Coronavirus update 27 March: self-employed scheme, loan guarantees and manufacturing
Good morning. Without doubt, the biggest news over the last 24 hours is chancellor Rishi Sunak’s announcement of a more generous support package for the self-employed.
Self-employment Income Support Scheme
In a nutshell, if you are self-employed and made an average profit of under £50,000 in 2018-19 (or over the three tax years from 2016-17 onwards), then you can claim a taxable grant worth 80% of your average monthly profit, capped at £2,500. You have to certify that you have lost income due to coronavirus. The scheme is likely to be operational in June and you’ll receive three months’ payment in one go. The chancellor has said the scheme will operate for more than three months if needed. You’ll also be able to claim the grants and continue to do business.
On the surface, the Self-employment Income Support Scheme seems to give the self-employed comparable treatment to employees under the Coronavirus Job Retention Scheme. However, some people are still going to fall through the gaps in the system. Highlighted problems include:
- Self-employed people who have not been in business for at least a year do not qualify (this is designed to prevent fraud).
- Self-employed people who pay themselves via a limited company may run into problems if they have paid themselves only a small salary and taken the bulk of their income via dividends. These people do not qualify for the new scheme. Instead, they can apply for 80% of their salary (not dividends) to be paid via the Coronavirus Job Retention Scheme. Unfortunately, this may amount to very little, depending on your circumstances.
On the positive side, if you haven’t yet filed your tax return due in January, you have four weeks from yesterday to do so.
We will soon publish a simple guide for self-employed people of all statuses. This will make it clear what support you qualify for and what options are open to you. Come back to this blog soon to find out more.
Other recent COVID-19 news
In other business and finance related coronavirus news since yesterday:
- Banks criticised for asking business owners to risk their personal savings to secure emergency coronavirus loans. Yahoo! reports that lenders are asking for securities before issuing government-backed Coronavirus Business Interruption Loans. Under current rules, lenders can’t ask borrowers to use their homes as security, but can take a charge on other assets.The All Party Parliamentary Group on Banking picked up on this on Wednesday, tweeting: “Treasury must issue clear guidance on parameters and not allow security at ‘discretion of the lender’ to muddy the waters. Unprecedented times require emergency funding. Keep it simple, and no PGs [personal guarantees].”
- SMEs in the manufacturing sector are urged to take part in a major survey about the impact of the pandemic on their industry. According to The Engineer, The Manufacturing Barometer went live yesterday. You can access the survey here.
- In lighter news, one Twitter user hit the nail on the head when he heard that cobbler and key-cutters Timpsons had closed its doors because of COVID-19. He said:
Shocked at Timpsons closing I was sure they were key workers
— Daniel Minty (@DanielMinty_) March 23, 2020
Be sure to check back for more news tomorrow. If you have any financial queries, be sure to get in touch. Our accountants may be working from home, but they are still here to help you.