The Government's self-employment package overlooks contractors, so what help is available?
After it was announced yesterday that the Government will contribute 80% monthly up to £2,500 of self-employed workers’ average profit over the past three years, limited company contractors - who do not qualify for this - were left wondering what support they will receive during the Coronavirus crisis.
While it was disappointing that this measure will not extend to individuals paying themselves a salary and dividends through their own company, the Government has rolled out a number of other initiatives to help small business owners navigate the next few months.
Business Interruption Loan Scheme
As small business owners, contractors are able to make use of the Coronavirus Business Interruption Loan Scheme (CBILS). This measure is designed to help companies with a loan of up to £5m, which can be repaid over six years. The Government will cover all fees and interest for the first year and will guarantee 80% of the loan.
VAT payments on hold
VAT payments have been deferred for three months, with the delay applying from 20th March until 30th June. In most cases, this means you will not need to pay one of your quarterly VAT bills for at least three months. You don’t need to apply for this and all businesses are eligible. The Government will still issue VAT refunds in this period, should you be due one.
Self-assessment payment delayed
Self-employed workers can defer their payment on account for the self-assessment tax return for six months. This was to be paid on 31st July 2020, but after considering the challenges presented by COVID-19, the Government will not expect this to be settled until 31st January 2021. Again, you do not need to apply for this and all self-employed workers - irrespective of whether you work via a limited company or as a sole trader - are eligible.
To reiterate, both of the above are deferrals. If you cannot or decide not to pay this time, it will be added to your next self-assessment or VAT payment.
Statutory Sick Pay (SSP)
While not a substantial amount, self-employed workers who are unwell and cannot work due to COVID-19 can claim Statutory Sick Pay (SSP) of £94.25 per week for two weeks. This covers individuals who have or believe they have contracted the virus and for those who are in self-isolation.
Extra time to file accounts
Businesses can apply for an additional 3 months to file their accounts with Companies House - a move made by the Government to ease the burden and help companies prioritise managing the impact of Coronavirus. This means that if you’re unable to finalise and file your upcoming company accounts due to COVID-19, you will be automatically and immediately granted an extension. You can apply for this on the gov website
Coronavirus Job Retention Scheme
At the time of writing, it’s unclear if contractors will be eligible for this scheme, where HMRC will pay 80% of PAYE earnings up to £2,500 per month. To do so, contractors would need to first reclassify themselves as a ‘furloughed worker’, which in this scenario would be an employee whose employer can’t cover staff costs due to COVID-19.
Once classed as a ‘furloughed worker’, which isn’t straightforward for contractors given they are the only employee of their limited company, HMRC will subsidise 80% of your PAYE earnings up to £2,500 for as long as three months. However, given the majority of contractors pay themselves a low salary, which is then topped up by dividends, this may not amount to much. Even so, it is worth considering in the event that you need financial help and if it is available for PSC contractors, which we believe to be unlikely.
Many contractors will be aware that the Government also delayed the introduction of IR35 reform in the private sector which, along with the measures outlined above, could prove important to the UK’s growing independent workforce as it manages this pandemic.
To learn more about the action taken by the Government in response to the Coronavirus, please visit the gov website