The Government has made various announcements regarding financial help during the Coronavirus pandemic.
On Friday 29 May, Chancellor Rishi Sunak announced more details about the extension to various schemes that are currently in place to support self-employed people and Limited Company/Personal Service Company (PSC) contractors. Here is the latest update of information, if you have any questions relating to the schemes detailed blow, please do not hesitate to contact us.
Limited Company Contractors (PSCs)
Coronavirus Job Retention Scheme (CJRS)
The CJRS allows you to claim 80% of your wage from the Government (up to a cap of £2,500 per month). Whilst this has been of limited use to PSC contractors due to their mix of low salary/dividend payments, it is still helpful to those who would otherwise be left with a gap in income. Under the CJRS, the government will also pay the employer National Insurance (ER NICs) and pension contributions for the hours that the employee does not work.
Information regarding the extension of the CJRS has been released, helping you to manage your return to work, as an employee of your own limited company.
Until the end of August, the Government will continue to pay 80% of wages, up to a maximum of £2,500 per month, but now you will have the flexibility to begin working part-time. You will have the freedom to determine your hours and shift patterns to fit your needs – with no minimum time that you can furlough yourself for. You will receive full pay for the hours that you work, but as before, if you’re on a low salary/dividend mix, that still won’t match your usual overall income level. For many contractors, there will be a point where work recommences permanently, and at that point, it will be sensible to end your furlough period.
You will need to submit information on the expected working hours during the claim period and the actual hours worked.
The Coronavirus Job Retention Scheme will be slowly tapered from August. If you are a smaller employer, some or all of your employer NIC bills will be covered by your Employment Allowance, so you should not be significantly impacted by the tapering of the government contribution. However, many PSC contractors are barred from using the Employment Allowance scheme. In reality though, the levels of salary claimed by most PSCs are unlikely to trigger a significant cost, if anything, in the employer’s NIC.
Please note that the scheme will close to new entrants from 30 June, meaning that if your furlough period hasn’t started by 10 June, you won’t qualify (furlough periods have to be at least three weeks in length).
If you wish to speak to a member of our team for more information of the tapering of the Coronavirus Job Retention Scheme, and how it relates to you personally, please get in touch.
Self-Employment Income Support Scheme
The Self-Employment Income Support Scheme currently allows you to claim a taxable grant worth 80% of your average monthly trading profits. This is paid to you in a single instalment that covers 3 months’ worth of profits, capped at £7,500 in total.
As of late, this scheme has been extended: if you are eligible, you can apply to claim the first grant on or before 13 July 2020, and you can claim the second and final grant in August 2020.
If you receive the grant, you can continue to work, start a new trade or take on other employment. This grant does not need to be repaid but it will be subject to Income Tax and self-employed National Insurance.
To be eligible for the scheme, you must:
- Have been trading in the 2018/19 tax year, and submitted your Self-Assessment tax return for that year on or before 23 April 2020
- Have been trading in the 2019/20 tax year
- Be intending to continue trading in the 2020/21 tax year
- Have lost trading profits due to Coronavirus.
This scheme is open to those whose trading profits are no more than £50,000 and for those who derive more than half of their income from self-employment.
If you are eligible…
If you have been identified as someone who is eligible for this scheme and would like to apply for the first grant, you will need the following to hand:
- Your Government Gateway user ID and password – if you don’t have one you can create one when you make your claim
- Proof that your business has been adversely affected by coronavirus
- Your UK bank details, including:
- Bank account number
- Sort code
- Name on the account
- Your address linked to your bank account.
If you are not eligible…
If you have applied and found that you are not eligible to claim Self-Employment Income Support, but believe that you are, feel free to contact us for help in determining your eligibility – a member of our team will be happy to work through this with you.
Please be aware that the online service has recently been updated. This means that if you submitted your returns between 26 March 2020 and 23 April 2020, you should check your eligibility again as you may now qualify to receive this grant.
Extension to the scheme
Since its implementation, the scheme has been extended to offer a second and final grant that you’ll be able to claim in August 2020.
If you’re eligible for this second claim, you can apply for a taxable grant worth 70% of your average monthly trading profits, capped at £6,570 in total. Like the first grant, this will be paid in a single instalment covering a further 3 months’ worth of profits.
You do not need to take any action at present though as the system is not yet up and running.
For PSCs and self-employed contractors
If you’re VAT registered:
Under the new provisions, while the option remains for you to pay as normal, some VAT payments can be deferred until a later date if necessary. Deferred VAT payments must be paid on or before 31 March 2021, though until that date you will be charged no interest or penalties from HMRC on VAT payments if they fall within the specified criteria:
- VAT return payments for the periods ending in February, March and April
- Payments on account due between 20 March 2020 and 30 June 2020
- Annual accounting advance payments due between 20 March 2020 and 30 June 2020.
If you wish to defer payment, you do not need to do anything apart from cancel your VAT direct debit (if you have one set up), or cancel online if you’re registered for online banking.
HMRC will continue to process VAT reclaims and refunds as normal. There is also the ability for you to apply online to move to monthly returns to improve your cashflow.
If you need to defer your self-assessment tax on account payment:
As a result of COVID-19, you can now delay making your second personal tax payment on account (due by 31st July 2020). You will not be charged interest or penalties as long as you pay before 31 January 2021.
If you would prefer to pay regularly throughout the year, you can use a budget payment plan to set this up – let us know and a member of our team will help you to arrange this to suit your needs.
If you can’t pay your tax bill:
If you are worried about meeting any of your upcoming tax payments, you can access the Time to Pay Arrangement which allows you to defer your outstanding payments or arrange with HMRC to pay in instalments. Arrangements are agreed on a case-by-case basis and are tailored to your individual circumstances. Please get in touch with us if you feel that you may need to access the Time to Pay scheme and we can help you calculate what you owe.
We are closely monitoring all Government communications surrounding COVID-19 legislation. We will continue to provide you with updates of further developments as the information becomes available. For more information, please click here.