COVID-19: Contractors overlooked in self-employment package.

Suppliers raise questions on support.

As the Chancellor has announced financial support for the self-employed affected by Covid-19, some in the industry are questioning if the support gos far enough. Tax specialist for freelancers and contractors Qdos, has responded to the COVID-19 support package saying that it overlooks individuals working via their own limited company.

Qdos CEO, Seb Maley, commented: “The Chancellor may have delivered for millions of self-employed workers, but hundreds of thousands of genuinely self-employed individuals working through their own limited companies have been overlooked.

“Like employees, these people pay their tax, contribute billions to the economy and are helping the UK through this crisis. So it’s concerning that the Government has ignored them when it matters most,” he continued. “While delaying IR35 reform last week was certainly the right thing to do, for the freelancers and contractors who have lost all income because of COVID-19, this delay will now feel meaningless for the time being.”

Joanne Harris, Technical Commercial Manager at umbrella employment company Parasol, also believes the measure are good as they stand but may not go far enough: “They will no doubt be a welcome boost to the vast majority of self-employed workers, who were in desperate need of some reassurances from the government after seeing their incomes fall dramatically in recent weeks,” she said.

“Although we appreciate it will be difficult for the government to implement what will essentially be a whole new system, the Chancellor was clear that the earliest HMRC would be able to process these new taxable grants, worth up to £2,500 per month, would be June. This could still cause a lot of problems for those facing hardship right now who will be potentially left relying on welfare support in the short-term.”

Harris also raises the issue of PSCs: ”Although the Chancellor recognised that the self-employed are a diverse population, there was no specific mention for many hundreds of thousands of contractors and freelancers working through Personal Service Companies (PSCs) in the UK.

“These solo workers operate through their own limited companies and support a wide range of sectors – everything from IT to manufacturing and the creative industries – and they effectively fall through the cracks of all the coronavirus support measures announced so far.

“Tonight’s announcement offered no clarity on if PSC workers would be included in the new measures for the self-employed,” she said. “However, guidance published on the government website soon afterwards confirmed that PSC who pay themselves salary and dividends will not be eligible for the scheme but will now be covered by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

“Given that the majority of these workers pay themselves a monthly salary of around £719, it’s clear that PSC workers have simply been left behind and are now facing the harsh reality of just £575 a month in financial support from the government.”

Interestingly Harris also reflects that this issue could reinforce the Chancellor’s push for ‘equal pay’ in term of tax in the future. She notes that the Chancellor said that if all types of workers want to benefit from state support as they currently are – everyone must pay the same.

“He wouldn’t be drawn on the specific detail of this, however, there will surely be increased tax burdens to come for the self-employed at some stage, so this will be an area to watch closely,” she concluded.

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