Since the start of the coronavirus pandemic, the UK Government has announced several measures to provide financial support to businesses impacted by the disruption. There has been much published on support for self-employed individuals or members of a partnership, but there has been some confusion as to what is available to contractors operating through their own PSCs. Andy Vessey of Larsen Howie talks us through the financial support from Government that PSCs can access:
1. VAT deferment
All businesses that deferred VAT payments between 20th March and 30th June 2020 have been given the option to spread their repayments out until the end of March 2022 under the VAT deferral new payment scheme. This allows businesses to pay up to 11 monthly instalments rather than settling the full amount by the end of March 2021. All businesses that still have deferred VAT payments are eligible but will need to opt in. If you'd like to take advantage of the scheme, you'll need to make sure you're up to date with all your VAT returns before applying.
2. Self-Assessment interim payments on account 2019/20
For contractors that were required to pay a second payment on account 2019/20 on 31st July 2020 under Self-Assessment, this payment was delayed to 31st January 2021. From this date, interest will be charged on any outstanding amounts. If you're finding it a struggle to repay, you may be able to set up a monthly payment plan online.
3. Coronavirus Job Retention Scheme (CJRS)
Government guidance states that all UK employers with an existing PAYE scheme can claim the 80% subsidy of wages up to the cap of £2.5K per employee per month.
There is some criticism that the Job Retention Scheme has failed to take into consideration the needs of contractors, as claims are based solely on PAYE income. Many contractors extract profits by way of paying themselves a minimal salary, with the greater part of their remuneration made up by way of dividends - which are not counted within the scheme. Therefore, many independent professionals and contractors are not eligible to receive anything close to the amount of £2,500.
Wages of furloughed employees are subject to Income Tax and NIC as usual. Total grant received under this scheme needs to be included in the PSC’s calculation of its taxable profits for C.T, although it will be able to deduct employment costs as normal.
4. Time to pay
Businesses with outstanding tax liabilities can ask HMRC for extra time to pay by contacting the department. PSCs are somewhat unique in this situation - whilst they are a corporate vehicle, there is typically only one person earning fees as they would do if they were a sole trader. Yet, they don’t qualify for the Self-Employed Income Support Scheme and there has been much confusion as to whether they qualify for CJRS.
If you're considering opting into the deferral VAT new payment scheme, it's worth noting that you can still have a 'time to pay' arrangement for other HMRC debts and outstanding tax.
5. Coronavirus Business Interruption Loan Scheme
CBILS was introduced to allow SMEs access to loans, overdrafts, invoice finance, and asset finance of up to £5M for up to 6 years. These loans are secured up to 80% by the Government and the first 12 months' interest is covered by the government. This scheme is open to applications until 31st March 2021.
You can read more about this and other support for businesses during the coronavirus pandemic here.
About the Author
Andy Vessey is the Head of Tax at Larsen Howie. He has previously worked for HMRC as a tax inspector and is a qualified accountant. Larsen Howie is an online insurance broker that was established in 2015 and is based in rural Leicestershire. It is one of the UK’s leading providers of specialist insurances and IR35 advice to contractors, freelancers and consultants.