Q. I am fairly new to contracting, having only formed my limited company in January of this year. I worked for a client for a week in January, however, since then I have been unable to find new opportunities. It’s been over four months since I last worked and I don’t know how much longer this will continue. Am I eligible to receive any benefits from the Government, such as the Coronavirus furlough scheme or even jobseeker’s allowance?
A. You can claim via the Coronavirus Job Retention Scheme (CJRS), as an employee of your personal service company. However, this initiative pays out 80% of PAYE salary only – it doesn’t take into account dividends which, for most contractors, make up the vast majority of their income. As a result, many contractors have found they are eligible for 80% of around £700 per month, compared to a typical employee, who will have 80% of their salary covered up to £2,500.
The CJRS will continue until October, but the Government contribution will drop to 70% in September and 60% in its final month. The cut-off date to apply is 10th June. Whether you will be able to claim may rest on whether you had set up payroll via your personal service company. More information can be found here.
There is a range of other help available to contractors, including the Coronavirus Business Interruption Loan (CBIL) and the recently unveiled ‘Bounce Back Loan’, which allows firms to borrow up to 25% of their turnover (up to £50,000) interest-free for 12 months. However, given your business was formed as recently as January and you have only worked for one week, it’s unlikely that you’ll be in a position to borrow a substantial amount. For more on the Coronavirus support for small businesses, read this article.
Whilst not a significant amount, applying for Universal Credit is another option to consider. This starts at £342.72 a month, but it’s worth firstly checking your eligibility and using the Government’s calculator to find out how much you’re able to receive. Do this here.
Given contractors fall between the cracks of the Government’s Coronavirus support, the Chancellor has found himself under increasing pressure to rethink the help available to hundreds of thousands of independent workers, like yourself.