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The extension of two core government Covid-19 business support schemes has prompted renewed calls for HM Treasury to offer more help to limited company directors as the pandemic continues.
The Chancellor of the Exchequer, Rishi Sunak, confirmed on Friday 29 May 2020 that the government’s Self-Employment Income Support Scheme (SEISS) is set to be extended by a further three months to support individuals whose ability to earn an income has been adversely affected by the pandemic.
The first iteration of the scheme offered self-employed people who earn up to £50,000 a year access to a grant that would provide them with a maximum payment of £2,500 a month to cover any loss of earnings Covid-19 caused them during March, April and May 2020.
The scheme is being extended with the introduction of a second grant worth up to £6,570 that will be paid out in a single installment, which works out at an average monthly payment of £2,190, and is intended to cover any financial losses incurred as a result of Covid-19 during the months of June, July and August.
Sunak also fleshed out further details about what shape the government’s extended Coronavirus Job Retention Scheme (CJRS) will take in the coming months, having previously confirmed on 11 May 2020 plans to keep that specific business support package running until October 2020.
Under the initial terms of the CJRS, employees are eligible to receive 80% of their usual monthly salary, up to £2,500, which will be paid out by the government provided they are furloughed by their employers.
However, in the coming months, the amount of financial support offered through the scheme by the government will be scaled back, Sunak confirmed, as businesses will be expected to start to “contribute modestly” to the furloughed salaries being paid out to employees from the start of August.
“The level of government grant provided through the job retention scheme will be slowly tapered to reflect that people will be returning to work,” said the government, in a statement.
“That means that for June and July, the government will continue to pay 80% of people’s salaries. In the following months, businesses will be asked to contribute a modest share, but crucially individuals will continue to receive that 80% of salary covering the time they are unable to work.”
As such, from August, the government will continue to pay 80% of the wages paid out to furloughed staff, but employers will be expected to resume making National Insurance and pension contributions on behalf of their employees too.
From September, the government’s contribution will drop to 70%, with employers expected to make up the remainder, alongside covering the National Insurance and pension contributions.
Andy Chamberlain, director of policy at the Association of the Independent Professionals and the Self-Employed (IPSE), broadly welcomed the government’s plans to extend both schemes, but queried why the support offered through SEISS is not being extended until October.
“It will be an overwhelming relief for many self-employed people that the government has heeded our calls and extended SEISS. The scheme is a vital lifeline for millions of people and it is absolutely right that the government keeps it running,” said Chamberlain.
“It is fair that, as with the Job Retention Scheme, the government has tapered the support on offer for the self-employed. However, it is disappointing that there will still be two months when employees can access support and the self-employed cannot. The government should watch the situation carefully and be ready to step in if the UK’s self-employed need more support.”
At the same time, he also renewed calls for the government to do more to support freelancers who provide their services to end-clients via limited companies, who are exempt from the support offered via SEISS and can only receive modest support through CJRS.
“It is vital the government does not ignore the self-employed who cannot access this scheme. At the moment, groups like freelancers working through limited companies and the newly self-employed have patently been forgotten. We urge the government to consider these groups and also help them through the coming months,” he added.
As previously reported by Computer Weekly, concerns have been repeatedly raised by contracting stakeholders about the lack of tailored support being offered by the government to see limited company directors through the coronavirus pandemic.
As well being excluded from the SEISS scheme, limited company directors have also found themselves facing a shortfall in income if they furlough themselves through the CJRS, as the government’s salary calculations do not take into account dividend payments.
Seb Maley, CEO of contractor tax consultancy Qdos, said this is a situation the government needs to urgently address, as “hundreds of thousands” of limited company directors and contractors find themselves having to rely on savings to see them through the coronavirus crisis.
“Individuals working via their own limited company have been all but ignored. The longer the situation plays out, the worse things get. Many have had projects cancelled, told their contract won’t be renewed and are under pressure to reduce rates. But unlike employees and sole traders, they don’t qualify for substantial support,” said Maley.
“Those who have lost work because of Covid-19 and slip through the cracks of government help will likely need to rely on savings to survive. But nearly one-third have no safety net. They need a financial lifeline from the Chancellor, who must rethink the support available to this vital sector of the independent workforce.”
Read more about IT contractors and coronavirus
- A lack of clarity over how Covid-19-related furlough pay calculations should be totalled up for IT contractors working for umbrella companies has left many facing financial hardship, it is claimed.
- IT contractors who provide services through their own limited companies will not be able to access government scheme to support self-employed through coronavirus outbreak.
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