, the grant is capped and paid at that figure.
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The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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