Home Coronavirus Updates Concern over government’s self-employed support package

Concern over government’s self-employed support package

by Martin Fullard

Questions have been raised over chancellor Rishi Sunak’s support package offered to the self-employed, 26 March. While support for the self-employed has been welcomed, those operating as the sole director of a limited company have been left in limbo. While this model would usually see a sole employee pay themselves a nominal salary through PAYE, they would also benefit from a tax-free dividend.

As the measures laid out by the chancellor would work out a monthly income up to 80% based on profit worked out from the last three years’ accounts, it leaves limited company sole directors with no choice than to apply for Universal Credit.

It is also unclear whether a sole director can furlough themselves to receive the government support of 80% wages. Theoretically if they could, they would not to be allowed to work for the duration, meaning a return to business would be difficult.

Lex Butler, chair of the Hotel Booking Agents Association (HBAA) expressed concern on this matter, saying: “I see a potential hole in this, which worries me. Those who are sole employees within a limited company are not classified as self-employed or sole traders. As directors of a limited company, they can’t claim the 80% as an employee or as self-employed. So, they will suffer having to apply for Universal Credit where many are already struggling to register, and business loans.”

Butler was, however, welcoming of the help for freelancers, but urged for speed. She said: “At last the chancellor has come to the rescue of the thousands of self-employed freelances who play vital roles in our industry, and with a scheme that gives them parity with employees. It will be a great relief to them.

“But there is great concern because they won’t access this support until June. Some won’t survive the two months without looking to secure the interest free loans, growing their personal debt.”

 The Association of Independent Professionals and the Self-Employed (IPSE) has welcomed the government’s announcement of financial support for the UK’s self-employed. While the package will provide essential support for the majority of the self-employed, IPSE has pledged to keep working with the government to extend measures to all freelancers in need during the Covid-19 outbreak.

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 income. This will be based on their last tax return.

The measures will be welcome to most of the self-employed, especially given recent IPSE and People Per Hour research that shows over two in five (43%) 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).

Derek Cribb, CEO of IPSE noted it was a complex undertaking. He said: “We 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.

“With our mission to support and promote the work of independent professionals and the self-employed, we will keep striving to stop those in need from being left behind.”

Jane Longhurst, chief executive of the Meetings Industry Association (mia) reaffirmed her eagerness to see support for the event’s industry’s valued self-employed event professionals and urged the government to expedite access to funds. She said: “The business, meetings and events industry has to recognise the important part our self-employed professionals play in our overall success. From AV professionals and event organisers to entertainers and sales and marketing professionals, these partners are the cornerstone to driving creativity and growth.

“The mia will continue to push the government to deliver on this promise but urges the chancellor to expedite delivery of the self-employed taxable grant sooner, providing the vital support this sector needs after a month of uncertainty, cancelled contracts, delayed payments and bleak forecasting.

Longhurst also said the industry must also recognise that unlike UK businesses, the self-employed are simply that, and in most cases they will have limited resource to call upon to assist in the application process, planning for the future and legal and financial advice.

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