A new report from the Treasury Committee has recommended that the Government offer greater financial support to contractors and freelancers, who have been largely excluded from existing COVID-19 measures.
The committee’s report, entitled ‘Economic impact of coronavirus: Gaps in support’, has been unanimously supported by all member of the Treasury Select Committee.
It says that the current support available is insufficient as it misses out important groups working through limited companies and the newly self-employed, which make up nearly a million workers in the UK.
Many individuals who operate via a limited company have fallen through the cracks of current Coronavirus support measures, according to the report, with many relying on the Coronavirus Job Retention Scheme that is based on PAYE salary.
This scheme does not take into consideration dividend payments and prevents even directors from working, which means it is of limited use to many contractors.
In comparison, self-employed workers can benefit from the Self-Employed Income Support Scheme (SEISS), which allows them to make a claim based on trading profits and permits them to carry on working.
The report says: “The Government must assist these people if it is to completely fulfil its promise to do whatever it takes to protect people from the economic impact of Coronavirus.”
In particular, it points out that there must be “a practical solution to supporting hundreds of thousands of limited company directors who are missing out on support because they pay themselves in dividends.”
The report also pointed out that “there are likely to be hundreds of thousands of people who have set themselves up in business since April 2019 who do not meet the eligibility criteria for either the SEISS OR CJRS scheme.”
In response, it has recommended, an “urgent review to see how it can extend support to those newly self-employed who are unable to benefit.”
The report also addressed the fact that thousands of freelancers on short-term contracts have missed out on support, despite paying being paid via PAYE.
This is because they are not engaged in a contract for long enough and have not earned more than half of their income from self-employment or because their contract stopped for reasons other than COVID-19 or that their employer, where they have one, has chosen not to place them on the CJRS.
The report concludes that the Government should “recognise the impact of the Coronavirus on PAYE freelance workers and establish a system of support which ensures that this group of people can access financial support during the crisis. We recommend it gives this group access to financial support that equates to 80 per cent of their average monthly income earned in the first 11 months of the 2019–20 tax year, based on their PAYE tax record.”
Responding to the report, Andy Chamberlain, Director of Policy at IPSE said: “This report is timely and sorely needed by over a million struggling freelancers and others across the UK who have fallen through the cracks in the Government support during Coronavirus. We are very glad the Treasury Select Committee listened to our evidence and warning about the freelance groups that have been left behind.
“There are over 710,000 freelancers who work through limited companies, most of whom are now burning through their savings to get by. This group is a startling and glaring omission from the Government support.
“There are also hundreds of thousands of people who became self-employed just last year, who, in the early stages of their freelance career, are likely to be in a particularly precarious financial position. The Government has left these groups completely out in the cold.
“Recent HMRC data shows over million fewer eligible people than expected drew down on the Self-Employment Income Support Scheme.
“We urge the Government to turn these unused funds to help struggling, left behind freelance groups. We are far from the economy and the freelance sector returning to normal: as the Select Committee report highlights, these vital groups urgently need more support if they are to get through the coming months.”