Published: July 29th, 2020 in Business,
It is widely believed that the UK Treasury is required to act to help bridge the gaps in the government’s ongoing efforts to support people.
A recent report by a group of influential MPs has suggested that there is an excess of 1 million people who are not receiving the support that they need. Despite the government’s schemes to assist with COVID-19 support, there are still large numbers of individuals who are in a position of financial hardship.
The treasury committee is made up of cross-party members whose role it is to examine the administration, policy, and expenditure of the HM Treasury. They also review The Bank of England, HM Revenue and Customs, along with the Financial Conduct Authority (FCA).
The people that are unable to enjoy a direct benefit from the schemes set aside for self-employed and salaried individuals are:
- New Starters
- Freelancers and those on short-term contracts
- Newly self-employed individuals
- Limited Company Directors
Although self-employed individuals are receiving some cover, the ones that are trading above the profits threshold of the £50,000 are deemed to be ineligible for the self-employment income support scheme (SIESS).
Doing whatever it takes
The all-party committee voiced concerns that the Chancellor should make good on his promise to “do whatever it takes” in order to provide adequate means of protection for businesses and individuals caught in the Coronavirus Pandemic.
The committee has also called upon Rishi Sunak – Chancellor to quickly deal with the gaps in both the SIESS and his Coronavirus Job Retention Scheme (CJRS) to ensure that a large volume of businesspeople are not left in a position of facing hardship.
With the furlough scheme being wound down from August, employers face the difficult decisions of making the necessary job cuts to ensure they remain in business.
Costly support packages
At present the two support packages are:
CJRS – The Coronavirus Job Retention Scheme, this provides employed workers with 80% of their salaries, but is capped at £2,500 per month.
SEISS – The Self-Employed Income Support Scheme, provides self-employed people with 80% of their average monthly trading profits. It is based on the trading history of 3 years, with people being ineligible for support if their trading profits exceed £50,000.
On the whole, people have welcomed what the government has tried to do to support the majority of people; however, quite clearly there are gaps where people are without cover.
Financial hardship
The report noted that large sections of the economy have been locked down for many two months, ensuring that financial hardship or difficulties have risen to affect those who have fallen through the cracks apparent in the governments response to the crisis.
Those affected are the businesses and trades that are unable to benefit from the two principal support mechanisms in place from the government.
Essentially there are the four main groupings of people discussed in the report that are bearing the brunt of the financial hardship.
Newly employed or self-employed
The data suggests that in most typical months there are over 500,000 people that start a new job. In addition, there are thought to be hundreds of thousands of people who have embarked on the self-employed route since April 2019. These people are simply not eligible for either scheme.
Self-employed with yearly trading profits over £50,000
It is believed that there are around 225,000 people who are ineligible for the SEISS scheme as they have trading profits that are in excess of the £50,000 cap set by the government.
The directors of limited companies
A figure of around 710,000 accounts for the directors that fall into the group of people who take large parts of their income as dividends, or who make infrequent PAYE payments. While cover is offered, these people can only claim CJRS support on the typically low PAYE element of their incomes.
Short term contract workers & freelancers
Another key group of people are those on short-term contracts and freelancers. These are believed to be ineligible for either of the governments two support schemes.
The government has been advised that it needs to find new additional ways to support these people, especially if it is to complete its previous promise of protecting jobs and incomes.
Addressing these concerns
Finding a way to address the issues faced by the groups who the report states are not receiving adequate support continues to be a bone of contention for the government.
Practical measures suggested include dealing with eligibility criteria relating to new starters by extending the cut-off date to the end of March 2020. In addition, the schemes could widen the acceptable forms of evidence that are used to demonstrate employment, for example, the production of a signed employment contract.
Also, the government could look at the removal of the £50,000 ceiling for the self-employed. If there were to allow people with profits just over this to access the financial support scheme in the same way that salaried employees can, then the potential support they could receive would be significantly enhanced.
Practical solutions are key
Finding practical solutions is critical if the government is going to support the great many limited company directors. As stated earlier the majority of these pay themselves in dividends, thus almost automatically ruling them out from claiming under the CJRS scheme.
There has been a solution that has been prepared and presented directly to the treasury from The Association of Independent Professionals and the Self Employed (IPSE) which has the ability to mitigate future economic damage, while at the same time helping to protect future tax revenues.
These suggestions from IPSE have helped inform the report authors, and their comments, as well as those from other trade bodies, have highlighted the real and serious issues faced by those who do not fit neatly into the criteria set for the two main current support schemes.
Where next for those missing out
It isn’t an easy task to satisfy everyone, especially given the level of chaos created by this pandemic. However, the government is facing calls from many corners to act decisively to avoid prolonging the financial pain that is being experienced by hundreds of thousands of the countries most talented and hardworking individuals.
Boris Johnson and his government colleagues have been given two months to respond to the select committee report, which was published on the 15th of June 2020.
If you or your company need help, then please consider calling the friendly and understanding team at TFMC. Our experienced accountants may be able to suggest other avenues for you and your business to explore, to help you better weather the current crisis.
We can be reached on 0800 470 4820 and look forward to your call.
