COVID-19: THE SELF-EMPLOYED. SEISS FINANCIAL SUPPORT COMPARED TO FURLOUGH

Update 5/11/20:  This blogpost has been updated as a result of the Chancellor's announcement today.  Some specifics on rates and eligibility change, although the basic principles and conclusions remain. 

 

It's good news for the self-employed that there will be a third Self-Employed Income Support Scheme (SEISS3) grant.  Albeit taxable and subject to NICs, according to total income in the year.

However, the SEISS3 webpage says, officially, "The Government are providing the same level of support for the self-employed as is being provided for employees through the Coronavirus Job Retention Scheme."  That is the basic principle that has been the case from the start, so should be honoured for all time periods.  But that means there are several issues that ought to be remedied:

• Frequency of payment
• The period for SEISS3, and missing months
  
• Rate 
• What about business expenses?
• What about those excluded from the earlier SEISS grants?

 

FREQUENCY OF PAYMENT

It was a major success for HMRC to set up the first payment to eligible people so quickly in May, for which I must applaud them:

• Calculating the payment automatically
• Putting the mechanism for the actual payment in place
• Putting in place anti-fraud measures
  

The first payment, SEISS1, was for a quarter.  Having got that all in place, SEISS2 and SEISS3 have also each been for a quarter.

Yet people's expenses tend to be monthly.  Why haven't payments been made monthly since May?

Applications for SEISS3 will be open on 30 November, with payments made early December.  That is two weeks later in the month than in August.  Earlier than first announced, but why that two-week delay?

THE PERIOD FOR SEISS3

This next payment of SEISS is explicitly for the quarter of November to January.  A further payment is planned for the following quarter of February - April 2021, but details are not yet available given the extention of the Furlough scheme to only March 2021.

The first two SEISS payments were as follows:

• SEISS1 explicitly "...will cover the three months to May." at 80% of average profits to a maximum of £7,500 (equivalent to earnings of £37,500, available to everyone with average earnings up to £50,000). 
  
• SEISS2 "will be extended" at 70%, i.e. June to August.  This was claimable from 16 August to a maximum of £6,570.

SEISS1 was not for a specific period, apparently, despite the reference on the official Government website above.  However it is reasonable that the self-employed should be given some support in March and April, to match that given to employees under Furlough.  As Rishi Sunak announced for Furlough "The Coronavirus Job Retention Scheme will cover the cost of wages backdated to March 1st."

There are 8 months from March to October, whereas there have only been two quarterly payments for SEISS.  So either:

• What happened to support for the self-employed for September and October?
• Or otherwise March and April 2020?  

Two months missing, whichever way you look at it.

 

RATE OF PAYMENT

The basic idea is to mirror the Furlough scheme, the Coronavirus Job Retention Scheme (CJRS), which as the Government explained was:

• 80% of wages and salaries for months up to August
• 70% for September
• 60% for October
• 80% for November to March 2021, now the Furlough CJRS scheme has been extended
  

So for the SEISS:

• Why not 80% for June to August?
• Why not matching CJRS for September and October (or March and April)?

 

BUSINESS EXPENSES

The SEISS is intended to cover income after expenses.  The "self-employed", as  defined for income tax purposes, include individuals and partnership partners.  Their business activities cover a wide range:

• Some with business premises
• Retailers
• Professional practices
• And all sorts

All will have some form of expenses, such as insurance, web sites and other marketing to try and find business.  None of this is covered by the SEISS.  

Some other support was provided earlier in the year in various ways.  But isn't it time for some extention, preferably in the form of grants, to help re-build the businesses?

The Government has now made one concession, which is to allow businesses to "top up" their Business Bounceback Loan if they didn't take full advantage first time around.  However the loan limit has not been increased - at least not as yet. 

WHAT ABOUT THOSE EXCLUDED FROM THE EARLIER SEISS GRANTS?

The SEISS3 webpage says it is for those who "have been previously eligible for the Self-Employment Income Support Scheme first and second grant".  Though that may need to say "or", as some people would not have been eligible for both.  Or that will create a new group of people not eligible for SEISS3.

So again there seems no coverage for the four main groups excluded from those first two payments:

1. Those with a mix of employed and self-employed income, where the self-employed element was not more than half in the three relevant tax years.  For example teachers with some time paid by schools being slightly higher than billed directly to parents.
2. Anyone earning more than the earnings limit, which for SEISS1 was set at £50,000 per year, do not get a penny.  Furthermore for SEISS3 there is a maximum payment for the quarter of £7,500, which is equivalent to £30,000 per year on earnings of £37,500 at 80% of average profits.  £2,500 per month may not even cover a monthly mortgage or rent payment for those living in London and other high-cost areas, although mortgage holidays have been officially extended.
   
3. Those becoming self-employed more recently, where this is insufficient history to calculate the payment
4. Those trading through a limited company who are not technically self-employed for income tax purposes, and as a director would not usually be eligible for furlough on their usual payroll earnings

Universal Credit is available, but for these groups that is far more complex than the average, with income tending to be variable.

Extending SEISS to groups 3 and 4 is tricky, especially in a way that minimises the risk of fraud, and group 2 is a policy decision.  But why hasn't support for those in group 1 with a mix of income not been extended to all their self-employed earnings?

IN CONCLUSION

The Government says it is "providing broadly the same level of support" in the SEISS as the Furlough CJRS scheme.  But for this to be the case:

• The SEISS3 payment in November should be for the quarter September to November, calculated at the equivalent of the CJRS rates applying to those months (or kept as November to January with additional money for March to April 2020)
  
• An adjustment should be added for any other historical underpayment, such as for June-August
• The claim date should be brought forward from 30 November to 16 November, to match the claim date in August
• Thereafter SEISS should be claimable monthly on 16th of each month, to match the rate applying to that month's relevant scheme for employees
  
• SEISS should also apply to those with self-employed income less than 50% of their total.  That should be back-dated to the start of SEISS.

There now also needs to be further support to cover business expenses to let the self-employed recover their businesses, for the benefit of the country as well as the individuals. 

Nothing less would be fair or appropriate.  Surely the SEISS3 and subsequent payments need to be improved significantly as shown?