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COVID-19: Limited company contractors excluded from self-employed support package

Limited company contractors have been excluded from the Self-Employed Income Support Scheme (SEISS), announced by Chancellor of the Exchequer Rishi Sunak this afternoon to help the self-employed navigate their way through the coronavirus pandemic.

The support package provides the self-employed who have been adversely affected a taxable grant worth 80% of their average monthly profits over the last three years. As is the case for the Job Retention Scheme (JRS), the grant is capped at £2,500 per month.

The Chancellor noted that the SEISS would be available for at least three months and extended if necessary, and that self-employed would be able to claim and continue to do business.

However, the Government briefing acknowledges that the scheme does not apply to contractors trading via limited companies, stating: ‘Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.’

Self-employed support excludes high-earning contractors

Many high-earning contractors are also set to be excluded from the measure. Described by Sunak as one of several “steps to make the scheme deliverable and fair”, the SEISS will only be open to self-employed with trading profits up to £50,000.

The scheme will strictly be available to those who make the majority of their income through self-employment, and who have a 2019 tax return proving their self-employed status.

The Chancellor added: “95% of people who are majority self-employed will benefit from this scheme”, which he claimed is “targeted at those who need it most”.

“While we welcome the support package offered this afternoon by the Chancellor, we would be interested to hear Government’s reasoning for excluding from the scheme the self-employed earning above £50,000, and in particular incorporated freelancers who have been entirely ignored,” comments ContractorCalculator CEO Dave Chaplin.

“It seems grossly unfair that employees of all incomes are covered up to £2,500 per month by the JRS, yet high-earning contractors and all those who are incorporated are penalised during a time of national crisis simply because they excel at what they do.

“Before the Off-Payroll postponement, many legitimate contractors were bracing themselves for the prospect of ‘zero rights employment’ courtesy of the draconian legislation. The prospect of months without work and zero support from Government is arguably much worse.”

Contractor exclusion set to charge Off-Payroll debate

The exclusion of limited company contractors from the SEISS will inevitably add fuel to the fire concerning the ongoing debate around IR35 and the Off-Payroll legislation. There were numerous calls for the alignment of employment status for tax and employment rights purposes during the recent House of Lords Finance Bill Sub-Committee inquiry.

Hilary Benn MP underlined the inconsistency once more yesterday in asking the Chancellor of the Exchequer whether the JRS will apply to those deemed to be employed for tax purposes under IR35.

Prior to this afternoon’s announcement, much discussion about the delayed provision of support for the self-employed centred on the reported difficulties experienced by Government in identifying those who need help. However, Chaplin argues that a very obvious solution is readily available, with many firms having taken measures to assess engagements with their contingent workers ahead of the postponed Off-Payroll Tax:

“Government already has a very simple way of identifying freelancers who it believes work broadly in the same way as employees and are likely to be of high risk of needing urgent support.

“It would cost nothing for Government to align the Coronavirus Job Retention Scheme with use of HMRC’s Check Employment Status for Tax (CEST) tool, which aims to fairly pick out the third of freelancers who are ‘deemed employees’.”

Chaplin adds: “There have also been large numbers of workers whose status has already been assessed by firms, in the build-up to the now delayed Off-Payroll Tax. These determinations could also be taken into account to help identify the most vulnerable self-employed workers who need Government support.”

Published: 27 March 2020

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