Over the last few months, the Government has provided a raft of financial support in an attempt to help the self-employed, business owners, and employees weather the storm caused by the coronavirus pandemic. Packages such as the furlough scheme, the Self-Employment Income Support Scheme (SEISS), as well as a variety of Government-backed loans have been made available since March, however, many of these are coming to an end.
SEISS paid out its second and final grant in September, while the furlough scheme is due to end this month. But with infection rates rising and restrictions tightening, many have been waiting for Chancellor Rishi Sunak to step in with further support packages in order to avoid mass unemployment. Last week, he announced a variety of support measures – some new, some extensions or variations on existing support.
Here at Kingsbridge, we’ve had a chance to really look through these measures and what they mean for contractors.
SEISS is being extended
If you are eligible for the SEISS grant (you unfortunately won’t be if you’re a limited company contractor) and your business is continuing to be adversely affected by COVID-19, then you will be pleased to hear that SEISS has been extended to cover six further months from November 2020 to April 2021. However, it is greatly reduced in terms of pay-out.
The grant will be paid in two lump sums with each one covering a three-month period. This means that the first grant will cover from the start of November until the end of January next year. It will take the form of a taxable grant covering just 20% of your average monthly trading profits for three months and will be capped at £1,875.
This isn’t a lot of money but, if you are eligible then it may just help bridge the gap until things pick up further.
Details of the second grant are yet to be announced but it will cover February 2021 to April 2021 and could be adjusted to suit the circumstances of the time.
HMRC will provide details of how to claim the third SEISS grant nearer to November, however, you should remember that if you have not yet claimed the second SEISS grant and are eligible for it, you should do so before the 19th October 2020 deadline.
There’s a new Job Support Scheme
During the last few months, some limited company contractors used the Job Retention Scheme in order to receive 80% of their PAYE salary and ensure they had some income. The Job Support Scheme replaces this, although it’s less generous overall and requires more financial input from the business owner.
The scheme is designed to protect jobs in businesses that are currently facing lower than normal demand. The idea is that the Government will pay a third of an employee’s unworked hours, while the employer will also contribute a third, meaning the employee gets at least 66% of their usual salary. The employee must be working at least 33% of their usual hours to be eligible.
This could be of some assistance to limited company contractors who have started working again, but not at their usual capacity. However, it is of little use to those whose work has not yet begun to pick up. It also only covers PAYE salary, which means that for contractors who draw down most of their income from dividends, it only represents a very small fraction of overall income.
Extensions to loans
As well as direct income support, businesses have also been relying on various loan schemes backed by the Government. The Bounce Back Loans and the Coronavirus Business Interruption Loan Scheme (CBILS) were due to close to applicants. However, the deadlines for both (along with other Government loan schemes) have been moved to the end of November.
In addition to this, banks have been given until the end of the year to process the loans.
Recipients of Bounce Back Loans have will be given longer to repay, as well as more flexibility in how they make the repayments, with the ‘Pay As You Grow’ repayment scheme announced. Sunak told MPs in the House of Commons:
“This means loans can now be extended from six to 10 years, nearly halving the average monthly repayment. Businesses who are struggling can now choose to make interest-only payments and anyone in real trouble can apply to suspend repayments all together for up to six months. No business taking up pay as you grow will see their credit rating affected as a result.”
The interest-only repayment periods can last up to six months and businesses will also be able to take advantage of repayment holidays.
How can these announcements help you?
There’s no easy answer to that question because it will all depend on your own personal circumstances as a contractor. You may be eligible for some things but not others and it’s up to you to work that out. If you have an accountant, you could discuss your options with them, or speak to HMRC directly.
It’s also worth bearing in mind that, at some point in the future, the Government is going to seek to recoup some of the money they’ve spent on coronavirus support. Rishi Sunak has already suggested the self-employed will see tax rises and, with the IR35 reforms set for April 2021, it’s not a stretch to imagine HMRC will be looking to use that as a way to claw back some of the funds they’ve put out.
This could have the potential to make some end clients nervous with regards Status Determination Statements (SDS) which could force knee jerk responses.
You can protect yourself against this, and make yourself a risk-free prospect for clients with Kingsbridge’s IR35 Protect insurance, which protects everyone in the contractor supply chain, flexing to cover whoever holds the tax liability for each engagement you take up.
Our Standard and Premium packages also include IR35 status reviews, so your client can issue your SDS with confidence. Call us on 01242 808740 to find out more.
