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.
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.”
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.