Coronavirus FAQs

Self-employment and freelancers in the Coronavirus crisis: Frequently Asked Questions

IPSE is compiling a list of commonly asked questions we are getting from freelancers and the self-employed. We are constantly updating this page to reflect the latest government policy and advice. Please note that the support available to you may also depend on whether you are self-employed as sole trader (unincorporated business) or operating via a Limited Company – we have tried to clarify the differences in the Q&As below.

If you have a question that we haven’t answered please email [email protected] and we will endeavour to find an answer for you.

 

Frequently Asked Questions:

What is the Self-Employment Income Support Scheme? Am I eligible? How do I access it?

Update: The Self-Employment Income Support Scheme (SEISS) is being extended. You’ll be able to make a claim for a second and final grant in August 2020. For more information see the Q&A for 'Has the Self Employment Income Support Scheme been extended? Can I apply for a second grant?'

Following sustained lobbying from IPSE and other organisations, on 26 March the government announced a new package of financial aid for the self-employed, called the ‘Self-Employment Income Support Scheme’ (SEIS).

The scheme will support self-employed individuals – specifically sole traders and members of partnerships - whose income has been negatively impacted by COVID-19. As of 29 May, there had been 2.3 million claims from self-employed individuals, worth a total of £6.8 billion.

The scheme will provide a grant to self-employed individuals or partnerships, worth 80% of their profits up to a cap of £2,500 per month. This is based on past tax returns - HMRC will use the average profits from your 2018-19 (and 2016-17 and 2017-18 if applicable) tax returns to calculate the size of the grant. 

You can use an online tool provided by HMRC to check if you're eligible. The eligibility criteria are as follows. You:

  • have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
  • traded in the tax year 2019-20
  • are trading when you apply, or would be except for COVID-19
  • intend to continue to trade in the tax year 2020-21
  • have lost trading/partnership trading profits due to COVID-19
  • have self-employed trading profits of less than £50,000 and more than half of your income comes from self-employment - this will apply for either the tax year 2018 to 2019, or the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019 if you have returns for these years

You can check online to find out if you’re eligible to make a claim. Your tax agent or adviser can also check your eligibility on your behalf using this link: https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference

The online service for the first grant is now available. If you’re eligible and want to claim the first grant you must make your claim on or before 13 July 2020. You can make a claim using this link here: https://www.gov.uk/guidance/claim-a-grant-through-the-self-employment-income-support-scheme

To apply you will need your Self Assessment Unique Taxpayer Reference (UTR), National Insurance number, Government Gateway user ID and password (if you do not have a user ID, you can create one when you make your claim) and UK bank details.

Once you’ve submitted your claim, you will be told straight away if your grant is approved. HMRC will pay the grant into your bank account within 6 working days. 

You’ll have to confirm to HMRC that your business has been adversely affected by coronavirus. You should not claim the grant if you’re a limited company or operating a trade through a trust. If you think you have been overpaid, or that your grant amount is too low, you should contact HMRC to review your case.

You must keep a copy of all records in line with normal self-employment record keeping requirements, including:

  • the amount claimed
  • the claim reference number for your records
  • evidence that your business has been adversely affected by coronavirus

You will need to report the grant:

  • on your Self Assessment tax return
  • as self-employed income for any Universal Credit claims
  • as self-employed income and that you’re working 16 hours a week for any tax credits claims

Full information about the scheme is available here: www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

IPSE has welcomed this package but we acknowledge there are omissions, particularly in terms of those who are Limited Company contractors and those who are newer to self-employment and yet to file a tax return. We will keep working with government to plug any gaps and at the same time provide as much information and support to those who the scheme does not cover.

Has the Self Employment Income Support Scheme been extended? Can I apply for a second grant?

After lobbying by IPSE and other organisations, the Chancellor confirmed on 29 May 2020 that the SEISS would be extended for a further three-month period until 19 October. 

If you are eligible the second and final grant will be a taxable grant worth 70% of your average monthly trading profits, paid out in a single instalment covering a further 3 months’ worth of profits, and capped at £6,570 in total.

If you’re eligible for the second and final grant, and your business has been adversely affected on or after 14 July 2020 you’ll be able to make a claim from 17 August 2020. You can make a claim for the second grant if you’re eligible, even if you did not make a claim for the first grant. Find out more about the extension to the scheme.

Individuals can continue to apply for the first SEISS grant until 13 July. The eligibility criteria are the same for both grants, and individuals will need to confirm that their business has been adversely affected by coronavirus. An individual does not need to have claimed the first grant to receive the second grant: for example, they may only have been adversely affected by COVID-19 in this later phase. Further guidance on the second grant will be published on Friday 12 June.

IPSE has welcomed the announcement that the government is extending the SEISS until August. However, we have also warned that the government has forgotten groups like limited company directors and the newly self-employed and urged it to do more for them.

How much money will I receive through the self-employment income support scheme grant?

Update: The Self-Employment Income Support Scheme (SEISS) is being extended. You’ll be able to make a claim for a second and final grant in August 2020. For more information see the Q&A for 'Has the Self Employment Income Support Scheme been extended? Can I apply for a second grant?'

The scheme will provide a taxable grant to self-employed individuals or partnerships, worth 80% of their profits up to a cap of £2,500 per month. This is based on your past tax returns - HMRC will use the average trading profits from your 2018-19 (and 2016-17 and 2017-18, if applicable) tax returns to calculate the size of the grant.

The payment will cover three months’ earnings – March (backdated to March 1), April and May. To understand how HMRC will works out trading profits and non-trading income, the government has set up a page which shows different worked examples: https://www.gov.uk/guidance/how-hmrc-works-out-total-income-and-trading-profits-for-the-self-employment-income-support-scheme

The money will not be ‘clawed back’. It is intended as a cash grant and therefore you do not have to worry about paying it back, regardless of how your business performs in 2020/21. 

The government announce the scheme will be extended for a further three month period, with individuals able to apply in August. While the eligiblity and application process will remain the same, the second taxable grant will be worth 70% of their average monthly trading profits - not 80% like the first grant - paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.

How does HMRC calculate my income and trading profits to check eligibility for the Self-employment Income Support Scheme? What about expenses?

Update: The Self-Employment Income Support Scheme (SEISS) is being extended. You’ll be able to make a claim for a second and final grant in August 2020. For more information see the Q&A for 'Has the Self Employment Income Support Scheme been extended? Can I apply for a second grant?'

HMRC will assess your eligibility for the grant based on your total income and trading profits. They will use the figures on your tax returns for your total trading income (turnover), then deduct any allowable business expenses and capital expenditure.

Trading profit

Allowable expenses include office costs, travel costs, staff costs, costs of your business premises, training courses and advertising or marketing. It also inlcudes any business expenses deducted through the trading allowance, capital allowances, and flat rate expenses.

HMRC will not deduct any losses carried forward from previous years or your personal allowance from your trading profits.

To work out your average trading profit HMRC will add together all profits and losses for all tax years you’ve had continuous trade. If you have only one year of trading history and that was for 2018-19, that will be used to determine your grant. If you traded in 2018-19 and 2017-18 - or 2018-19, 2018-18 and 2016-17 - then they will use an average across all those years. 

Income

Your total income is the total of all your:

  • income from earnings
  • trading profits
  • property income
  • dividends
  • savings income
  • pension income
  • miscellaneous income (including social security income)

Eligibility 

Therefore, to be eligible for the SEISS, your trading profits must be no more than £50,000 and more than half of your total income for either:

  • the tax year 2018 to 2019
  • the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019

HMRC has published a full guide on this, including several worked examples, here: https://www.gov.uk/guidance/how-hmrc-works-out-total-income-and-trading-profits-for-the-self-employment-income-support-scheme

I am eligible for the self-employment support scheme but have to wait for the money. What other support is available? What can I do until then?

Update: The Self-Employment Income Support Scheme (SEISS) is being extended. You’ll be able to make a claim for a second and final grant in August 2020. For more information see the Q&A for 'Has the Self Employment Income Support Scheme been extended? Can I apply for a second grant?'

IPSE has praised the government for the fact that SEISS is up and running before the June target date, but there are still concerns that the money is not arriving quickly enough for some applicants. With the extension of the scheme, the next round of applications will be August - which could mean a three-month wait for more financial support

If you are waiting for the grant to arrive, we recommend you look at what other options may be of use in the meantime. These could include applying for a bounce back loan, if you are eligible, or Universal Credit. Please note that for Universal Credit, the grant will be treated as earnings - check if you can apply for support before the grant is paid.

Another option may be using money you have set aside to pay for other outgoings, such as tax, to cover any urgent expenses. The government has announced that you can defer July’s self-assessment income tax payment until January 2021 – the money will still have to be paid but at a later date, potentially allowing you to free up some cash to tide you over until June.

My trading profits for 2018/19 were affected by having a child. Can I adjust my SEISS application?

If you’re self-employed and had a new child, you may still be able to make a claim.

If you’re already eligible for the grant based on your 2016 to 2017, 2017 to 2018 and 2018 to 2019 Self Assessment tax returns, how HMRC work out your grant amount will not be affected.

You may be able to make a claim if having a new child either:

  • affected the trading profits or total income you reported for the tax year 2018 to 2019
  • meant you did not submit a Self Assessment tax return for the tax year 2018 to 2019

For this scheme having a new child is any of the following:

  • being pregnant
  • giving birth (including a stillbirth after more than 24 weeks of pregnancy) and the 26 weeks after giving birth
  • caring for a child within 12 months of birth if you have parental responsibility
  • caring for a child within 12 months of adoption placement

You must have been self-employed in the tax year 2017 to 2018 and have submitted your Self Assessment tax return for that year.

You must also meet all other eligibility criteria.

HMRC will work out your eligibility and average trading profits based on your Self Assessment tax returns for either the:

  • average of the tax years 2016 to 2017 and 2017 to 2018 if you were self-employed in both these years
  • tax year 2017 to 2018 if you were not self-employed in the tax year 2016 to 2017

You’ll need to confirm to HMRC that being a new parent affected your trading profits or total income in the tax year 2018 to 2019, and provide supporting evidence. You’ll be able to do this for the first and second grant using an online form in August 2020.

Can I apply for Universal Credit while I wait to be paid the self-employment income support grant?

Update: The Self-Employment Income Support Scheme (SEISS) is being extended. You’ll be able to make a claim for a second and final grant in August 2020. For more information see the Q&A for 'Has the Self Employment Income Support Scheme been extended? Can I apply for a second grant?'

Yes. You can apply for Universal Credit while you wait for the payment to come through. Provided you meet the eligibility criteria, such as having less than £16,000 in savings, you will be assessed on need – you can also ask for an advance that could be paid out within days. A UC application will not affect the grant you receive under SEISS.

However, the government guidance does state you should record the grant as part of your self-employment income, and it may affect the amount of Universal Credit you get. This will not affect Universal Credit claims for earlier periods.

Can I continue to work while I wait to be paid the self-employment income support grant?

Yes. Unlike the Job Retention Scheme designed for ‘furloughed’ employees, you can continue working and earning in self-employment if you are able to if you are eligible for the scheme. This will not have an impact on you getting a grant or the amount available, as this will be based on previous returns. If you can find a way to keep money coming in then you should definitely do so.

I recently became self-employed. Do I qualify for the coronavirus self-employment support?

Unfortunately not. You will have had to file a tax return for self-employed earnings in 2018/19 to be eligible for the scheme and your previous earnings as an employee will not count towards anything.

IPSE is asking the government to consider ways that the current tax year could be factored into calculations. For example, if taxpayers submitted a tax return for 19/20 by the end of April. We are waiting for a response from the government but at present the only other support available would be the bounce back business loans, Universal Credit or tax deferrals.

The only exception is for those self-employed individuals who reside in Scotland. The Scottish Government has set up a Newly Self-Employed Hardship Fund. More informaiton is available here: https://findbusinesssupport.gov.scot/service/coronavirus/newly-self-employed-hardship-fund

What if I am not eligible for the self-employment income scheme? What support is available?

Unfortunately, not all self-employed people will be able to access this scheme. Broadly speaking, this includes the following groups:

  • Those who operate via a Limited Company (‘Personal Service Companies’) and pay themselves dividends
  • Those who became self-employed after April 2019
  • Those whose average earnings are above £50,000
  • People who are part-time self-employed and generate less than 50% of their income from self-employment

IPSE are continuing to make representations to government to ensure there is support available to the wider self-employed population.

However, for those who are not eligible you can find about additional forms of support that have been made available. These include: the Coronavirus Business Interruption Loans, Universal Credit, and tax payment deferrals. Information about these is available elsewhere on this page. We would also encourage you to consider the wider range of measures the government has unveiled, including rent and mortgage support, so that you can manage your finances in the coming months.

What benefits am I entitled to? Should I apply to ESA or UC?

For many self-employed people who see their incomes fall substantially or, in some cases, entirely, Universal Credit (UC) will be the primary route for you to top up your income. Employment & Support Allowance (ESA) is available if you are ill or self-isolating as a result of COVID-19 (more information below).

IPSE will be launching a more comprehensive guide to applying to UC shortly but here we summarise the benefit, the basic eligibility requirements and amounts available.

What is Universal Credit?

Universal Credit is a payment to help with your living costs. It’s an ‘in and out of work’ benefit and was brought in to replace a suite of existing benefits (Child Tax Credit, Housing Benefit, Income Support, income-based Jobseeker’s Allowance (JSA), income-related Employment and Support Allowance (ESA), Working Tax Credit). The rollout of UC is not fully complete - there are still many people on these ‘legacy’ benefits or who live in areas where it is not available, and the following information does not apply directly to them.

How much money can I get on Universal Credit as a self-employed person?

UC is made up of a standard allowance, and some people may be able to get additional amounts, due to their circumstances. This is a difficult area to navigate because what you can claim is largely dependent on your individual circumstances, including: your specific earnings, whether you have a partner and what their earnings are, if you have children, a disability or health condition which prevents you from working, or require help in paying rent.

The government has made some welcome changes in recent weeks to help ensure that self-employed people affected economically by the crisis are better compensated than they would otherwise have been.

First, the main change has been to temporarily remove the ‘Minimum Income Floor’ in Universal Credit for those affected by coronavirus, either economically or in terms of their health. The MIF was a formula used to work out how much UC you should get when self-employed, based on the National Minimum Wage and an assumed number of worked hours. IPSE has always felt this was a bad policy which did not account for fluctuations in people’s freelance incomes – we are pleased to see it removed for the duration of the outbreak. 

The Resolution Foundation has estimated that a self-employed person earning around £20,000 annually would now have an income replacement rate of 85 per cent if their earnings fall to zero, compared to 59 per cent with the MIF in operation, a substantial boost.

Second, the government has announced a one-year increase in the standard allowance of £1,000. This brings the standard allowance available up to an equivalent rate to Statutory Sick Pay - £94.25 a week (£95.85) from April 6.

Universal credit allowance depends on your individual circumstances. Following the changes, new and existing claims will stand at the following:

  • If you're single and under 25 - £342.72
  • If you're single and over 25 - £409.89
  • In a couple and you’re both under 25 - £488.59
  • In a couple and either of you are 25 or over - £594.04

This does not include the additional elements for other costs, such as housing, caring responsibilities or bringing up children. As our friends at Money Saving Expert have noted, It is important to note that from April there will be big change to housing payment within UC – which can be used to cover your rent, interest payments on your mortgages, and any service charges you may pay - has been increased quite substantially which will be reflected in your calculation.

There are many helpful online calculators where you can work out what you me be entitled to. For further information see: www.entitledto.co.uk/

 

Am I eligible for Universal Credit? Is there anything else to consider?

If you or your partner have £6,000 (£10,000 if you are over state pension age) or less in savings this will not affect your claim for these benefits.

If you or your partner have £16,000 or more in savings, you will not be entitled to any of these benefits. If you or your partner have any savings or capital of between £6,000 and £16,000, the first £6,000 is ignored. The rest is treated as if it gives you a monthly income of £4.35 for each £250, or part of £250.

For those directly affected or self-isolating, there will be no attendance requirements, and Universal Credit can be claimed online or via phone. There is a five week wait for the money to come through but you can get an advance. Universal Credit is tax-free.

This is a complex area and IPSE is working with other organisations and the government Business Department to provide you a clear guide. To help guide you through, Citizen’s Advice and Money Advice Service also offer helpful guides.

Can I apply for a Bounce Back Loan?

The government has annoucned an additional loan scheme for small businesses, called Bounce Back Loans. You cannot apply if you are already claiming under the Coronavirus Business Interruption Loan Scheme (CBILS), however if you have received a CBILS loan under £50,000 this can be transferred into the Bounce Back Loan Scheme.

The Bounce Back Loan Scheme aims to help small and medium-sized businesses to borrow between £2,000 and £50,000.

The government will guarantee 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. Loan terms will be up to 6 years. No repayments will be due during the first 12 months. 

The scheme will be delivered through a network of accredited lenders and will open on 4 May 2020. To apply for a loan your business must be based in the UK, have been negatively affected by COVID-19, and not an 'undertaking in difficulty' on 31 December 2019.

Full details of the scheme are available here: https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan

 

What is the Coronavirus Business Interruption Loan Scheme (CBILS)? Am I eligible?

The CBILS is intended to provide government-backed, partially-guaranteed (80%) financial support – via accredited lenders – to small businesses and self-employed people that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.

The British Business Bank says self-employed people with an annual turnover of up to £45m can apply under the scheme, as long as they operate through a business bank account, and generate more than 50% of their turnover from trading activity.

This includes sole traders, freelancers, and limited partnerships, operating in all sectors.

A lender can provide up to £5 million in the form of:

  • term loans
  • overdrafts
  • invoice finance
  • asset finance

The Government will not charge businesses for this guarantee, and will also cover the first 12 months of interest payments for businesses. For more information on the Coronavirus Business Interruption Loan Scheme and the eligibility requirements go to: www.British-business-bank.co.uk/CBILS.

Am I eligible for the Small Business Grant funding?

The Government is providing additional funding for Local Authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBRR), rural rate relief (RRR) and tapered relief. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.

You will be eligible if you are a small business or self-employed and already receive SBRR and/or RRR and you are a business that occupies property. In other words, you are likely to be eligible only if you have a business premises.

For more information see here: www.businesssupport.gov.uk/small-business-grant-funding/

Am I entitled to Statutory Sick Pay?

No. The self-employed are not eligible for SSP and won’t be able to claim for it. If you are ill or self-isolating as a result of Coronavirus, you should be able to apply for ‘new-style’ Employment and Support Allowance (ESA) instead. The standard allowance available through Universal Credit has been increased so that it is available at a rate equivalent to SSP – around £94.25 a week.

What if I have the coronavirus or I am self-isolating according to government advice and I cannot work – what support is available?

If coronavirus means you’re unable to work and you’ve paid enough National Insurance Contributions, you might be able to claim new style Employment and Support Allowance (ESA) if you’re ill.

Self-employed people unable to work because they are directly affected by Covid-19 or self-isolating will be eligible for Contributory or ‘new-style’ Employment and Support Allowance. This is now payable from the first day of sickness, rather than the eighth. Eligible claimants under 25 will be entitled to £57.90 per week, and over 25s £73.10 per week.

You’ll need to have paid enough National Insurance contributions for 2 tax years – in 2020 the tax years are 2017-18 and 2018-19.

This is separate to the broader question of what happens if you are otherwise healthy and are seeing your income fall. For information on this, see the advice on Universal Credit.

What support is available for paying my taxes? What about paying VAT?

The government has announced that your next Income Tax self-assessment payments – due in July 2020 – can be deferred to January 2021 for the self-employed. This is an automatic offer with no applications required. The government website states that you are eligible if you are due to pay your second self-assessment payment on account on 31 July.

The government also states the deferment is optional and “if you are still able to pay your second payment on account on 31 July you should do so”.

The government has also announced that for VAT, the deferral will apply from 20 March 2020 until 30 June 2020. This is an automatic offer with no applications required.

The HMRC helpline is 0800 024 1222. More information is available here: www.gov.uk/difficulties-paying-hmrc

For more general advice and help, the government also has a Business Support Helpline. Information is available here: www.gov.uk/business-support-helpline

What is HMRC’s Time to Pay arrangement? Can I defer my Corporation Tax payment and tax on dividend income?

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.

IPSE is checking with government the exact scope of this but our understanding is that arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. This means that, for those operating via a Limited Company, you can use this service to defer or delay Corporation Tax payments and dividend income tax, which is also on payment on account.

The HMRC helpline is 0800 0159 559. More information is available here: www.gov.uk/difficulties-paying-hmrc

For more general advice and help, the government also has a Business Support Helpline. Information is available here: www.gov.uk/business-support-helpline

Is my bank offering any help or support?

We have published links to the coronavirus advice pages for individual banks and building societies on our main coronavirus hub. While we cannot provide an exhaustive summary of the actions of each individual bank or building society, broadly speaking they are undertaking a range of actions that might help – these include:

  • Some banks and building societies are now saying you’ll be able to access savings in fixed term accounts with no penalties
  • No fees for missed payments on credit cards, loans and mortgages
  • Extra borrowing – change credit limits and overdraft facilities
  • Several banks have begun to announce changes to how overdraft fees are to be paid will no longer go ahead

What is happening with IR35? Is the rollout to the private sector still going ahead?

The government has confirmed it is postponing the reforms to IR35, from April 2020 to April 6, 2021. This in response to the ongoing spread of Covid-19 to help businesses and individuals. The government states that this is a deferral not a cancellation and has included the off-payroll reforms in its latest Finance Bill. You can read an update on this here

IPSE continues to oppose the IR35 reforms in the private sector. We will continue to press the case with MPs and government, while we also try to educate clients on the legislation.

What is the Coronavirus Job Retention Scheme? Am I eligible?

Through the Coronavirus Job Retention Scheme (JRS) the government will compensate employers for 80% of wages for furloughed employees, up to £2,500 a month. The scheme was extended by the Chancellor in May and will now continue until October, with an element of tapering to allow employers to bring staff back on a part-time basis. More information is available here: https://www.gov.uk/government/news/chancellor-extends-self-employment-support-scheme-and-confirms-furlough-next-steps

If you are self-employed you are not eligble for this scheme. We are aware that some people who are freelance or self-employed may be paid occassionally through an agency, umbrella organisation or on a company payroll through PAYE. Our understanding is that these engagements can be covered by the JRS, although this will depend on your exact working and contractual arrangements. 

The government does also state that company directors are eligible for the JRS and can in effect 'furlough' themselves. We have outlined this in more detail in the FAQs below.

I am a director of my own limited company (a Personal Service Company, PSC). What support can I get?

Update: The deadline for new applicants to the JRS has now passed. If you chose to furlough yourself prior to June 30, you can however make use of the scheme's new flexiblity. 

IPSE recognises that many self-employed people operate via a Limited Company as 'owner-managers' of their own limited company and typically receive income either as salary and/or dividends. We have campaigned for any financial support provided to the self-employed to include those who are owner-managers or directors of their own limited company as well. We are disappointed that they have been exlcuded from the financial support package offered to sole traders and are exploring options to provide additional support for those in this position - we recently gave evidence to the Treasury Select Committee on this, which you can view here.

The government has confirmed that company directors - including those who are directors of their own Personal Service Company (PSC) - will be eligible for the Coronavirus Job Retention Scheme - you will be able to furlough yourself and receive 80% of the salary you received from the company as PAYE.  However, any additional income you take out as dividends will not be covered. The deadline for new applicants to the JRS has now passed. 

For more information on this, please visit the government guidance here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-schemeIPSE has developed a template furlough letter for company directors, exclusively for members. This is available to access here: https://www.ipse.co.uk/resource/ltd-co-furlough-letter-template-docx.html

If you are supplying your services through a Personal Service Company to a public sector organisation, you will be considered a contingent worker and the government has confirmed you should be paid at 80% of your pay rate up to a maximum of £2,500 per month. This should be backdated to 1 March 2020 if necessary, and will be available initially for at least 3 months. Guidance issued by the Cabinet Office on this can be found here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/877221/PPN02_20-Contingent-Workers-Impacted-by-Covid-19-2.pdf

As noted above, there are some other measures that might be of some help. You can also consider using the HMRC Time to Pay arrangements to defer or delay tax payments, including Corporation Tax and on dividend income. You can also defer your next VAT payment. The CBILS or the Bounce Back Loans are other options that are open. From 25 March 2020, companies can apply online for a three-month extension for filing their accounts to Companies House. The Government has also said that it will temporarily suspend the wrongful trading rules to help company directors continue to trade during the coronavirus period.

What are the rules on furloughing as a limited company director? How do I do this?

The government has published updated guidance on how company directors can apply for the Job Retention Scheme. Full guidance is available here under the section 'Company Directors': https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme.

It states that while salaried company directors are eligible to be furloughed and receive support through the JRS, they owe fiduciary duties to their company as set out in the Companies Act 2006. The decision to furlough a director should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

IPSE has developed a template furlough letter for company directors, exclusively for members. This is available to access here: https://www.ipse.co.uk/resource/ltd-co-furlough-letter-template-docx.html

As the guidance states, where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company “they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.” The kind of work that a director may reasonably be expected to continue includes administrative work such as filing, preparing tax returns and annual accounts and updating company records.

This also applies to salaried individuals who are directors of their own personal service company (PSC).

While this appears restrictive, and we are seeking further clarification on these points from HMRC, there are important points to consider that may enable you to keep income flowing in.

First, if you furlough yourself, it can be for a short time period - three weeks is the minimum. If a work opportunity comes up, or is due to come later in the year, you can take yourself off furlough and work, then ‘re-furlough’ if necessary afterwards. Second, as yet there is no suggestion that you cannot undertake work outside of your current Limited Company. In other words, you should be free to take up a PAYE job, operate as a sole trader, or indeed set up a new Limited Company while you are furloughed.

Can I continue to work if I furlough myself as a limited company director?

The government guidance states: 

"Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company."

In other words, you cannot invoice clients or suppliers, take on, or seek, additional work while on furlough. However this does not mean you can find other ways to keep income flowing in.

First, if you furlough yourself, it can be for a short time period. If a work opportunity comes up, or is due to come later in the year, you can take yourself off furlough and work, then ‘re-furlough’ if necessary afterwards. Second, as yet there is no suggestion that you cannot undertake work outside of your current Limited Company. In other words, you should be free to take up a PAYE job, operate as a sole trader, or indeed set up a new Limited Company while you are furloughed.

I work in the creative sector. Is there any other support available?

As well as the other support highlighted in this FAQ, a number of creative and arts organisations have launched dedicated ‘hardship funds’ open to freelancers. These are listed below:

Can limited company directors claim Universal Credit too? What if they are on furlough?

Yes, provided they meet the other eligibility criteria. There is also nothing to suggest you cannot claim UC while on furlough – the 80% of your PAYE salary you receive will however be treated as earnings.

Unlike the ‘legacy’ benefits it was intended to replace, Universal Credit generally treats company directors as self-employed. Further information about how company directors and their income is treated is available here: https://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/self-employment/companies/

Applying for Universal Credit as a company director can raise several uncertainties in terms of the application form. We would recommend you speak with a trusted welfare adviser, such as Citizen’s Advice, if you do go down the UC route.

However, for illustrative purposes, we have shared below the guidance received from DWP for one Limited Company Director who shared their experience with us. The example is of a ltd co contractor who intends to furlough themselves through the JRS but currently has no other income coming in. The following is a summarised version of DWP’s guidance:

The applicant should answer ‘Yes’ to the question of whether they are currently working. The applicant should answer that they are Self Employed on the question of what their employment status is. The DWP will get any PAYE element direct from HMRC, the applicant would just need to enter any additional Self Employed earnings (excluding PAYE) for the qualifying period (i.e. next month for calculation at end of month) which may be 0 (if unable to pay any further earnings/dividends). If the applicant subsequently applies and qualifies for JRS then they will not need to enter that as DWP will be informed by HMRC.

I am a self-employed tradesperson. Should I still continue to work?

Yes. You can continue work, providing that you are well and have no symptoms. The government has published specific guidance on this here about the health and safety measures you should take while you carry out your work: https://www.gov.uk/guidance/social-distancing-in-the-workplace-during-coronavirus-covid-19-sector-guidance#tradespeople-and-working-in-peoples-homes

I live in Wales. Is there any additional support available to me?

The Welsh Government has announced two additional policies that self-employed people may benefit from.

First, the Covid-19 Wales Business Loan Scheme. This will work alongside the CBILS and offers loans between £5,000 to £250,000, with 12-month capital and interest repayment holiday. Sole traders, partnerships and limited companies are eligible to apply and will need to provide 3 months of previous bank statements. More information is available here: https://developmentbank.wales/covid-19-wales-business-loan-scheme

Second, as part of the Welsh Government’s Economic Resilience Fund, grants of £10,000 will be made available for micro-businesses employing up to 9 people. This includes sole traders employing staff. Qualifying businesses will be able to apply by mid-April. More information is available here: https://gov.wales/new-500-million-economic-resilience-fund-launched-wales

I’m worried about losing my clients and income. What financial support is available to me?

The government has announced a series of measures of support designed to help those who are self-employed during the Coronavirus.

We have gone into more detail on each of the current government measures below but broadly the following channels have been made available for self-employed people:

  • A Self-Employment Income Support Scheme is a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months – it is available for sole traders and members of partnership but there is additional eligibility criteria to look out (Explained below)
  • Changes have been made to Employment & Support Allowance and Universal Credit that will enable you to apply more easily and receive more income through the welfare system
  • The rollout of IR35 in the private sector has been postponed, more information is available here and in our recent webinar
  • 100% government-guaranteed Bounce Back Loans worth up to £50,000 are available for small businesses, including the self-employed
  • The Coronavirus Business Interruption Loan Scheme for a year’s worth of interest free lending up to £5 million is available to self-employed individuals with an eligible business entity
  • Small Business Grant funding up to £10,000 is available for self-employed people with a business premises
  • Your next Self-Assessment income tax return payment – due on 31 July 2020 – can been deferred until January 2021
  • Similarly for VAT, the deferral will apply from 20 March 2020 until 30 June 2020
  • HMRC Time to Pay arrangements - a helpline for businesses and self-employed people who are concerned about paying their tax due to COVID-19 has been set up (0800 024 1222) and can be used for wider tax deferrals (i.e. Corporation Tax, tax owed on dividend income)
  • Mortgage and rent support is available, including three month ‘mortgage holidays’ 
  • Bank and building societies are providing additional access to finance and lending, including postponing changes to overdraft fees due to roll-out in April – check with your bank
  • From 25 March 2020, companies can apply online for a three-month extension for filing their accounts to Companies House. The Government has also said that it will temporarily suspend the wrongful trading rules to help company directors continue to trade during the coronavirus period.
  • A range of hardship funds in particular sectors, particular the creative induestries, are in operation and several local authorities are also making dedicated funds available for self-employed people in their areas

I live in Scotland. Is there any additional support available to me?

The Scottish Government has published a list of current funding sources and advice here: https://findbusinesssupport.gov.scot/coronavirus-advice. On 15 April, the government announced it would be making grant funding available for those newly self-employed people who are ineligible for the SEISS. Information is available here: https://news.gov.scot/news/additional-support-for-business

The Newly Self-Employed Hardship Fund (totalling £34 million) will be managed by Scottish local authorities. They will allocate funds to the newly self-employed facing hardship through grants of £2,000. It will be possible to make applications for the grants by the end of April and recipients will receive funds in early May. 

The Scottish Government has put in place a similar scheme of business rates reliefs and grants, for those who have business premises, that is operational in England.

I’m worried about paying mortgage/rent. Is there any help for this?

Yes. Mortgage lenders have announced support if you have to take time off work because of coronavirus, including a repayment holiday of up to three months. This includes buy-to-let mortgages. Information on how to do this is available here: https://www.fca.org.uk/consumers/mortgages-coronavirus-consumers

The government has announced emergency legislation to suspend new evictions from social or private rented accommodation during the coronavirus crisis.

Your landlord will not be able to apply to the court to start possession proceedings until you have missed rent payments for at least three months.

I live in Northern Ireland. Is there any additional support available to me?

The Northern Ireland Executive has published a list of current funding sources and advice here: https://www.nibusinessinfo.co.uk/business-support/coronavirus.

There is as yet no dedicated scheme or grant for the self-employed. However the NI Executive has put in place a similar scheme of business rates reliefs and grants, for those who have business premises, that is operational in England.

 

Is there a government website that has more information?

We are aiming to cover the key self-employment coronavirus questions in this FAQ however If you have any that have not been answered in this FAQ, please email us at [email protected] and we will endeavour to get back to you.

IPSE is working with the government Business Department to set up a dedicated page of advice and guidance for the self-employed. In the meantime, the Government Business Support Offers advice on the Coronavirus Interruption Loan Scheme, business rates holiday, cash grants and more. The website is here https://www.businesssupport.gov.uk/coronavirus-business-support/ and it can also be reached on 0300 456 3565.