The chancellor, Rishi Sunak, announced a further package of measures for the self-employed community, mirroring the scheme for the employed workforce. The new self-employed scheme will be worth up to £2,500 per month for three months and will be paid in a single lump sum in June, but it could be earlier if the government can establish the process sooner.
Nimesh Shah, a partner at Blick Rothenberg said: ‘It is fantastic that the government has introduced a scheme which puts the self-employed on a level playing field as the employed workforce. However, there are some notable differences and issues which may suggest that the scheme is not as generous as it first seems, and there are some slightly onerous requirements to navigate.
‘Firstly, the scheme is only available to those self-employed persons with average business profits up to £50,000, whereas the furloughed worker scheme had no such cap. Also, the scheme does not recognise the fact that many self-employed persons operate their business through a company; this is not necessarily for any tax reason but for limited liability protection.
‘It was always going to be difficult for the chancellor to design a scheme for the self-employed because there are too many variables in play, and it appears that it was too difficult to consider those operating through a company. It’s also another sign that the government and HMRC do not favour self-employed persons using companies, and it follows the decision to delay the much criticised new IR35 rules.
‘The chancellor proclaimed that the self-employed ‘have not been forgotten’ but a reasonable proportion will not eligible because of the conditions around the scheme.
‘There was also a suggestion by the chancellor that the National Insurance (NIC) position for self-employed persons could be levelled-up in the future by harmonising the NIC rates. Currently, a self-employed individual pays 3% less NIC on profits up to £50,000 compared to an employee (but they also have to pay Class 2 NIC which is £158.60 a year).
‘Given that self-employed individuals have been granted an almost identical package of support to the employed worker (albeit with some restrictions), this could be the pre-cursor opportunity for the Government to end the disparity in the two tax regimes, which it has been wanting to do for some time.’
George Parker, assistant manager at Blick Rothenberg said: ‘Although welcomed, many self-employed workers that have recently started up that have incurred losses will be disadvantaged. Losses tend to occur at the beginning of a business’s life cycle and will reduce the overall average trading profits the self-employed can claim – employees cannot earn losses.
‘Similarly, complex rules exist to new self-employed traders who’s year end is not the 5th April. As a result, their first year’s profit is usually apportioned, thus showing an overall lower trading profit in the first year of trade, and lowering the overall average for three years – in this case.’
Robert Pullen, partner at Blick Rothenberg said: ‘The additional support announced today for self-employed individuals is welcome and should help protect those smaller businesses which have so far not been the focus of the chancellor. This measure, combined with the previously announced rate relief, grants and loan scheme should go some way to propping up the finances of struggling business owners.
‘It is clear that at some point, possibly later this year, we are likely to have an emergency budget. Tax rises are on the horizon, possibly for all taxpayers, which will likely be justified by the chancellor to part fund the massive spending and borrowing now taking place.’
Robert Salter, client service director at Global Mobility and Blick Rothenberg said: ‘Another challenge with the government’s recently announced support for the self-employed is that it requires individuals to have completed tax returns in previous years.
‘While this is clearly an understandable safety-check on the part of the chancellor, it does mean that individuals who have only recently started a business for example and who weren’t therefore classified as self-employed at or before 5th April 2019, for example, would not appear to be eligible for this support.’
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