Covid-19 Support Schemes Inquiry: How eligibility gaps left limited company directors out in the cold

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IPSE has responded this week to a Public Accounts Committee inquiry on Covid-19 Employment Support Schemes, highlighting the flaws in the design of SEISS and the lack of support for limited company directors.

The inquiry is reviewing the Coronavirus Job Retention Scheme (furlough) and the Self-Employment Income Support Scheme (SEISS), following the publication of a National Audit Office report which reviewed the design of the schemes and the level of error and fraud.

Eligibility gaps

Our response initially focuses on the devastating exclusion of many limited company directors from any support during the pandemic – with only a handful being able to claim through the furlough scheme.

Indeed, we know from previous IPSE research that approximately 1.6 million of the 5 million people who were self-employed at the start of the pandemic were excluded from support.

We also highlight the unwillingness of the Chancellor and the Treasury to engage with many of the concerns raised about the support schemes by IPSE and other groups – even citing the comments of the Treasury Select Committee Chair Mel Stride from July 2020:

“The Treasury needs to have more political will and help the self-employed who are desperate for support.”

Similarly, the response also highlights the exclusion of the newly self-employed (individuals that started trading in 2019 to 2020 having not traded in any of 2016 to 2017, 2017 to 2018, 2018 to 2019) from the first two SEISS grant payments.

Design of SEISS

Within our response, we also highlight the lack of a tapered mechanism within the design of SEISS. This ultimately meant that those eligible received the full grant irrespective of the fact that their earnings may have increased during the pandemic.

On the other hand, those deemed ineligible by the rigid criteria were unable to access any support. This is despite the fact that IPSE research from April 2021 revealed that 60 per cent of freelance businesses saw a decrease in their turnover because of the pandemic with almost half (47%) of these reporting a decrease of over 40 per cent.

Ultimately, the ‘cliff edge’ nature of the scheme meant that the scheme gave out a lot of money to those who didn’t always need it whilst failing to provide any money to those who did.

The response also reviews the problem of using earnings to determine SEISS grants when it failed to accurately account for gaps in work. For instance, women that had a period out of work due to a pregnancy had that period included in their calculation which unfairly resulted in a reduced grant payment.

Alternative proposals to improve Covid-19 support

During our discussions with HMRC on the support schemes, IPSE offered an alternative proposal where corporation tax returns could be used to identify directors’ earnings.

Indeed, this idea was later adopted by the Treasury Select Committee when reviewing the economic impact of the pandemic and the support schemes in 2020.

This would have allowed limited company directors to access the support from tax returns that HMRC already had, but Treasury officials remained unsympathetic to the idea due to their concerns about calculating earnings from dividend payments.

Whilst the employment support schemes hurriedly developed by the Treasury provided a generous package of support to those eligible, IPSE’s response highlights the unwillingness of the Chancellor and the Treasury to engage with those excluded from support – most notably many limited company directors that were left devastated by the impact of the pandemic.

Meet the author

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Joshua Toovey

Senior Research and Policy Officer