COVID-19: Government support is welcome but too many businesses and workers could miss out

Author
Claire Ralph
Policy Manager | Business West
1st April 2020

Last week when Chancellor Rishi Sunak announced a Government support package for the UK’s 5 million self-employed, he acknowledged that the technical difficulties in designing the long-awaited Self-Employment Income Support Scheme (SEISS) were to blame for the delay. 

The dizzying array of working arrangements that come under the umbrella of ‘self-employment’ meant that Government faced a mammoth task in designing a support package that would fairly target and deliver financial assistance to those who need it fast. 

Despite the government’s best efforts, we expect a significant number of self-employed in our region who are in dire need of help will slip through the net.

Under current arrangements, sole traders or partners will miss out on government support if any of the following applies to them:

  • Self-employed businesses that made a loss overall in the 3 tax years to 2018-19;
  • Those who commenced self-employment after 5 April 2019;
  • Those who were employees earning a salary alongside setting up their self-employment business between 2016-17 and 2018-19 where their employment earnings were higher than trading profits;
  • Self-employed businesses that had a few boom years within the 3 reference years when profits were >£50,000 p.a regardless of their profitability since April 2019;
  • The self-employed who have incorporated their business into limited companies, will also miss out as they are no longer sole traders or partners. 

Adding to the mounting financial woes businesses are experiencing right now, some business owners hoping to take advantage of the Coronavirus Job Retention Scheme may find themselves out of luck.

The Coronavirus Job Retention Scheme covers employees where the employing business has insufficient work for them due to Covid – 19 disruption  and who were employed via PAYE on 28 February 2020. The employer is able to claim back 80% of the pre-tax salary costs of furloughed workers (up to a cap of £2,500 per calendar month) plus employer costs such as secondary National Insurance Contributions for 3 weekly periods. The scheme specifically excludes the following:

  • Employees of a business where the PAYE scheme wasn’t started by 28 Feb 2020;
  • Employees who were laid off after 28 Feb 2020 and haven’t been re-hired since;
  • Employee costs where met by public funding;
  • Employees hired after 28 Feb 2020 or on statutory sick or maternity pay or unpaid leave at this date.

It is currently unclear whether sole shareholder/directors of personal companies are eligible to furlough themselves, and we are seeking urgent clarification on this point.

Don’t get me wrong, whilst we welcome the government’s support measures in terms of their ambition and scope, the race to design these initiatives and get them online has meant that some businesses have been left behind. 

Now that both schemes have been announced, attention must now turn to getting the cash into businesses, clarifying how they work and helping plug important gaps in the economic safety net.

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