Are freelancers being forgotten?

 

The self-employed provision from government was a long time coming.

Once it arrived, it was initially regarded as being similar to the ‘furlough’ scheme – the difference, however, is that this system will not be live until June. That is a long way off for many self-employed people with no work and limited cash flow!

It’s clear that the state has struggled to bring this provision together, with questions remaining on the definition of income, turnover and profit as well as further concerns raised on the classification of dividends. This is clearly an autocratic scheme, which was expedited and arbitrary.

Many people are unhappy with the provision, as they are falling through the gaps for a variety of reasons. So…what are you entitled to?

The scheme will give people who are eligible 80% of profit, limited to a maximum of £2500 as a grant. It doesn’t need to be paid back, but remains a taxable income. Calculation is based on a 3-year mean average of profit up until the 2018/19 tax year. If you only have one year’s worth of accounts, they will act on that single year and similarly against a two-year record. If you have been operating for shorter period of time, prior to April 2019, they will only take into account the total profit for the period of trade and count that as your annual profit, not pro rata.

You are only eligible for this scheme if over 50% of your earnings come from self-employment. If it is less you are excluded, but more importantly you are eligible for this grant even if you are still working. If you have only been self-employed since April 2019 – you are not eligible!

If you are a freelancer, you are deemed to be on PAYE and are being asked to approach the company or companies that you work for to be furloughed. The biggest news is that dividends are not covered within the provision.

There is currently no provision for those who are the Director and sole employee of their own limited company – as many in the events world are. Is there a legal case brewing here?

Why do limited company Directors pay corporation tax on profits and personal tax on dividends if the Government are now telling us they don’t classify this money as ‘income’ when calculating their financial rescue packages? Yet when a claim for Universal Tax Credits is made, dividends are classified as income!

I am yet to hear an explanation other than the fact that HMRC are not able to determine the difference between dividends arising from passive investments and dividends from work-related income. Dividends paid to directors of small Ltd companies are NOT a return on investment of capital. Surely it isn’t difficult to identify the trail of income streams via our tax returns.

I’ve just read a tweet from a director of a small limited company applying for universal credit who says he won’t be eligible for UC because he receives dividends. So, either dividends are income, or they’re not. Which is it? The government can’t have it both ways.

Time is of the essence. We need to close these gaps!