Recognising the economic damage that the coronavirus crisis is likely to cause, the government has committed to £330 billion financial measures to help individuals and businesses weather the crisis.
As more and more people contract the virus, as seems almost certain in the short-term, offices may close down, or during the peak of the crisis businesses may be forced to suspend trading by government to halt the spread of the disease. There are also rumours that stock markets may be closed temporarily to stop them from continually crashing.
This may leave contractors, who do not benefit from statutory employment benefits such as annual leave or sick pay, in a situation where they temporarily can’t work. Contractors who develop the disease or come into contact with someone infected with the novel coronavirus may also be prevented from working due to being in hospital, quarantined at home or otherwise too ill to work.
For contractors, the government’s financial measures will be of differing assistance dependent on whether you work as a PAYE Employee (either through an umbrella company, agency PAYE or payrolled directly by your client), a self-employed Sole Trader (or self-employed working through a partnership), or a Limited Company Contractor working through your own company.
PAYE Employee contractors
Last Friday, chancellor of the exchequer Rishi Sunak announced a new “Coronavirus Job Retention Scheme”, under which the government have committed to fund eighty per cent of employed workers’ salaries if they are “furloughed”, or unable to work, capped at £2,500 per month.
Under the scheme, which will run for three months backdated from March 1, your employer can apply to receive eighty per cent of your salary from HM Revenue & Customs. Mr Sunak also said the scheme will be extended past May “if necessary”.
The wage subsidy is extraordinary, particularly coming from a Conservative government. The chancellor said they were “unprecedented measures for unprecedented times”. Under previous proposals, furloughed workers would only have been able to receive Statutory Sick Pay, which is currently £94.25 per week.
How the subsidy will work for contractors in practice remains to be seen: contractors do not receive a uniform salary, however most contractors take home more than the £2,500 per month cap, so it is likely that they will receive the maximum available under the subsidy, should it be made available to them.
PAYE contractors should speak to the company that employs them now, whether that is their umbrella company, agency, or client, in order to confirm their eligibility under this new scheme so that they are clear on their rights before needing to claim under it.
Self-employed contractors have not yet been offered the same earnings guarantee as employed workers by the government.
Under the current proposals, self-employed workers that cannot work, whether due to illness, quarantine or lack of available work, will only qualify for Universal Credit, which the chancellor has recently increased to £94.25 per week to bring it into line with Statutory Sick Pay. He has also removed the minimum income floor to make it easier for self-employed individuals to claim the benefit.
Self-employed workers will also be able to apply for government-backed loans that will be interest free for an initial period of twelve months under the Coronavirus Business Interruption Loan Scheme, launched this Monday, and the next round of self-assessment payments has been deferred from the end of July to next January, which will help people manage cashflow.
HMRC is offering extended Time To Pay (TTP) arrangements to self-employed individuals having trouble paying their tax bills.
The Federation of Small Business and the Association of Independent Professionals and the Self-Employed are currently lobbying for the government wage subsidy to be extended to self-employed workers.
Limited Company contractors
Limited company contractors who operate a salary and dividend split will have the choice of claiming Statutory Sick Pay at £94.25 per week or claiming under the Coronavirus Job Retention Scheme, under which the government have committed to fund eighty per cent of employed workers’ salaries if they are “furloughed”, or unable to work, capped at £2,500 per month. The amount of salary that the contractor receives from their limited company will dictate which is more beneficial. The subsidy received under the scheme will be paid by HMRC.
Contractors who own a limited company should also be eligible for interest-free loans under the Coronavirus Business Interruption Loan Scheme launched this Monday. More information on this scheme can be found on the British Business Bank website.
Last week it was announced that the IR35 reforms known as Off-Payroll would be delayed by one year until April 2021. HMRC is also offering extended Time To Pay (TTP) arrangements to business owners having trouble paying their tax bills.
Financial measures available to all British residents
Regardless of how you operate, there are a number of measures that the government has announced which may benefit you:
- Council tax relief and other financial support is being made available from local authorities (councils)
- Individuals facing financial difficulties may be eligible for a three-month mortgage or rental holiday
- The Financial Conduct Authority is working with lenders to facilitate payment holidays for people having trouble paying back loans or credit card bills
NOTE: This information is correct as of 23rd March and may be subject to change.
23rd March 2020.