Coronavirus - what financial help is there for freelancers? - Penny Freedom

Coronavirus – what financial help is there for freelancers?

In these uncertain times, the team at Penny are here to support the freelancer community as much as we can.

We know that many of you will be concerned about your financial situation during the Covid-19 pandemic. There is a lot of confusing and conflicting information about what financial help will be available to freelancers.

We hope the following information is useful. It is correct at the time of posting and we will post regular updates.

Coronavirus Job Retention Scheme

In order to support businesses who have been forced to “furlough” (temporarily lay off) employees, the government has announced a Coronavirus Job Retention Scheme, which will underwrite 80% of employees’ salaries, up to a cap of £2,500 /month.

If you employ staff, you will be able to apply to this scheme to pay your employees while they are not working.

Limited company freelancers

If you are a freelancer, providing your personal services through a limited company, your eligibility to be paid by the Coronavirus Job Retention Scheme hinges on whether you are actually an employee of your limited company.

This isn’t necessarily a given, and there has been conflicting case law on it over the years.

However there are some hallmarks of whether you are an employee of your limited company, including:

  • Is there a contract of employment between the limited company and you as a director?
  • Was a “statement of written particulars” issued when you set up the company?
  • How is remuneration accounted for?

It is our understanding that Limited company directors who provide their services through a Personal Service Company (PSC), even if they are the only employee, can furlough the PAYE element of their income – ie. get 80% of salary up to £2,500, which will be backdated to 1st March 2020.

They will only qualify if their contract is paused or terminated because of Covid-19 and they must have had a PAYE scheme on the 28th February 2020 and have made a salary payment for February.

If a PSC contractor chooses to furlough themselves under the Job Retention Scheme, they can’t technically work for the company, other than to perform their statutory obligations as directors.

However, if you would consider applying for the scheme to pay yourself as an employee you may also want to think about:

  • How financially beneficial it would be for you (given that it would most likely pay 80% of salary, nothing on dividends)
  • The potential impact on your IR35 status when things return to normal.

Support for the self-employed

When the government made preliminary announcements around how they would be supporting businesses and salaried employees, they were criticised for not extending these measures to the self-employed.

On 26th March, Chancellor Rishi Sunak made a statement to redress the balance by announcing a similar financial scheme to those on PAYE.

Self-employed Income Support Scheme

The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) who have lost income because of COVID-19.

The scheme will provide a grant to self-employed individuals or partnerships, worth 80% of their profits up to a cap of £2,500 per month.

HMRC will use the average profits from tax returns in 2016-17, 2017-18 and 2018-19 to calculate the size of the grant.

The scheme will be open to those where the majority of their income comes from self-employment and who have profits of less than £50,000.

The scheme will be open for an initial three months with people able to make their first claim by the beginning of June.

Who is eligible?

To be eligible for the scheme you must meet all the criteria below:

  • Be self-employed or a member of partnership;
  • Have lost trading/partnership trading profits due to COVID-19;
  • File a tax return for 2018-19 as self-employed or a member of a trading partnership. Those who have not yet filed for 2018-19 will have an additional 4 weeks from this announcement to do so;
  • Have traded in 2019-20; be currently trading at the point of application (or would be except for COVID 19) and intend to continue to trade in the tax year 2020 to 2021;
  • Have trading profits of less than £50,000 and more than half of your total income come from self-employment. This can be with reference to at least one of the following conditions:
    • Your trading profits and total income in 2018/19
    • Your average trading profits and total income across up to the three years between 2016-17, 2017-18, and 2018-19.

Further information on the SEISS, including how to access it, can be found here.

There is still plenty of clarification and guidance to follow from the government, and we will keep our readers updated as more is known.

Where Penny comes in

As business grinds to a halt amidst the coronavirus crisis, not being able to work may not be the only reason for loss of income.

You may have invoices outstanding or work that has yet to be invoiced. You might also find that clients will try to shore-up their own cash reserves and delay or avoid paying freelancer invoices.

You may be able to sell your invoice to Penny for up to 99% of its value and get paid straight away. How it works

Sharing knowledge and updates

In the weeks and months to come, we’ll continue to share knowledge, information, and updates (with some fun stuff thrown in!)

If you have any questions please get in touch – wherever the Penny team are working from, we’re here to help!

This blog was originally published on 26th March 2020 and was updated on 3rd April 2020