End-clients step in to fill the void of coronavirus support measures for PSCs

End-users are starting to step in to fill the void of coronavirus-related official financial support measures for limited company contractors.

Lloyds Banking Group, for example, has offered its contractors two working weeks of pay at their contracted rates, in the event of a 12-week ‘lockdown’ period due to the pandemic.

Although some contractors say the financial support is inadequate, especially as the bank is not lifting its incoming PSC ban despite IR35 reform’s delay, others say it trumps the state’s.

'Very little support'

In fact, “for the vast majority of contractors, consultants and freelancers, there is currently very little [official] support” with COVID-19, calculates contractor accountant James Poyser.

The one exception which could provide a “huge” ballast to contractors, he says, is that their self-assessment income tax payments (due in July) can now be deferred (until January).

Unveiled by chancellor Rishi Sunak on Friday, the income tax deferral scheme is part of a multi-tier, billion-pound package of emergency measures to help firms during the outbreak. 

'Contractors left out in the cold'

But although the package also includes a VAT deferral scheme (allowing limited companies’ VAT March-June payments to be put off until next April), many contractors are unmoved.

One PSC reflected: “If the recent IR35 debacle is anything to go by, the self-employed are not an important part of this country's future.

“The emergency package [from Mr Sunak] may be reassuring for employees and businesses -- and that's great…[but] we [contractors] are left out in the cold.

“[Isn’t it] odd that the IR35 changes were [mooted as] all about ‘fairness’ to employees? But this [absence of government support for PSCs] really highlights where the unfairness lies.”

'Doubtful PSCs are included'

The contractor was alluding to the package’s showpiece being a state guarantee to pay up to 80% of the wages of private sector employees, or up to £2,500 a month, for three months.

At inniAccounts, where Mr Poyser is CEO, the criteria of this ‘Coronavirus Job Retention Scheme’ is being assessed, to gauge if umbrella/agency PAYE contractors are eligible.

He says payments will be backdated to March 1st; could even be extended to beyond three months and, though PSC contractors run PAYE, cautions that PSCs’ inclusion is “doubtful.”

'Applies to furloughed workers'

Others are equally scrutinising the finer details of who qualifies. “We are getting enquiries from members unsure of the eligibility of the salary subsidy”, says agency body APSCo.

“Our understanding is that it applies to furloughed workers as an alternative to redundancy… [as] the exact words by the chancellor were… ‘a grant to cover most of the wages of people who are not working but are furloughed and kept on payroll, rather than being laid off.’”

Status expert Rebecca Seeley Harris advises: “It only applies to staff who are placed on a furlough. So there is a ‘no work’ rule. Their contract of employment has to allow for the furlough, otherwise the employer needs to negotiate it.”

'Opportunistic death blow'

A spokesman for HMRC has been invited to comment on contractors’ eligibility, given that Mr Sunak said employers should contact the department to get the grant for the wages cover.

In the meantime, “we’re getting nothing useful,” one limited company assesses.

“Most of us aren’t VAT registered after the Tories butchered the Flat Rate Scheme. [And] self-assessment…[deferral is] a minor detail…”

Writing online, the contractor added: “[They] have been waging a war against contractors for the last few years and this is an opportunistic death blow.

“IR35 is only delayed, not scrapped so that’s still hanging over us -- if we survive this virus.”

'Government has done nowhere near enough'

Contractor trade body IPSE confirmed that those who work for themselves are right to feel significantly short-changed, compared to those who don’t, in terms of financial support during the outbreak.

“Despite unprecedented measures to support employees, the government has still left the self-employed trailing far behind,” says IPSE’s director of policy Andy Chamberlain.

“The government has done nowhere near enough to support the self-employed. In fact, instead of supporting freelancers to help them keep their businesses going, it is pushing the self-employed into the benefits system.

“Worse, in the benefits system, the amount of money available will simply not be enough to cover many freelancers’ costs.”

Chamberlain was referring to all PSCs (running PAYE) being able to reclaim Statutory Sick Pay, of just £94.25 week -- for two weeks, if they have to self-isolate due to coronavirus.


One ContractorUK reader reflected: "If anything, the government approach to employees versus self employed underlines exactly why we contractors are taxed differently.

"Employees [who self-isolate will] get up to £2,500 a month and I’d get a paltry £94 a week. I’m currently living off of retained funds which wouldn’t be available if I had been operating under IR35."

Nonetheless, some accountants are now asking PSC clients to get in touch so adjustments to payroll can be made, but the government says the “repayment mechanism” for SSP is not yet ready.

'Further clarification'

Moreover, not all PSCs’ advisers sound sure about their clients’ eligibility. “Unfortunately, the government did not identify what was meant by ‘small employers’ or ‘employees’ [in its original announcement],” says employment law firm Chartergates.

“If the reference to ‘employees’ means ‘employees’ as defined within the legislation that governs SSP then on that basis, it would include workers and potentially those with dual PAYE status (i.e. self-employed for employment law purposes and employed for tax purposes). We expect further clarification in the coming weeks from the government.”

'Perilous position'

Others agree that more must be incoming from policy-makers. “We will also be asking about help for the self-employed,” said APSCo’s Ms Swain, ahead of a meeting with advisers to No 10.

Also speaking on Friday, the Institute of Directors said: “The perilous position of the self-employed can’t be ignored.

“While steps to ease the tax burden will provide relief, there are many entrepreneurial people out there who had good businesses last month, but for whom demand has now completely disappeared.”

'Keep them afloat'

At IPSE, a concerned Mr Chamberlain said: “We urge the prime minister and chancellor to match the steps they have taken for employees and create a Temporary Income Protection Fund for the self-employed.

“This should give a temporary, targeted cash injection to the freelance businesses that are struggling most – a financial boost to make up for lost income and keep them afloat.

“We urge the government to act on this and we urge anyone affected to sign our petition to make this happen.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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