Coronavirus: financial support for limited company contractors and consultants

Updated 3/12/2020

SUMMARY

The majority of the measures announced so far are designed to improve cashflow by the deferral of tax payments. For contractors, consultants and freelancers using limited companies, there is very little support in the form of grants or subsidies. This is unlikely to change.

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Self-employment Income Support Scheme

The coronavirus self-employment income support scheme does not apply to contractors, consultants and freelancers who use a limited company.

“Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.”

HM Treasury

Coronavirus Job Retention Scheme

Note: this scheme has been extended, but will shortly be replaced by the Job Support Scheme

What is it: a grant for employees who can’t work due to coronavirus
Applies to: companies with employees, including one-person limited companies

The Coronavirus Job Retention Scheme is a grant to pay employees’ wages, administered by HMRC. Companies are reimbursed up to 80% of salaries (up to a cap of £2,500 per employee per month).

The important aspect to note is that this is available for your payroll / PAYE earnings: dividend income from your limited company is not covered by this or any other support scheme. This means, in many cases, only a small proportion of your total income will be supported by this grant.

This scheme has recently been extended and updated. You can find more details here.

This is a grant. You will not be expected to repay this subsidy.


Coronavirus Job Support Scheme

Note: this scheme has been delayed

What is it: a grant for employees can work at a reduced level
Applies to: companies with employees, including one-person limited companies

The Coronavirus Job Support Scheme is designed to support businesses where employees can still work but at a reduced level. Your employees will need to work at least 20% of their usual hours, and be paid for this as normal. For the unworked hours, the government will pay 61.67%, and the employer a further 5%, meaning employees receive at least two thirds of their income.

As per the job retention scheme it replaces, this does not cover income paid via dividends.

You can read more about the job support scheme here.

This is a grant. You will not be expected to repay this subsidy.


Job Retention Bonus

Update: this bonus currently won’t be paid and a retention incentive will be deployed at the appropriate time

What is it: a £1,000 bonus for each eligible employee
Applies to: qualifying employees who are still employed on 31st Jan 2021, after using the JRS or JSS

Job Retention Bonus is a £1,000 one-off taxable payment to the business for each eligible employee furloughed. You can claim for employees:

  • Who had an eligible claim made for them under the JRS
  • Kept continuously employed from end of claim period for them to 31st January 2021
  • Not serving contractual or statutory notice period in the period to 31st January 2021
  • Who earn a total of £1,560 gross through the three tax months from 6th November 2020 to 5th February 2021

You can read more about the Job Retention Bonus here

This is a grant. You will not be expected to repay this subsidy.


Sick pay for self-isolation

What is it: £94.25 per week of sick pay paid for by the government
Applies to: anyone self-isolating who has or is using a PAYE scheme

If you find yourself self-isolating, you are entitled to claim statutory sick pay (SSP) and the government will refund the cost to small businesses – including contractors and consultants using limited companies. It’s not a huge amount (£94.25 per week), but you should be eligible to claim it.

If you’re an inniAccounts client and find yourself self-isolating and you’d like to claim SSP, please contact your account manager and they’ll arrange for your payroll to be configured.

If you’ve found yourself using an umbrella recently, you are legally entitled to statutory sick pay (and the umbrella cannot pass this cost on to you). Contact your umbrella company for more details.

You will be refunded SSP. You will not be expected to pay it back.


VAT payment deferral

What is it: VAT payment due up between 20 March 2020 to 30 June 2020 can be deferred
Applies to: any VAT registered business

Any VAT payments due between now and the end of June can be deferred until the end of the tax year (April 2021). This is available now, and no applications are required. You can simply hold back any VAT payments due.

In addition, it’s also possible to spread the repayment of VAT over 11 equal instalments in 2021/22. You’ll need to opt in to this, all businesses are eligible and HMRC will be putting the opt-in process in place in 2021.

This is not a grant. You’ll still need to pay the amount in full 

This is a useful, quick means to improve cash flow. However, if your earnings have been depressed during the last quarter due to IR35, it may not be beneficial as limited VAT could be due. 

Whilst there’s no application process, this measure is designed for businesses facing distress. If you are able to pay your VAT without putting yourself into distress, we recommend that you do. 

You must file your VAT return as normal during this period, but you can skip the payment – remember you may need to cancel your direct debit.


Self Assessment deferral

What is it: more time to pay taxes due in Jan 2021
Applies to: anyone who pays income tax via self-assessment, including tax due on dividends

Contractors and consultants who draw dividends usually pay self-assessed income tax in advance, via ‘payments on account’, due in July and January. The July 2020 payment was deferred until January 2021. 

This means, in January 2021, you could be facing a tax payment for your July 2020 payment on account, your January balance payment (if required) and a further payment on account.

HMRC are offering more time to pay this balance. It’s available if your tax payment is less than £30,000 and HMRC can offer you repayments over 12 months. You’ll need to use HMRC’s self-service Time To Pay to set up a payment plan. If you already have a payment plan with HMRC, have larger debts or wider issues paying your taxes, see the section below on time to pay.

This is not a grant. You’ll still need to pay the amount due in instalments.


HMRC’s Time To Pay

What is it: payment plans for outstanding taxes
Applies to: any company or individual in financial distress

If you’re facing financial distress and you have an outstanding tax liability, HMRC’s Time To Pay (TTP) service may be beneficial. TTP is a long-established means for HMRC to support businesses who are unable to meet tax payment deadlines. With TTP, HMRC will discuss your business’s finances and – should they approve – they will allow you to pay any outstanding tax liabilities as monthly instalments. These payment plans are agreed on a case-by-case basis.

This is not a grant. It’s a monthly payment plan for outstanding tax.

You should only contact HMRC if you have missed, or are about to miss a tax payment. If your next tax payment is some time away, HMRC has asked that you contact them closer to the time to help manage demand for the service.

HMRC has set up a specific COVID-19 helpline on 0800 0159 559

Here are some tips for using Time To Pay:

  • Expect to be on hold for some time – demand is significant and HMRC are currently scaling up call centres
  • Make sure you have all the required information to hand:
    • Payment reference numbers (CT UTR, self-assessment UTR, VAT number, PAYE accounts office reference number)
    • Details of the outstanding tax liabilities
    • How much you think you can realistically pay now, and each month
    • Expect to be asked about your businesses and your personal income and expenditure, and assets such as bank accounts and savings. It is likely that HMRC will want to establish if your business is still viable.
  • Make sure you’re authorised to speak to HMRC
    • You’ll need to be either a company director or an ‘authorised agent’ – i.e. an accountant with pre-existing authorisation to speak on your behalf
  • We would advise that you also write to HMRC asking for a deferral
    • Summarise the above in a letter, and ensure that you include your payment reference numbers
    • You should write to each individual department if needed (CT, income tax/PAYE, VAT) 
      • Corporation Tax Services, HMRC, BX9 1AX
      • PAYE and Self Assessment, HMRC, BX9 1AS
      • HMRC VAT Written Enquiries, Crown House, Birch Street, Wolverhampton, WV1 4JX

inniAccounts clients: please contact us for support with TTP


Government-backed loans

What is it: quick-access loans of up to £50,000, and more complex loans up to £5m
Applies to: all companies who have been impacted by CV19

There are two loan schemes in operation:

  • The Coronavirus Business Interruption Loan Scheme (CBILS), which offers unsecured loans up to £250k, and secured loans up to £5m. The application process is similar to a traditional loan, and requires submission of forecasts and will be tested by the lender.
  • The more popular Bounce Back Loans, which offer low-interest loans of up to £50,000. They’re available quickly (often next-day), the application is straightforward as the criteria is less stringent than CBILS. There are no repayments for the first year, and the interest rate is fixed at just 2.5%.

It is likely that most smaller companies who require a loan will first investigate if the Bounce Back Loan is suitable for them. We’ve written a page on this: can contractors use Bounce Back Loans?

This is a loan You will need to repay it.

Small Business Grant Scheme for businesses that occupy properties

What is it: a £10,000 grant 
Applies to: small companies who occupy ‘rateable’ properties

If your business formally occupies a property (such as an office) which is rateable (this would exclude home offices), then you may be entitled to a grant. In addition, your business must be based in England and receive the small business rate relief, rural rate relief or tapered relief. 

In these circumstances, you will qualify for a £10,000 grant. This grant will be administered by local authorities, who will write to you if you are eligible for this grant. You do not need to do anything.

This grant will be useful to the small number of contractors and consultants who rent commercial premises to run their businesses.

This is a grant. You will not be expected to repay this.


Universal Credit

Should you need further income support, the only backstop at present is Univeral Credit. This is typically worth £409.89 per month. The government have recently relaxed the application rules for the self-employed, making it more accessible.

You can find out more about Universal Credit here. 


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Next → Up next in this guide: Job Retention Scheme

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