In further measures to help beleaguered UK businesses, the government has stepped in with news of a package that is not dissimilar to the Job Retention Scheme offered to support furloughed employees earlier in the week.
The scheme will pay those “who make the majority of their income from self employment” 80% of their average monthly profits for the last three years up to a maximum of £2,500 and will be open for “at least three months” but as he has done with other COVID-19 measures, the Chancellor has said that he has the option to extend it if necessary.
There will be an earnings cap of £50,000 and aims to cover 95% of self-employed workers.
In order for self employed workers to qualify for this scheme, they should have filed a 2018/19 Self Assessment Tax Return. The government has added this condition to minimise fraud, but the Chancellor admitted that we “shouldn’t let perfect be the enemy of good”, signalling that the system is far from perfect.
Those that started trading in 2019/20 will need to “look at the extra support in the welfare system” and anyone who missed the 31 January 2020 Self Assessment deadline has until 23rd April 2020 to submit their tax return in order to meet scheme’s requirements.
The government advises that “You cannot apply for this scheme yet. HMRC will contact you if you are eligible for the scheme and invite you to apply online.”
The last paragraph of the government guidance (linked below) offers some comfort to Limited Company directors who pay themselves through a combination of salaries and dividends, saying “If you’re a director of your own company and paid through PAYE you may be able to get support using the Job Retention Scheme.” However as employees of their own Personal Service Companies (PSC) it may be impossible to ‘furlough’ a sole director because every company must have a director to manage the company’s affairs.
Even if this PSC obstacle could be overcome, most only pay small salaries (say £12,500 for 2018/19) and the rest in dividends. As dividends are not included as salary in the Job Retention Scheme that would mean the monthly payment will likely be around £833 and that would be subject to National Insurance (both employees and employers) taking off a further £29 per month.
Further details may be found on the .gov website here: https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme