Extension to COVID-19 support is ‘woefully inadequate’
Chancellor Rishi Sunak’s Winter Economy Plan has been criticised for ignoring the specific needs of freelancers and contractors, leaving millions to face what one expert has described as a “dark winter ahead”.
In his statement to the House of Commons last week, Sunak said the new job support scheme, which will replace the furlough scheme, is targeted at small businesses.
However, it has been condemned by industry representatives for failing to properly support the reported 2million freelancers, contractors and small business owners who operate through their own limited company and pay themselves a combination of dividends and salary.
One in three contractors to miss out on vital support
And although the Chancellor went on to extend the Self-Employment Income Support Scheme (SEISS) for sole traders, capped at 20 per cent of earnings, the help available is still “woefully inadequate” says Andy Chamberlain, director of policy at IPSE.
He added: “Limited company freelancers and the newly self-employed almost entirely missed out on support in the last lockdown and have faced bleak months of financial devastation. Now they face a dark winter ahead unless the government does more for them.
“Based on the drastic financial hit self-employed people took in the last lockdown, the new 20 per cent cap on support is likely to be nowhere near enough. As well as plugging the gaping gaps in support, government must follow the situation closely and be ready to raise the amount of support SEISS offers if needed.”
According to the association, one in three self-employed people will still miss out on vital support from the government. The extension to SEISS is only open to those who are currently eligible for the grant and are “continuing to actively trade but face reduced demand due to Coronavirus”, guidelines state.
Sunak gives stark warning of future tax hike
Those eligible for the SEISS will receive an initial lump sum to cover three months’ worth of profits for the period from November to January next year, up to £1,875 (20 per cent of average monthly profits). A second grant, which may be amended depending on the circumstances, will be available for the self-employed from February to April 2021.
The Chancellor also announced a new ‘Pay as you Grow’ flexible repayment system for those who took out a Bounce Back Loan. It includes extending the length of the loan from six to ten years, interest-only periods and payment holidays. Sunak also extended applications for the government’s Coronavirus loan schemes.
Alongside this, VAT-registered businesses who deferred their payment earlier this year are able to split this bill into 11 interest-free payments in the 2021/21 financial year. Meanwhile, self-assessment tax return payments will not need to be settled until January 2022.
However, when announcing these changes, the Chancellor gave a stark warning stating that the economy is facing a “permanent adjustment” and implied that in the long run, there would be tax rises.
Contractors need tailored support
Before the Autumn budget was scrapped, rumours suggested that the self-employed could face a significant tax hike, with increases to both Income Tax and National Insurance Contributions on the table.
But while the schemes may provide vital funds for some sole traders, for many freelancers and contractors it isn’t enough and if there are tax rises in the near future, this could be detrimental, warned IR35 specialist Qdos.
Seb Maley, CEO at Qdos, said: “It looks like freelancers and contractors have once again been cast aside when it comes to receiving meaningful support from the government.
“Millions of people working for themselves via their own limited company have had very little to no support for six months now. Yet it will be these independent workers who will prove crucial to the UK’s economic recovery – they will provide businesses with flexibility and skills at a time when they need them more than ever.
“The government needs to look at this specific sector and offer more tailored support if it wants the economy to bounce back quickly.”