The government has done a lot to support British business. It is, frankly, on a hiding to nothing, because it’s never going to please everybody all of the time, as the steady queue of people going to the media pleading for their own special interest to get additional support demonstrates.
One of the central planks of government support is the Self-Employed Income Support Scheme (SEISS). The first tranche of SEISS benefited 2.7M people to the tune of £7.8BN. The second wave of support is now well underway and, according to our clients who have been able to meet the qualifying criteria and taken advantage of it, it is slickly organised and pays out the money in only a few days. However, and we make no apologies for returning to this, there are significant flaws in the scheme.
Firstly, and most appallingly, the government has decided that limited company directors, the newly self-employed and PAYE freelancers operating in the private sector are not getting anything. This creates the ridiculous situation where I know of two friends who run their own businesses, one of whom is a sole trader and the other a Ltd company. Both have turnover of more or less the same amount, both work in the same area (marketing) and in fact they frequently support each other with references for new work and indeed work together on various projects. The one with the Ltd company has been seriously ill and can’t work just now. The other has received the full amount from SEISS on both occasions because his income has fallen substantially as a result of the crisis. While I know it is not good practice to argue from specific examples, this graphically illustrates the unfairness of the situation. I would not like to believe that the government has not tried very hard to come up with a solution for owner-managed, limited company businesses, but given the general miasma of incompetence, dreadful communication, U-turns and mixed messaging, it’s hard not to believe that they simply thought, “too hard,” and ditched limited company owners.
The excuse put forward has been that HMRC cannot identify which dividends have been paid from companies in which the individual may have an investment and their own limited company. I would offer that this is nonsense and certainly not applicable for our clients. When we submit tax returns for shareholders who are paid dividends through their own limited companies, we always separate out on the tax return the dividends received from each company. I therefore leave you to draw your own conclusion on this excuse!
Secondly, it’s worth noting that just half of the total five million self-employed in the UK applied for SEISS between May and June. However, the number of self-employed is falling and it can never be emphasised enough that our millions of small businesses are equally important as the big blue chips, arguably more so in the current circumstances. However, whilst some limited company directors, have been able to access other grants to help support their companies (as, of course, have sole traders), they have received nothing directly to compensate for their own lost income and have still, in our opinion, been shabbily treated.
The PR from No. 11 is standard fare, with the Chancellor recently quoted as saying, “Our self-employment income support scheme has already helped millions of hard-working people, whose get up and go drive is crucial to our economy. It means that people’s livelihoods across the country will remain protected as we continue our economic recovery, helping them get back on their feet as we return to normal.”
At M&S we remain optimistic that there could still be a V-shaped recovery, however, much will depend on what the budget brings. Creating a mix of conditions that allow businesses to thrive will be crucial if the Chancellor’s soundbites are to become economic reality. Supporting those who missed out because they were not established sole traders ought to be part of that mix however there could yet be another ironic kick in the teeth awaiting shareholders running their own companies (who are seen by HMRC as tax dodgers). The accumulated debt has to be paid somehow and in amongst growing and seemingly inevitable tax rises, why not target both the companies by raising the rate of corporation tax and the rate of tax that is applied to dividends paid to shareholders. Watch this space!
Stewart McKinnon, Director, M&S Accountancy & Taxation