Report calls on Government to help limited company contractors
The Treasury Select Committee has told the Government that it “must” improve the COVID-19 support available to nearly three-quarters of a million limited company contractors and hundreds of thousands of other self-employed workers.
In a report exploring the gaps in the state Coronavirus support, contractors were identified as one of four groups of concern. The remaining three are the newly self-employed, self-employed workers with average profits of £50,000 and above, and freelancers on short-term contracts.
Contractors need “a practical solution”
When focusing on contractors, whose company dividends do not count towards the Coronavirus Job Retention Scheme (CJRS), the Government has been told that it “must find a practical solution to supporting hundreds of thousands of limited company directors who are missing out on support because they pay themselves in dividends.”
In agreement was IPSE’s Director of Policy, Andy Chamberlain, who said most freelancers impacted by COVID-19 are now “burning through their savings to get by. This group in particular is a startling and glaring omission from the Government support.”
CEO of Qdos, Seb Maley, also welcomed the report and praised the Treasury Select Committee for sending a “clear message to the Chancellor, who must plug this hole in the Coronavirus support.”
Maley also questioned why freelancers and contractors have been left “stranded” at a time when many face “tremendous difficulties, as projects get cancelled and they face pressure from clients to reduce their rates.”
Calls to review self-employment support scheme
The Government faces pressure to examine the eligibility criteria for the recently extended Self-employment Income Support Scheme (SEISS). According to the report, “there are likely to be hundreds of thousands of people who have set themselves up in business since April 2019 who do not meet the eligibility criteria for either scheme.”
While recognising the challenges facing the Government, that is tasked with mitigating “the very real risk of fraudulent claims for support”, the Treasury Select Committee recommended an “urgent review to see how it can extend support to those newly self-employed who are unable to benefit.”
£50,000 “cliff edge” must be scrapped
Self-employed workers with trading profits of £50,000 per year or more also slip through the net, finding themselves ineligible for the SEISS. Clarifying the Government’s position, the Chancellor recently said “the average income of those who earned more than £50,000 in 18/19 was more than £200,000. It is not right for the Government to be giving money to individuals with higher average incomes who are more likely to have access to savings and other resources.”
However, with around 225,000 self-employed workers set to miss out on this support, the Treasury Select Committee stressed that the Government “must tackle this cliff edge that exists in the design of the SEISS by removing the £50,000 cap and allowing those with profits just over this cap access to some financial support, up to the total monthly support cap of £2,500.”
Short-term PAYE workers also overlooked
The report addressed the fact that thousands of freelancers on short-term contracts miss out on substantial state support, despite paying PAYE taxes. This may occur due to the worker not having been engaged in a contract for enough, that they do not earn more than half of their income from self-employment, that their contract stopped for reasons other than COVID-19 or that their employer chose not to place them on the CJRS.
As a result, the report calls on the Government to “recognise the impact of the coronavirus on PAYE freelance workers and establish a system of support which ensures that this group of people can access financial support during the crisis. We recommend it gives this group access to financial support that equates to 80 per cent of their average monthly income earned in the first 11 months of the 2019–20 tax year, based on their PAYE tax record in year.”
Commit “unused funds”, urges IPSE
Having contributed significantly to the report, IPSE also suggested a way for the Government to pay for this extra support. According to the association, there are over 1million fewer eligible people drawing down on the SEISS, which led Andy Chamberlain to advise the Chancellor to invest these unused funds to “help struggling, left behind freelance groups. We are far from the economy and the freelance sector returning to normal: as the Select Committee report highlights, these vital groups urgently need more support if they are to get through the coming months.”
The full report can be read here.