One of the major criticisms raised in relation to the far-reaching support measures announced by the government over recent weeks has been that they fail to adequately provide for self-employed individuals. Several days after the launch of the Coronavirus Job Retention Scheme (CJRS) and Coronavirus Business Interruption Loan Scheme (CBILS), on 26 March the Chancellor announced the creation of the Self-Employed Income Support Scheme (SEISS). However, many were quick to note that a number of self-employed individuals, particularly those with very new businesses, would not benefit under the new scheme.
The Chancellor has this week responded to queries raised by the Treasury committee about the lack of support for the newly self-employed (those who have become so since 6 April 2019), and those self-employed persons who operate through a personal service company, and receive dividends by way of income. However, it appears that for now the government’s overriding concern is that, if it were to open the scheme up so as to benefit these individuals, the scheme would become more vulnerable to fraudulent applications. The reasoning provided in the Chancellor’s letter is that HMRC would be unable to distinguish the genuine newly self-employed claimants from ‘fraudsters and organised criminal gangs’ seeking to take advantage of the scheme.
This protectionist response is difficult to justify on the basis that new companies, some of which will now have been trading for a complete tax year, would be able to file a tax return as evidence in the same way as any other company. Requiring companies to file tax returns early for this purpose would certainly be a more proportionate response than excluding them from the scheme altogether. The government might also consider accepting other evidence for more recently self-employed individuals, such as verifiable bank statements, to reduce the risk of fraudulent claims.
For the moment, the government’s suggestions for alternative support are limited. Those working through personal service companies may apply through the CJRS for lost salary payments. Those self-employed persons not otherwise catered for can apply for universal credit, the usual minimum income threshold for this benefit having been temporarily relaxed, or 'new style JSA', which does not take into account a partner’s business income or savings.
It is clear that this issue is very much on the Treasury committee's radar, and we hope that the Chancellor will consider a more robust approach, which would protect against fraudulent claims while offering support to the genuine newly self-employed, over the coming days and weeks.
Whilst the Government has undoubtedly taken bold action at pace, the Treasury Committee continues to receive evidence of the hard edges and delivery challenges that need addressing, such as further help for those receiving self-employment related dividends and the slow pace at which emergency loans are reaching businesses.