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The measures announced by Chancellor Rishi Sunak guarantee self-employed people who work as 'sole traders' and earn up to £50,000, 80 per cent of their average monthly profits over three years. This will be based on their last tax return.
Guidance published on the Government website soon after the announcement confirmed that PSCs (Personal Service Companies) who pay themselves salary and dividends will not be eligible for the scheme but will now be covered by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.
SJD - Guidance
Joanne Harris, from contractor accountancy firm SJD Accountancy, said: "Although the Chancellor recognised that the self-employed are a diverse population, there was no specific mention for many hundreds of thousands of contractors and freelancers working through Personal Service Companies (PSCs) in the UK.
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"The Chancellor's announcement offered no clarity on if PSC workers would be included in the new measures for the self-employed.
"However, guidance published on the Government website soon afterwards confirmed that PSC who pay themselves salary and dividends will not be eligible for the scheme but will now be covered by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.
“Given that the majority of these workers pay themselves a monthly salary of around £719, it’s clear that PSC workers have simply been left behind and are now facing the harsh reality of just £575 a month in financial support from the Government.”
Overall, the measures will be welcome to most of the self-employed, especially in the light of recent research that shows over two in five say that without support they might have had to close their businesses in the next three months. On average, they said they think their savings could cover them for 22 weeks if they had to stop working (although among sole traders this is lower at approximately 14 weeks).
However, many freelancers groups were focused on the fact that the measures are aimed at sole traders rather than freelancers or contractors who inevitably operate through their own limited companies.
SJD - Parity
Joanne Harris from SJD said: "The new Self-Employed Income Support Scheme brings a level of parity for self-employed workers following the measures introduced to protect the incomes of PAYE workers recently.
"They will no doubt be a welcome boost to the vast majority of self-employed workers, who were in desperate need of some reassurances from the government after seeing their incomes fall dramatically in recent weeks.
"Although we appreciate it will be difficult for the Government to implement what will essentially be a whole new system, the Chancellor was clear that the earliest HMRC would be able to process these new taxable grants, worth up to £2,500 per month, would be June. This could still cause a lot of problems for those facing hardship right now who will be potentially left relying on welfare support in the short-term.”
IPSE - Historic lifeline
IPSE represents the interests of both the self-employed and freelancers.
On the one hand, it welcomed what it described as a 'historic lifeline' of financial support for the self-employed, while pledging to keep working with the Government to push to extend measures to all freelancers in need during the Coronavirus outbreak.
Derek Cribb IPSE said: “This will offer essential support to the many hard-working self-employed people across the country who are losing projects and contracts because of the Coronavirus outbreak.
“We understand this is an immense and complex undertaking, and urge the Government to get this vital support to freelancers as soon as practically possible.
“This is an unprecedented package and a very welcome response to our campaign for freelancers and the self-employed.
“While this assistance is practical and wide-ranging it does not, however, cover all self-employed people. We will keep working to fill in these gaps.”
Qdos - Overlooked
Tax specialists Qdos recognised that the Government had delivered for millions of self-employed workers, but claimed that individuals working through their own limited companies had been 'overlooked'.
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“Like employees, these people pay their tax, contribute billions to the economy and are helping the UK through this crisis. So it’s concerning that the Government has ignored them when it matters most.
“While delaying IR35 reform last week was certainly the right thing to do, for the freelancers and contractors who have lost all income because of COVID-19, this delay will now feel meaningless for the time being.”
APSCo - Clarification
Agency group APSCo welcomed both the clarification that the job retention scheme would apply to agency workers, and the help for the self employed.
Tania Bowers from APSCo said: “We are very pleased that the recruitment sector now has some clarity over how the Job Retention Scheme will work. There is clear reference in the guidance to those working through an employment business and the guidance clearly sets out how to calculate payments for workers whose pay varies (i.e. zero hours and agency workers).
"The other good news is that the grant will also cover the cost of NI and pension contributions. The cap is in respect of the employee’s salary – employers NI and minimum statutory pension payments paid in respect of that salary can be claimed back on top of the £2,500.
“We also welcome the package announced for the self-employed although contractors working through a PSC in the professional sectors served by APSCo members are unlikely to benefit as they will generally be generating profits above the £50,000 trading profits cap.
"We noted the Chancellor's comment on the fairness of the differential rates of tax for the self-employed and how this could be subject to review. We have long called for a review of employment status for tax and rights and a separate definition of Independent Professional for highly skilled contractors."
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Susie Hughes © Shout99 2020
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