James Cartlidge MP - PPS Treasury
1st April 2020
Yesterday I took part in a virtual self employed summit with sector representatives from Brighton and Hove, watched by many of the city's self employed residents. The Government’s Self Employed Income Support Scheme(SEISS) was welcomed across the board as a positive first step in providing this sector of the workforce with financial security through the coronavirus pandemic. There were also some key concerns that cropped up time and again and which are recurring in my case work too. I therefore wanted to take this opportunity to bring them to your attention. In large part they are about seeking clarity and nuance, so that SEISS better reflects the realities of self-employment in Britain today - at the moment the provisions are, understandably, given the speed with which the scheme has been developed, rather blunt. I welcome the opportunity to work with you to consider improvements so that nobody accidentally falls between the gaps.
The key concerns are as follows:
As you will know, some ltd company directors pay themselves via a mix of PAYE and dividends. At present the SEISS does not allow dividend payments to be included in the assessments that HMRC will make to determine how much grant support someone will receive. This is a real blow to the self employed that are paid in this way and means the scheme will not deliver the income protection intended. Please could this be reviewed so that assessments include dividends.
Likewise, those who have invested significantly in eg developing their business or in eg equipment rather than drawing down a wage, are penalised by the current arrangements because, as it’s currently understood, calculations will only be based on profit. Please could this be reviewed so that assessments reflect money invested into eg business development.
The scheme as it stands will use average income across a 3 year period to calculate the grant to which someone is entitled. Whilst on the surface this seems fair, it doesn’t allow for eg women taking maternity leave or those who might have scaled back their self employment for other caring responsibilities. In most instances the latter will be women and, in the case of maternity leave, women in this position have already lost out because they are not entitled to statutory maternity pay. Many have to save to meet the costs of time out from self-employment and to meet the shortfall from any maternity allowance. They feel discriminated against even further by the failure of the SEISS to allow for this in calculating their average income and I back calls for time off for maternity/care leave to be discounted in the HMRC’s assessments.
As well as the points above about maternity and care leave, I wanted to note that the gender pay gap is as much of a problem in the self employed sector as it is elsewhere. For self employed women that are currently pregnant this is particularly acute, as they are officially considered in the vulnerable category for Covid-19 yet are not universally guaranteed access to ESA. I hope this might be looked at as a matter of urgency, especially for those women affected by the other gaps in the SEISS set out here.
Newly self employed and start ups
As you will know, at present eligibility for the scheme is linked to completing a tax return for 2018-19 and an extra 4 weeks has been granted to self employed people that missed the January deadline to complete this return. In order to bring the more newly self employed and start ups into scope for the scheme, it should be possible to allow for a 2019-20 tax return to be filed early and to grant an extra 4 weeks from now ie the end of the financial year, for that process to be completed. The Government’s argument that including these people in the scheme opens it up to abuse doesn’t stack up when compared with the welcome 4 weeks leeway already being granted for those who were self employed in the 2018-19 tax year. Without this provision, a whole swathe of self employed people are arbitrarily being excluded from the SEISS.
It is also worth noting that the SEISS doesn’t yet fully reflect the nature of self employment, and in particular that people rarely switch neatly from being employed to only generating an income from self-employment. Most have a period of time in which they are doing both, and indeed many self employed people continue to do both even after many years. Locking them out of accessing both the SEISS and the job retention scheme fails to recognise the complex nature of self employment and I would urge you to review this so that both PAYE and self employed elements of someone’s income can be protected during this crisis.
In a similar vein, Equity members who are currently contracted in TV and theatre are on a weekly payroll and have other characteristics of employees but have self-employed tax and NI status (the latter since 2014) because of their pattern of work. It seems they should be in the Job Retention Scheme but this needs clarifying please.
This is traditionally a lifeline for those in self-employment. It allows them to learn from others, innovate and stay connected. It also plays a valuable role in well being and good mental health for those otherwise working alone and at risk of isolation. Please could you review the current business rates relief programme and consider extending it to include co-working premises.
A number of other points were raised in the summit that relate to self employment. Most significantly, what support will be given to those who have not even earned enough to submit a tax return – is this just Universal Credit or will there be something further available?
I was also asked for clarity for the many trades people who are self employed and are struggling to eg work in people’s homes and follow social distancing guidance. They risk being in breach of contract if they withdraw from work and need the Government to issue clearer instructions.
Finally, there’s growing anecdotal evidence that the banks are not acting in the common good with regards their practices during this crisis. From interest rates to loan conditions, their tactics seems more concerned with excessive profiteering than playing a positive role in our economic resilience. As one self employed dentist told me: So far I am unaware of any dentist being offered the government backed loan. Banks are using this as an opportunity to force dentists to take their own bank loans using our family homes as security. CBIL is not helping practices who need it, many who are already in debt and are fearful of taking another loan with no certainty as to when we are going to be able to return to work.
I appreciate I have raised a number of points here and would be very grateful if you could address them in turn. I look forward to hearing from you.