Government Package for Self-Employed and the current situation for business owners
The Chancellor has now announced details of the package that the government will offer to protect the self-employed from the sudden and unexpected reduction in work that has been caused by the Coronavirus pandemic. This announcement came after the government faced significant pressure to extend the financial protection offered under the Coronavirus Job Retention Scheme to the self-employed.
In order to support self-employed workers, the Government has committed to setting up a scheme that will allow self-employed workers to claim a taxable grant worth 80% of average monthly trading profits, capped at £2,500 per month. At present the grant is available in respect of the next three months, but this may be extended. Current guidance states that trading profits will be calculated by assessing the average profits from the three previous tax years.
Whilst the details and mechanics of the scheme are yet to be crystallised, government guidance sets out an initial series of eligibility requirements for the grant. It appears that self-employed workers will be eligible for the grant provided that:
- they have submitted their tax returns for the 2018-19 tax year (the deadline for such filings has also been extended to 23 April 2020);
- they are trading in the 2019-20 tax year, will be trading when they apply and intend to continue trading into the 2020-21 tax year; and
- they have trading profits of less than £50,000 and more than half of their income comes from self-employment.
The application process is also still subject to clarification, but the government has advised that HMRC will contact you if you are eligible and will send an invitation to apply online. This scheme is unlikely to be up and running before the end of June so it will not offer immediate assistance. However, unlike furlough leave under the Job Retention scheme, the self-employed will be able to receive the grant and continue to do business (which is good news but is of course subject to work being available in the current situation).
Whilst the grant may come as welcome news to self-employed individuals, concern still remains amongst owners and managers of businesses. Thanks to the Job Retention scheme such owners/managers can shield their employees through furlough leave and are assured that self-employed contractors may access relief through the grant, but furloughing themselves appears to be an unrealistic option for many. To qualify for furlough leave they would need to cease work entirely. For many businesses owners this is not a viable option as they need to supervise the business to simply ensure it does not fold during this difficult time and also they may have directors duties (in respect of financing and managing the business for example) that they are personally obliged to comply with. Business owners are therefore currently caught between a rock and a hard place as they are precluded from accessing government support unless they choose to cease carrying out their duties as a business owner. It appears that business owners are exercising increasing pressure on the government in this respect, but to date we have not heard any further updates on how this issue will be tackled.
Share this blog
- Adtech & martech
- Artificial intelligence
- EBA outsourcing
- Cloud computing
- Complex & sensitive investigations
- Cryptocurrencies & blockchain
- Data analytics & big data
- Data breaches
- Data rights
- Digital commerce
- Digital content risk
- Digital health
- Digital media
- Digital infrastructure & telecoms
- Emerging businesses
- Financial services
- KLick DPO
- KLick Trade Mark
- Open banking
- Software & services