COVID-19 SUPPORT: Daily Update – Friday 27 March 2020
Self-Employed Income Support Scheme
The Chancellor of the Exchequer Rishi Sunak has unveiled the Government’s Self-Employed Income Support scheme, which will provide financial support to self-employed workers adversely affected by the COVID-19 outbreak.
The scheme will be available to those persons who generate more than 50% of their income through self-employment and have trading profits of less than £50,000 per year. Unlike ‘Furloughed Workers’ under the Coronavirus Job Retention Scheme, self-employed persons can continue to trade and still be eligible for the grant.
The taxable grant, worth 80% of average monthly income (up to a maximum of £2,500 per month), will be backdated to 1 March 2020 and paid as a lump sum directly into the eligible claimant’s bank account at the start of June 2020. Those who have recently become self-employed, or who have trading profits of over £50,000 per annum, will not be eligible under the scheme.
The Government has also announced a filing extension to 23 April 2020 for those who missed the self-assessment filing deadline in January 2020.
Updates on the Coronavirus Job Retention Scheme
The Government has released further guidance on the Coronavirus Job Retention Scheme, which includes the following clarifications:
- The scheme will cover full-time and part-time employees, as well as those on agency, flexible or zero-hour contracts.
- Those employees who have been made redundant since 28 February 2020 will be eligible, provided they are rehired by their employer.
- Employers remain liable for associated Employer NI contributions and minimum automatic enrolment employer pension contributions. However, contributions relating to the grant amount can be claimed by employers.
- Furloughed workers will not be entitled to the National Minimum Wage, save where they are required to undertake training courses or other such activities whilst furloughed.
Security requirements by banks
The Coronavirus Business Interruption Loan (CBIL) scheme, which launched earlier this week, is intended to support smaller businesses incurring disrupted cashflow as a result of the COVID-19 outbreak. Under the scheme, the Government will grant an 80% guarantee over loans up to £5 million.
Despite this, some business-owners have been deterred from seeking the emergency loans, due to certain lenders requiring security by way of personal guarantees. In the event of default, the lender could repossess personal property of the borrower before reclaiming under the Government guarantee, thereby shifting all the risk to the borrower. Although the borrower’s home would not be subject to repossession, they would risk losing personal assets, savings and other properties.
Although seeking additional security is not strictly prohibited under the CBIL scheme, banks have faced criticism for this approach of shifting the risk of the loans onto businesses.
Please see our daily updated Financial Support Guide for Businesses for futher information- COVID-19 FINANCIAL SUPPORT FOR BUSINESSES
For more information on any of the points raised, please contact our corporate team.