Eoin Holohan, an accountant from MJH Accountancy, explains what you may be eligible for from the Chancellor’s announcement last month.
The Chancellor, Rishi Sunak, has led the government’s economic response to the coronavirus pandemic. While support for employees came first, a host of measures have now been implemented to support the self-employed.
Some of the more eye-catching reliefs include:
The Coronavirus Job Retention Scheme to help PAYE workers
The government has committed to support up to 80 per cent of employees’ salaries capped at £2,500 per month, otherwise known as the furlough scheme.
Self-Employed Income Support Scheme for non-PAYE workers
Self-employed workers can apply for a taxable grant worth 80 per cent of trading profits, again capped at £2,500.
Small Business Grants
Funding of £10,000 and grant funding of £25,000 for certain retail, hospitality, and leisure businesses.
Am I eligible for coronavirus support?
You may be thinking that this all sounds generous, but does it apply to you? If you are a limited company contract worker, the answer is maybe.
First, let’s rule out what doesn’t apply to you. As you work through a limited company, you are not self-employed so that rules out the Self-Employment Income Support Scheme. Also, the business grants are for rateable businesses – so let’s assume they don’t apply either.
In good news, you may be eligible for the Job Retention Scheme.
The Job Retention Scheme
This leaves the Job Retention Scheme which is the assistance for PAYE employees. It’s important to understand the rules around this scheme. For example:
- You are only eligible if you cannot maintain your current workforce because your operations have been severely affected by coronavirus
- Employees are not allowed to undertake work for, or on behalf of, the organisation during the period they have been furloughed
- Directors can carry out particular duties to fulfil statutory obligations they owe to the company. They should not do work they would carry out in normal circumstances to generate commercial revenue or provide services on behalf of their company
Am I eligible for the Job Retention Scheme?
Let’s assume a client has terminated your contract expressly due to coronavirus (you might have difficulties claiming if you’re contract has been terminated due to IR35 for example). Looking for a new contract could be seen as looking to generate commercial revenue, and therefore you would fall outside of this scheme.
If after reading the guidance you are satisfied that you are eligible for the Job Retention Scheme, then you will need to apply to HRMC for your grant. The 80 per cent figure is calculated based on your monthly salary as of 28 February. What was your salary for the month of February? As we all know, it can be tax efficient for limited company contractors to pay themselves a large portion of their earnings as a dividend as opposed to their salary – so this is something to be aware of.
The answer to the question of can a limited company contract worker claim is yes. To find out if it is worth your while, I would calculate the maximum you can claim and then make your decision.
For more support from Eoin, check out MJH Accountancy’s guide to government support for business.