Post Updated: 1st April 2020
As a result of the deadly spread of COVID-19, Boris Johnson has said it is his responsibility to ensure parliament acts like a “wartime government“ and does what is necessary to beat coronavirus, while supporting everyone who will inevitably be impacted by it. The pandemic has already had a significant impact on employers and employees in the UK – resulting in the loss of jobs and severe financial insecurity. But until now, Rishi Sunak had been unclear in explaining his plans for helping the self-employed. However, more information has been made available this afternoon (Thursday 26th March 2020) and here is what we have learned.
Support promised for the self-employed
Before shutting down parliament until at least the 21st April, Boris Johnson had already promised MPs:
“We will do whatever we can to support the self-employed, just as we are putting our arms around every single employed person in this country”.
What is happening for the self-employed?
On the afternoon of Thursday 26th March, Rishi Sunak, Chancellor of the Exchequer, announced that his new scheme offered an “unprecedented level of support for self-employed people” and would “cover 95 percent of all self-employed people”.
Here is what was announced:
- Rishi Sunak announced that this new scheme would benefit 95 percent of all self-employed people.
- Self-employed workers with at least three years of accounts are entitled to claim 80 percent of their monthly wages from the government – for three months (based on profits).
- The amount that can be claimed each month is capped at £2,500.00.
- The scheme is only available for self-employed workers with up to £50,000 trading profits.
- While the government is working hard to get substantial infrastructure set up and running, this scheme for self-employed workers is unlikely to be available until June 2020. However, when it is ready, self-employed workers can claim back previous months in a lump-sum.
- Those who don’t have three years of accounts – the government will look at the accounts that are available and will look to average out pay-outs based on the time the individual has been self-employed.
- Those who are newly self-employed and have not submitted historical tax returns will need to rely on extra support that the government has put into the welfare system. Without information about these workers, Rishi Sunak admitted there is “not much” the government can do because it opens them up to potential fraud and people abusing the system.
- Those who are late in submitting their 2018/19 tax return have a 4 week window to get them filed in order to take advantage of this scheme.
- More information will be made available soon.
What is the governments stance regarding limited company contractors?
The new government scheme to protect the self-employed does not include support for contractors working through a personal service company (limited company). The government state “those who pay themselves a salary and dividends through their own company are not covered by the scheme”.
However, there is still support available to contractors operating through a limited company. The government mentioned that PSC contractors “will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.”
A majority of contractors who are the sole Director of their limited company choose to pay themselves with a combination of dividends and a low salary. Therefore, the Coronavirus Job Retention Scheme will allow these workers to claim 80 percent of the salary they have allocated themselves historically.
Additional measures introduced by the government to support limited contractors affected by Coronavirus
The UK government and HMRC have announced additional measures to provide support to UK businesses and self-employed contractors.
Three-month extension period to file company accounts
You should, where possible, take appropriate measures such as filing your accounts online, to ensure you do not miss the deadline.
If your company has been affected by the Coronavirus pandemic and your accounts will be late, you can apply for an automatic and immediate 3-month extension. You must apply for the extension before your filing deadline to avoid the late filing penalty.
Deferring VAT Payments
The government are offering support to businesses by deferring VAT payments for three months. If you are a UK VAT registered business and have a VAT payment due 20th March 2020 and 30th June 2020 you can defer your company’s VAT payment until a later date.
If you choose to defer VAT payment as a result of the Coronavirus, you must pay the VAT on or before 31st March 2021. HMRC will not charge any interest or penalties on deferred VAT payments as a result of the chancellor’s announcement.
More information about how to defer a VAT payment can be accessed on the government’s website.
Please note – if you do not want to defer VAT payment you can still pay the VAT due as HMRC will continue to process this as usual.
Deferring the second payment on account
If you are due to pay the second payment on account by the 31st July 2020 but are facing difficulties due to Coronavirus, you can defer this payment until 31st January 2021.
The postponement is optional, and if you can pay your second payment on account, you should do so before 31st July 2020.
If you need to defer, no interest or penalties will be charged until 31st January 2021. During this time, you can set up a budget payment plan to help settle the deferred payment and spread the cost.
More information about differing the second payment on account is available here.
HMRC Time To Pay Scheme
HMRC’s Time To Pay Scheme offers support to all self-employed people and businesses who may be facing financial stress due to the Coronavirus pandemic. If you have outstanding tax liabilities or are worried about future payments, you may be eligible to receive support from HMRC’s Time To Pay Service.
The scheme is tailored to individual circumstances and is decided on a case-by-case basis.
If you have recently missed a tax payment or you are unable to make a payment, please ring HMRC’s dedicated helpline for support. If you are worried about future payments, HMRC advises you to contact them nearer to the time the payment is due to ensure they can speak to those who urgently need assistance.
Further information about the Time To Pay Scheme can be found on the government’s website.
Keep visiting out blog for the latest developments
Churchill Knight will continue to keep you up to date with the latest news affecting the self-employed. Please keep visiting our blog and follow us on LinkedIn, Facebook and Twitter.
We await more details of the scheme so that we can advise our clients on the best way to proceed. As soon as this information is made available, we will be able to offer guidance to our clients and we will continue to update this post.
