HM Revenue & Customs will pay grants of up to £2,500 a month for three months to millions of self-employed people to support them during the coronavirus outbreak, Chancellor of the Exchequer Rishi Sunak announced.
Large employers have already said the government’s coronavirus job retention scheme announced on March 20 means that they can furlough thousands of members of staff rather than laying them off, Sunak said in a televised address March 26. Local authorities are informing more than 700,000 retail, hospitality, and leisure businesses that they will pay no business rates this year, and a new hardship grants scheme for the smallest businesses is now up and running, Sunak added. Details of government support schemes are being set out at businesssupport.gov.uk.
“I know that many self-employed people are deeply anxious about the support available for them,” Sunak said, noting that many face the prospect of losing their livelihoods through no fault of their own.
HMRC will set out details of a new self-employed income support scheme soon, HM Treasury said in a release. Self-employed people who have been adversely affected by the coronavirus will be able to apply directly to HMRC for a cash grant worth 80 percent of their average monthly trading profit over the last three years. “This covers 95 percent of people who receive the majority of their income from self-employment,” Treasury said. The grant will be taxable.
There are “genuine practical and principled reasons why it is incredibly complicated to design a scheme that is analogous to the one that we have for employed workers,” Sunak had told members of Parliament on March 24.
Treasury said the income support scheme will be open to sole traders and partners with a trading profit of less than £50,000 in 2018-2019, or an average trading profit of less than £50,000 from the last three years (2016-2017, 2017-2018, and 2018-2019). “To qualify, more than half of their income in these periods must come from self-employment,” it added.
To minimize fraud, only those who are already in self-employment and have a tax return for 2018-2019 will be able to apply. But those who have missed the January 31 filing deadline will be given four weeks from March 26 to submit the return. The absence of support for newer businesses will “hit new businesses hard” but is pragmatic in terms of robustness and preventing fraud, Heather Self of Blick Rothenberg tweeted.
The scheme will cover March, April, and May, and grants covering all three months will start to be paid at the beginning of June. Those who pay themselves a salary and dividends through their own company are not covered, but “will be covered for their salary” under the job retention scheme if they are operating Pay As You Earn, Treasury said.
Sunak said he will extend the scheme beyond three months if necessary, adding that “you’ll be able to claim these grants and continue to do business.”
The scheme was designed after “extensive engagement with stakeholders,” including the Trades Union Congress, the Federation of Small Businesses, and IPSE, the Association of Independent Professionals and the Self-Employed, Treasury said.
Measures already announced to support the self-employed include relaxation of the universal credit rules and deferral of income tax and VAT. HMRC published guidance on VAT deferral, pointing out that those who wish to defer payment should cancel any direct debit as soon as they can.
Sunak’s announcement offers a lifeline to the vast majority of the United Kingdom’s five million self-employed people who have “seen their livelihoods vanish overnight,” Adam Marshall, director general of the British Chambers of Commerce, said.
Carolyn Fairbairn, director general of the Confederation of British Industry, said many self-employed people would be hugely relieved. “These new measures will provide essential support to those facing significant uncertainty and loss of income. Given the complexity of the task, it’s understandable this will take time to deliver. Fast clarity on how and when money will reach their bank accounts will help individuals to plan,” she said.
"Building companies will now also be able to close sites to protect workers and public health without having to worry about the losses faced by self-employed workers on those sites,” said Brian Berry, chief executive of the Federation of Master Builders.
“Many taxpaying self-employed who will be helped by today’s measures will be relieved. Although the deal is not perfect, the government has moved a very long way today,” said Mike Cherry, national chair of the Federation of Small Businesses. “This is an incredibly challenging situation for everyone. While the healthcare response is paramount, overcoming the economic disruption also requires a speedy response in the interests of jobs and future growth.”
Sunak pointed out that it was now much harder to justify “the inconsistent contributions between people of different employment statuses.” He suggested that if taxpayers want to benefit equally from state support in the future, “we must all pay in equally in future.”