The needs of contractors and freelancers seem to have been somewhat ignored in the Government’s economic support package for the Coronavirus pandemic.
We appreciate that those working in this sector may have many questions and queries that need answering, which is why we have prepared a helpful Q&A below:
Can I apply for the Self-Employed Income Support Scheme?
The Self-Employed Income Support Scheme (SEISS) will pay self-employed individuals an amount equivalent to up to 80 per cent of their average monthly trading profits, capped at £2,500, to cover at least the three months from March.
People who pay themselves a salary and dividends through their own company will not be eligible for the scheme.
HMRC has said that self-employed people will have to confirm that their trading has been adversely affected by Coronavirus. To assess this the tax authority will use a ‘risk-based approach’ to compliance.
If I am not eligible for SEISS, what are my other options?
The Coronavirus Job Retention Scheme is likely to be your best option at the moment. It is a temporary scheme open to all UK employers until at least the end of June that is designed to support employers whose operations have been severely affected by coronavirus (COVID-19).
Employers can use the HMRC portal to claim for 80 per cent of furloughed employees’ usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
Unfortunately, this is calculated via salary income and does not take into consideration dividends.
Any UK organisation with employees can apply for the scheme including:
- recruitment agencies (agency workers paid through PAYE)
- public authorities.
However, you must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account to access the scheme.
Does the scheme apply to directors?
Yes, directors of a company can be furloughed. The guidance provides an exemption for company directors who are also furloughed employees to carry out duties “relating to the filing of company accounts or provision of other information relating to the administration of the director’s company…”. This may include Companies House submissions and other statutory duties.
During this period directors should be careful to avoid anything that could be mistaken for work, including posting promotional material on their social media feeds.
We operate in the public sector, how does the CJRS apply to the current IR35 rules?
It may be appropriate to furlough IR35 contractors deemed employees “in a small number of cases”.
Public sector organisations have to confirm this with both a contractor’s Personal Service Company (PSC) and the fee-payer and agree between the parties that the contractor will not carry out work for the organisation during the period of furlough.
The fee-payer – usually the agency that pays the PSC – will have to apply for a furlough payment of 80 per cent of the monthly contract up to the £2,500 cap and the employer National Insurance Contributions (NICS).
The fee-payer will then need to pay the furlough payment in respect of wages to the PSC via PAYE and make the necessary tax and NIC deductions.
The PSC will have to report the payment to the contractor as deemed employment income via PAYE using box 58A on the PAYE Real Time Information return.
If a contractor opts to furlough themselves as an employee or director of their PSC, and they are still receiving an income from a public sector organisation, including through the CJRS, they must deduct this income from their reference pay for the CJRS.
Work has completely stopped, I am on the CJRS, but because I am mainly paid via dividends, is there any other financial support available to me?
The Government has indicated that those who cannot access sufficient support via the measures on offer should apply for benefits to supplement their income. The amount you can receive will depend on your income and the number of dependants in your family. If you feel that you need this support it is recommended that you visit the Governments dedicated webpage here.
Can I seek support via a Coronavirus Business Interruption Loan?
The Coronavirus Business Interruption Loan (CBILS) is available to all businesses with a turnover below £45 million. If you operate via a Personal Service Company, the business may be eligible.
However, remember that the business will remain 100 per cent liable for the debt. An 80 per cent guarantee offered by Government is simply to provide some recourse for the lender in the event of a borrower defaulting on their debt in future.
Rejected applications should not affect your businesses credit rating, but non-payment of an accepted loan will.
You are strongly advised to seek advice before seeking a CBILS finance facility to ensure it is appropriate to your needs.
Would a Bounce Back Loan be more appropriate?
The Government has announced another new loan scheme, that will work alongside CBILS known as the Bounce Back Loan scheme (BBLS).
This offers finance of between £2,000 and £50,000 to all businesses if they are struggling as a result of the pandemic.
Unlike CBILS, these loans are 100 per cent backed by the Government, which should mean they are easier to access and that money can be released sooner.
Can I defer my self-assessment payment?
Income Tax Self-Assessment payments due on 31 July 2020 will be deferred until 31 January 2021 for self-employed individuals.
Again, this is an automatic offer and it is not necessary to apply to benefit from it. No penalties or interest for late payment will be charged during the deferral period.
I am not self-employed but I still report other income via self-assessment, can I seek a deferral?
Yes, you can delay making your second payment on account. If you choose to delay, you’ll have until 31 January 2021 to pay it.
Can I defer VAT as well If I am VAT-registered?
All VAT payments, apart from import VAT and VAT MOSS, have been deferred by three months from 20 March 2020 until 30 June 2020. During this period, businesses will not need to make VAT payments to HM Revenue & Customs (HMRC).
Businesses will have until 31 March 2020 to pay any liabilities that have accumulated during this period. The deferral is automatic and businesses do not need to apply to be able to benefit from it.
However, you must cancel any direct debit manually with your bank immediately to make use of this deferment or HMRC will continue to take payments.
Can I still reclaim VAT during this period?
HMRC will continue to process VAT reclaims and refunds as normal during this time.
I am struggling with my commercial rent, what can I do?
As part of the Government’s Coronavirus Act 2020 (the Act), new measures were introduced to protect commercial tenants. Section 82 of the Act bans the forfeiture of commercial leases until 30 June 2020 for non-payment of rent, thus preventing evictions.
Although landlords are unable to evict tenants, they are permitted to take several other steps including Commercial Rent Arrears Recovery (CRAR), making a debt claim, issuing a statutory demand, or commencing winding-up proceedings.
I am unable to keep up with credit card payments, is there any support on offer?
The Financial Conduct Authority (FCA) has fast-tracked new measures that force banks to freeze loans and credit card payments for up to three months to help those individuals whose finances are affected by the Coronavirus outbreak. This includes:
- A three-month repayment freeze on loans;
- A temporary freeze on credit card and store card debt up to three months; and
- Zero-interest for three months on up to £500 for customers affected by Coronavirus using an arranged overdraft for up to three months.
The FCA wants to ensure that “consumers are no worse off and not paying more than they would have under previous prices.”
It is recommended that you speak with your lender to ensure you can make use of these facilities.
I cannot afford to pay the finance on company vehicles, what are my options?
Businesses and individuals currently repaying finance on vehicles are to be granted a payment holiday under new measures from the Financial Conduct Authority (FCA).
The financial watchdog is currently consulting with motor finance firms to grant a three-month freeze, which is expected to come into force sometime after 24 April 2020.
Motor finance companies have also been asked to halt repossessions and not end loan agreements with customers who are “experiencing temporary financial difficulties due to coronavirus”.
Here to Help
If you are struggling to get to grips with the new financial measures introduced by the Government and other organisations then our team at Cogent are here to offer a helping hand.
We are sure you will have many more questions in the coming months and we will be here to provide you with the answers you need.