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COVID-19: Minister exploring ways to help contractors 

Small Business Minister assessing ways to support contractors 

The Small Business Minister, Paul Scully, has announced that he wants to support the millions of freelancers, contractors and individuals “falling between the cracks” of the Government’s COVID-19 financial help and intends to “work up a scheme to present to the Chancellor.”

As reported by the Financial Times, Mr Scully is searching for ways that individuals paying themselves a salary and dividends through their own limited company can be better supported by the Government throughout the COVID-19 pandemic. 

Currently, 2m people who operate this way aren’t eligible for the Coronavirus Self-employment Income Support Scheme (SEISS). Meanwhile, the Coronavirus Job Retention Scheme (CJRS), which recently launched, covers 80% of PAYE earnings only, leaving low-salaried contractors – who top of their earnings by drawing dividends – unable to claim a significant amount.

Mr Scully, who has run a number of small businesses, explained on a recent webinar that he used to also pay himself in dividends and therefore understands these workers’ frustrations. 

COVID-19 support is “urgently needed”

Lobbying body, IPSE, that revealed 69% of limited company contractors do not think the Government’s measures are enough to sustain them, welcomed the Small Business Minister’s comments. Alasdair Hutchison, Policy Development Manager, believes “more support is urgently needed for self-employed people working through limited companies. The limited company contractors we have spoken to are utterly despondent and feel completely left behind.”

A clear way of solving this problem would be to include dividends in the CJRS, Mr Hutchison added: “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 but only for the small portion of their earnings that comes from PAYE. This would enable many limited company contractors who pay themselves through dividends to make full use of the scheme.”

Meanwhile, Edwin Morgan of the Institute of Directors also praised Mr Scully for being “sympathetic to the need for support for company directors that have been left out in the cold.” Mr Morgan also believes that it’s time for the Government to deliver, having “made much of its backing for entrepreneurs, but too many have been missing out on the existing measures.”

Treasury reluctant to listen

IPSE 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.”

Even so, how likely the Small Business Minister is to succeed in convincing the Chancellor to rethink the financial help available to limited company contractors remains to be seen. Despite Rishi Sunak having said “all ideas are welcome”, the Financial Times reported that the Treasury stated there are “no plans to change the existing arrangements.”

A petition calling on the Government to include limited company contractors in the COVID-19 support has been signed by more than 330,000 people.

By Contractor Weekly

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5 thoughts on “COVID-19: Minister exploring ways to help contractors ”

  1. LookingForWorkAndy

    Whatever Paul Scully decides to do, I hope it’s with IR35 at the forefront of his mind.

    The last thing us contractors need is for a small bit of assistance now that ultimately undermines contractors standing against IR35.

    For example, if Dividends are included in the support given, it adds weight to Chancellor Rishi’s assertion that contractors should be treated the same as employees.

    I’d rather business loans or grants were available to business entities than have dividends included in tax-payer compensation to contractors which will no doubt be later used as a big stick to demonstrate that contractors should be treated with the same employment status as permanent employees.

    I doubt Paul Scully will see this comment/sentiment, but if he does – PLEASE Paul, DO NOT undermine contractors’ standing in regards to the planned IR35 implementation.

    If contractors can remain treated differently now to permanent employees, it will add further weight to our argument that we ARE different and the proposed IR35 plans need revision or scrapping.

  2. John Dall

    Hopefully you can get this through parliament it would be money most welcome. Thank you.

  3. Xed

    It’s worse than they are saying. My company made its annual RTI submission on 24th March (which should be fine, given that we have until 5th April) but when we went to claim via the government portal, it said “Not eligible”.

    Because “your PAYE scheme did not have any members on 19th March 2020”.

    There was a link to write a message to hmrc support, so I explained, adding that I’ve been a member of that scheme for donkeys years, submitting on the same pattern year by year…

    I got a short response from “Martin” re-stating the “PAYE scheme had no members on 19/3” line and ignoring the rest.

    Anyone know what causes their records to think I’ve left a scheme that’s been operating that way for years?

    • Stewart Taylor

      Hi, My Accountant has told me the same ! Because we did our Tax return after 19th March we get Nothing!! We do this at the same time every year up to 5th April, so why is 19th so important?

  4. Phil the Pill

    Never supported the low wage topped up, by dividends way of paying yourself. Unless you are managing to “avoid” paying tax on your dividend in some way then the tax advantages are minimal. Having said that I do have sympathy with those who are finding little or no support at this time including my daughter-in-law whose limited company provides a recruitment service for the hospitality sector! Perhaps there should be some factor based on last 3 month turnover.

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