Small Business Minister is exploring various ways to support contractors during COVID-19 crisis

As millions of freelancers and contractors struggle to find sufficient financial support during the Coronavirus crisis, the Small Business Minister, Paul Scully, has announced that he intends to “work up a scheme to present to the Chancellor.”

Mr Scully has told The Financial Times that he is searching for a solution that better supports individuals that pay themselves a salary and dividends through their own limited company, who may be ineligible for some of the support currently on offer.

Directors who work through their limited company, many of whom are contractors, are not eligible for the Coronavirus Self-Employment Income Support Scheme (SEISS), while the Coronavirus Job Retention Scheme (CJRS), which they may be eligible for, could see their income significantly reduced.

The CJRS will cover 80 per cent of PAYE earnings (capped at £2,500 per month), but for those low-salaried contractors who top up their earnings by drawing dividends, it may mean they see a drastic decline in income.

What’s more, the SEISS allows recipients to continue working and receiving the grant, whereas the CJRS requires a director to be furlough, preventing them from doing any work that may generate revenue for the business.

The Small Business Minister, who has run a number of small businesses himself, has admitted that he used to also pay himself in dividends and that he understands the frustrations of directors.

IPSE, the trade body for contractors and independent professionals, has conducted a study that found that 69 per cent of limited company contractors do not think the Government’s measures are enough to sustain them.

They have welcomed Mr Scully’s comments and made suggestions to the minister on how contractors could be better supported.

They feel the easiest solution would be to include dividends in the CJRS. Alasdair Hutchison, Policy Development Manager at IPSE said: “It is very welcome that Mr Scully is looking at ways to plug the gap for company directors.

“One way to do this would be to include dividend income in the Government’s Job Retention Scheme, which company directors are eligible for. This would enable many limited company contractors who pay themselves through dividends to make full use of the scheme.”

IPSE has stressed that time is very much of the essence and urged Mr Scully and the Chancellor to “act quickly to extend their support package to this vital and varied section of the workforce”.

Despite Mr Scully’s comments and an encouragement from the Chancellor Rishi Sunak that “all ideas are welcome”, The Financial Times has reported that the Treasury has indicated that there are “no plans to change the existing arrangements”.

In light of the current plight of contractors, a petition has been launched calling on the Government to include limited company contractors in the COVID-19 support package, which has been signed by more than 340,0000 people. To sign this petition, please click here.