An open letter to the Chancellor
The Chancellor’s £9bn coronavirus bailout for the self-employed is most welcomed and offers a lifeline to many of our clients. The scheme however, drawn up in haste, is not without its faults.
We’re curious why is the compensation of 80% of profits (worth up to £2500 per month) 3 months away? Our self-employed clients need the money now and HMRC already holds the information to calculate entitled compensation. The Chancellor has said that, to combat fraud, those taxpayers who commenced self-employment after 5 April 2019 will be excluded from the scheme.
We strongly suggest that the Chancellor revise this to include those taxpayers who have already registered as self-employed with HMRC and files a 2019/20 Self-Assessment Return within 4 weeks of the 5 April 2020. It will also be interesting to see how net profits are calculated. Those taxpayers who regularly invest in plant and machinery to grow their businesses will have reduced their taxable profits (sometimes to £nil) by the availability of capital allowances. For the purposes of calculating the compensation, shouldn’t the capital allowances claim be ignored? Also what about the directors of small limited companies? To exclude them on the basis that they can take their remuneration by way of a low salary and dividend is just not right. Indeed many self-employed, such as computer contractors, are required to work through their own limited companies due to the nature of the tax arrangements existing within their industries. Taking Corporation Tax into account, they still pay tax at an effective basic rate rate of 26.5% and contribute so much to the economy. They need support.
The purpose of the compensation is to support individuals during these difficult times so they haven’t got to go out to work to put themselves and others at risk. Self-employed taxpayers earning more than £50,000 per annum aside it should therefore be fully inclusive to be fully effective.