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Coronavirus and the self-employed contractor

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In the early days after the launch of the Coronavirus Job Retention Scheme, which introduced the concept of furloughing for employees, the self-employed were demanding: “What about us, we need help too!”

The self-employed/contractors have been thrown several possible lifelines by the Government in recent weeks: some are more welcome than others; some unfortunately are not available to them because they do not meet the strict eligibility criteria.

The Self-Employed Income Support Scheme (SEISS) allows eligible self-employed individuals to receive a taxable grant of 80% of their average monthly trading profit over the last three years - up to £2,500 a month. The scheme will run for an initial three months and may be extended.  To be eligible, the individual must meet the following requirements:

  • They must have traded in the tax year 2019-20 and still be trading when they apply (or would be trading but for COVID-19)
  • They must have submitted a self-assessment tax return for the tax year 2018-19 by 23 April 2020 – this will preclude a huge number of new businesses from applying
  • Their trading profit must have been less than £50,000 in the 2018-19 tax year, or their average trading profit over the last three tax years must be less than £50,000 a year
  • More than half of their income must have come from self-employment during the above periods
  • They must intend to continue trading in the tax year 2020-21.
  • They must have been adversely financially impacted by COVID-19.

HMRC will contact the estimated 3.8 million individuals considered to be eligible to invite them to make a claim. The grant will be paid as a single lump sum covering the 3-month period from March to May 2020 inclusive, and HMRC expects to start paying the grants in early June.

To further assist, the Government has suspended the minimum income floor for the self-employed so that they can access Universal Credit at a rate equivalent to the SSP received by employees – currently £409.89 per month (unless you have a disability, are a carer or have children to look after).  Self-assessment payments have also been deferred until January 2021.

Contractors might also be entitled to access the coronavirus small business loans, including the “Bounce-back loans” scheme depending on eligibility.

Surprisingly, some contractors can ‘furlough’ themselves in order to access the Coronavirus Job Retention Scheme payments.  This is where they are officeholders (including company directors of their own Personal Service Company) and meet the eligibility criteria for the scheme.  A decision to furlough a director should be formally adopted as a decision of the company, noted in the company records, and communicated in writing to the director. Work undertaken by that director to fulfil a legal obligation to file company accounts or provide other information relating to the administration of the company is permitted without falling foul of the requirement of the furlough scheme not to undertake any work.

IR35 workers operating out of personal service companies, PAYE agencies and their own umbrella companies may be eligible to be placed on furlough leave, but only if they are working for public sector organisations; they then cannot take advantage of the SEISS. 

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