SEISS has provided millions of self-employed workers with support throughout the pandemic but due to stringent eligibility rules, millions of workers found themselves ineligible for the grants. Rishi Sunak faced multiple calls to remedy this and in the 2021 Budget, the Chancellor addressed the problems to a certain extent.
Following the announcement of a furlough extension, Rishi made the following comments: “Support for the self-employed will also continue until September with a fourth grant covering the period February to April, and a fifth and final grant from May onwards.
“The fourth grant will provide three months of support at 80 percent of average trading profits.
“For the fifth grant, people will continue to receive grants worth three months of average profits, with the system open for claims from late July.
“But as the economy reopens over the summer, it is fair to target our support towards those most affected by the pandemic.
“So people whose turnover has fallen by 30 percent or more will continue to receive the full 80 percent grant.
READ MORE: Furlough scheme extended into September – full details
Rebecca Seeley Harris, an employment expert, former senior policy advisor to the Office of Tax Simplification and creator of the proposed Targeted Income Grant Scheme (TIGS) questioned Rishi’s numbers.
Speaking exclusively with express.co.uk, Rebecca explained: “The Treasury announced that there would 600k extra self-employed included in the fourth and fifth grants for SEISS, but it was reported as 600k ‘newly’ self-employed.
“The problem was that the ONS say that there are only 151k newly self-employed for 2019/20. So, ExcludedUK first of all said that the Chancellor had over exaggerated the figures again. I looked at them and thought that it must then include another sector and the only one that fitted was the PAYE Freelancers, but I just couldn’t see the Treasury going for that sector.
“[I] managed to find out that the Treasury were saying that 380k new tax returns were filed in 2020.
“So, that would account for a much higher figure of newly self-employed. But the extra number may be made up of those who were ineligible who have now become eligible because the average is being taken over four years not three years or because they now have 50 percent of trading income, whereas before they had under 50 percent of trading income from self-employment.
“So, there will be a group of people who may not realise that they can claim and probably don’t understand that the ‘newly self-employed’ are referring to the 2019/20 year not the 2020/21 year.”
Rebecca concluded by warning the tax system is “too complicated for Joe public.”
These issues were put to ExcludedUK, the organisation dedicated to getting the Government to address their apparent support scheme problems.
The group, who have been at the forefront of the self-employed movement, examined the changes and noted “the devil is in the detail and it’s frustrating”.
Rachel Flower, a spokesperson for the organisation, laid out the following problems with the changes:
- We initially estimated (based on ONS 2019 data, later validated by the TSC report June 2020) that at the time of the first lockdown that 200,000 would be excluded as “newly self employed” and unable to file a 2018/2019 tax return, which is what the rules of the scheme required. They were ineligible and (we say unfairly) excluded and received £0 as a result. We asked for that category to be allowed to submit an application on the basis of whatever job they were doing in 2018/19 as that was a fair record (held by HMRC) or taxes paid in the 2018/19 year but that request was not accepted. We later asked for them to be able to submit their 2019/20 tax return early, because even though it wasn’t yet due to be filed it was available as evidence of working status. That was also refused. We have always found this particular category of exclusion incredibly unfair as these are people who had recently taken the plunge into self employed status and could not therefore access Bounceback Loans, and in many cases had used savings to set themselves up in business in the first place.
- The Government has not justified the data upon which the 600,000 figure is being based upon, although it’s referred to ‘newly self employed’ in one statement which we dispute as being accurate. In any event, even if this category is now being enabled to access the fourth and fith grant this is not parity and does not allow them to backdate or claim the previous grants based upon its 2019/20 tax return which we believe would be fair.
- In addition, the first year of business is not necessarily profitable for many new self employed, as they often have to plough profits back into the business for example to buy equipment, kit, set up costs etc. We have many examples of individuals where by month 10/11 of that 2019/20 year they were starting to turn a good healthy profit but when it is taken into the year as a whole the trading profits are low or even non existent. This means that the scheme rules which require the grant to be based on trading profits still leaves them with no meaningful income support amount as a result.
- The scheme has not yet opened, they cannot apply yet and as we understand it they will not receive any money until April. This yet again shows no sense of urgency on the Government’s part nor recognition of the devastating reality for these individuals.
- If the person in question did not generate trading profits in the year, then they will still receive £0. They may have generated a healthy income and be set to generate great profits in the next tax year post April 2020 but then the economy was shut down and they were unable to trade at all. Looking at these worked examples shows why the schemes are unjust and do not take into account the reality of self employed or small business growth journeys.
- We absolutely agree that it appears that people who were previously excluded under the 50/50 rule may now be eligible and that may account for the higher number of 600,000 but this has not been made clear and people who are now eligible may not apply so the schemes are yet again not transparent. This is helpful and we are seeing a number of examples of people who are now excitedly waiting for the scheme to open as they believe that their 2019/20 tax returns will “tip them over” the 50 percent threshold. Again, a perfect example of the unjustness since it is perfectly normal for a self employed person to run a part time job alongside setting up in self employment to assist with cash flow and mitigate risk, and they have previously been excluded (we say unjustly) from the scheme on that basis. We have many examples of people who were full time employed in 2016 and 2017 and as a result were excluded from the scheme as “less than 50 percent majority self employed” despite the fact they had been fully self employed for several years (but the historical look back unfairly excluded them).
Express.co.uk contacted HM Treasury for comment.
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