Reproduced with kind permission from Jane Merkin.
This is my summary of The TV Mindset’s webinar with David Thomas on
28.3.20, with some additional information kindly provided by a Chief Operating Officer.
This is my summary of The TV
Mindset’s webinar with David Thomas on 28.3.20, with some additional
information kindly provided by a Chief Operating Officer.
DEFINITIONS OF TAX STATUS
PAYE Freelancer: you will be moving
between short contracts in a company and are effectively paid as an employee,
even though you will not receive some employee rights. Your employer will be
responsible for deducting tax and NI and you will not complete a tax return on
Self-employed Sole Trader: If you are
registered with HMRC as Schedule D you are also considered a Sole Trader. You
will invoice for your work and are required to complete an annual tax return.
You will be taxed on your profit and NOT your turnover – ie your profit will be
your turnover minus legitimate business expenses;
3. Limited Company: You will be an employee of your company, even if you
are the sole director and will receive PAYE income from that company. Usually
this is a very small amount for tax reasons. The company will receive payment
from whoever you work for and is able to then pass that on to you as a dividend
at various points throughout the year. The company will pay corporation tax and
as a recipient of dividends, you will complete a tax return and be liable for
the tax on that income.
Now is the time to look at your
finances and cashflow.
Assess your current situation
2. Project your spending and any known income and identify any gaps between your expenditure and your income. Use the very handy spreadsheet that David has on his website
3. Investigate what support is
available – from the new schemes introduced by the Government in the past few
days, as well as from unions and other bodies
NEW GOVERNMENT SCHEMES
This was announced on Thursday for people who are Sole Traders. NB it is
possible for people to be partnerships of more than 1 Sole Trader
It is open to Sole Traders whose annual PROFITS, averaged over 3 years of tax
returns (2016-17, 2017-18 and 2018 – 19), are less than £50,000 – ie if your
average profits are £49,999.99 you are eligible, but if your average profits
are £50,000.00 you are not.
This is based on your profits and NOT your turnover
You need to have been trading for at least 1 year (ie 2018-19) and submitted a
tax return for that period.
5. If you are late in filing
your tax return (tsk tsk), you have FOUR weeks to submit it.
If you have only submitted for 1 or 2 years (ie 2018-19 or 2017-18 and
2018-19), HMRC will calculate the average across those years
You will be entitled to a taxable grant of 80% of the average profits to a
maximum of £2500 for 3 months. This will be paid as a single lump sum, probably
HMRC will contact everyone who can benefit from this scheme directly with
details of how to apply. PLEASE be aware that there may be unscrupulous
scammers who will try and exploit this situation so only respond to a bona-fide
email – HMRC will never ask for personal banking information as they will
already hold these details.
Even if you intend to use (or are using when it comes in) this scheme you can
apply for Universal Credit but any income from this scheme will affect what you
will receive through UC (more detail on UC later)
The tax which would ordinarily be due to be paid on 31st July 2020 can
be deferred until January 2021
If you are VAT registered, and have a VAT payment due between 20th March and 30th June 2020 you
have the option to either pay the VAT due as normal or defer to a later date.
You will not be charged interest penalties on any amount deferred but you must
pay the VAT due on or before 31st March 2021. If you normally pay by Direct Debit you
should cancel your Direct Debit as soon as you can either directly with your
bank or through online banking. After the VAT deferral ends, VAT payments due
will need to be paid as normal. Information about how to repay the VAT you’ve
deferred will be available soon. If you’re experiencing financial difficulties,
more help is available from HMRC’s “Time to Pay” scheme.
Use the spreadsheet on David’s website to automatically calculate your average
profits and the 80% taxable grant that you will receive. It currently is not
set up for those with less than 3 years’ worth of tax returns but he will
address that asap.
Sole Traders can also apply for Business Interruption Loans which are available
through any bank (not necessarily your own although if you are a customer I
suspect you will be considered more kindly!) which are 0% interest loans. But
these are currently only loans and will need to be repaid.
Sole Traders often have what is called “lumpy profits” – ie not regular
amounts. If you had time off in the last 3 years, the Government is trying to
find a solution to this and the scheme will be tweaked.
15. If you have only recently
set up as a Sole Trader, you are currently not eligible for this scheme, but if
you are going to submit a tax return for 2019 – 2020, given that the tax year
ends on 5th April 2020, it is worth submitting your return asap as this will
provide evidence to the HMRC that you are a Sole Trader and as things wash out,
you may be entitled to be considered for this scheme
and Support Allowance (ESA)
You can apply for this if you are sick or self-isolating
It is NOT means-tested and covers basic living costs
You will need to have paid two years of NI contributions
Apply by phone 0800 3285644
e) It is paid fortnightly in
arrears at £73/week
2. Universal Credit
It is available for households whose income has gone down
It is means-tested. If you have £6000 in savings, the money on offer reduces
incrementally to nothing if you have £16,000 or over
It contains elements if you have children and help with rent
You apply online and then will have a telephone interview
It is paid monthly in arrears or fortnightly in arrears in Scotland
Approximate maximums range are £300/month for single under-25 year olds,
£400/month singles over 25 and £550 for couples where 1 is over 25. If you’re
both under 25 – what were you thinking?! (seriously, don’t know the figure but
check the Government website)
The advice is to get into the UC system if you qualify. Don’t worry if you will
be eligible for the Self-Employment Income Support Scheme as the UC will adjust
when that is paid.
h) If you need it, UC can give
an advance within days of being approved, otherwise it takes an average of 5
weeks before the first payment arrives.
Job Retention Scheme
This is for anyone who was being paid as PAYE (ie on a company’s payroll),
whether as permanent staff or on a fixed-term contract on 28th February 2020.
If you were not contracted on 28th February you are NOT eligible for this scheme.
Companies designate employees as “furloughed workers” who are then not allowed
to generate any income for that company.
HMRC reimburse the employer with 80% of an employee’s wages to a maximum of
£2500 for 3 months
NI contributions and a minimum level of any auto-enrolled pension scheme will
be paid, initially by the company but HMRC will reimburse both.
HMRC are in the process of setting up an online portal for employers to use and
the scheme can be backdated to 1st March 2020.
If you were on the payroll on 28th February and either the company terminated your
contract because of the Coronavirus OR your contract came to its natural end
after that date, your employer could extend your contract or rescind the
termination. It would be at almost no cost to the company as HMRC would
reimburse wages etc as above – the only cost would be for the company to
administer this. But it is for the company to keep you on their payroll.
Pressure IS being brought to bear on indies by all sorts of bodies to follow
this practice and there is a real moral imperative for them to do so. The
advice is that you should approach the company that you were working for and
ask to be taken back onto their books. There is a real understanding that it
might be difficult for an individual to approach a company and request this but
do remember that the people who run these companies are having to deal with
many of the same things as you and are likely to be sympathetic.
You may need to patient with indies if you approach them as this is a very new
scheme and everyone is unsure how it will operate. It’s very complex and
particularly small indies will face huge issues of cash flow but do be assured
that this is being explored 24/7.
9. If the indie refuses on the
grounds that they had already issued a P45 and they cannot rescind it, you can
confidently tell them that this is contrary to the
on the HMRC website and there is an explanation available on what they need to
do in order to put you back on the payroll.
If you were employed by the BBC on a PAYE contract on 28th February which
was either terminated or came to a natural end after that date, you should
contact whoever was your line manager and ask to be taken back onto the books.
I’ve seen an email in which those employed on PAYE contracts have been told
they will be eligible for this scheme to a maximum of £3000, which is a move to
be applauded. Presumably the BBC are making up the £500 above what is being
offered by the Government from their own coffers.
If you are furloughed from a company you may still be entitled to work, just
not for that company.
12. If the company at which you
were working on 28th February has gone into administration, contact the
administrators to request to be put back on their books and furloughed as
administrators have a legal obligation to pay employees.
Under the Job Retention Scheme you can furlough yourself, even if you are a
director, and receive 80% of any salary paid to you as an employee, although
this is likely to be very small
Any dividends which you are paid by your company will NOT be considered as
income under the Job Retention Scheme.
You can apply for a Business Interruption Scheme through any bank at 0%
interest but remember this is a LOAN.
4. If your company is VAT
registered, the same conditions apply as outlined under Self-Employment Income
Support Scheme Item 11
Any Other Business
I understand that some of you
will have questions after reading this and I wish I could answer them, but this
is all the information that I currently have. Read this document carefully and
you may well find the answer. Adrian and Benetta are working incredibly hard on
numerous issues – please don’t take their attention away from those.
If you fall through any of the
gaps DO NOT DESPAIR, DO NOT PANIC! This is an evolving situation and the
Government’s intention seems to be to help as many people as possible but the
differences in people’s employment makes it a very complex task. They have
attempted to help the biggest group first – employees – now the self-employed.
What’s important is to keep reminding them that you are outside these new
There is more here too.