Reserarch by IPSE has found that a surprising number of sole trader contractors operate through limited companies and aren't covered under the government's CODID-19 income support schemes.
The UK government recently announced support measures for self-employed people impacted by the COVID-19 outbreak to match the support it's offering those employed through PAYE, offering 80% of their expected earnings for three months. Despite this support, a recent survey has indicated that nearly half of all self-employed people in the UK fear they won't have enough to live on during the Coronavirus crisis.
The results come from new research carried out by IPSE (the Association of Independent Professionals and the Self-Employed), which found that 45% of self-employed people think they may not be able to afford rent and bills during the crisis. Around 66% think they'll burn through all of their savings in the next three months to stay afloat.
Around 60% of freelancers surveyed said the government support isn't enough to sustain their business before the announcement of the Government's support for self-employed people, but this only dropped to 43% after the announcement. Many of those who believe the scheme doesn't offer enough support are freelancers working through limited companies.
The problem arises from sole traders and partenrships which have formed limited companies to do their business through. Many of these people pay themselves only up to the tax thresholds via PAYE and then withdraw the rest of their earnings as dividends. Sole company directors who pay themselves in this way will not be eligible for the self-employed income support scheme and are only eligible for the PAYE portion of their wages under the employment support scheme.
The IPSE has recommended that the scheme be adjusted to include dividend income, and this week welcomed the news that Small Business Minister Paul Scully is considering ways that people in this situation can be supported.
IPSE Policy Development Manager Alasdair Hutchison had this to say: "The Chancellor’s Self-Employment Income Support Scheme was very generous to the people it covered, but there were several holes in the package – particularly limited companies and people who have only recently become self-employed. It is very welcome that Mr Scully is looking at ways to plug the gap for company directors."
Source: Written based on press release
