Yesterday, the Chancellor found a way of supporting the self employed with a c.£6.5bn (or 0.3% of GDP calculated by Capital Economics) package to help them the viral storm.
The idea is to offer taxable grants of 80% of previous income up to £2,500 a month to those already in the self-assessment system and with an income below £50,000 (anyone over that is considered able to fend for themselves). Members please note.
To arrive at the taxable grant, it will be based on an average of income declared in the last three tax years. If you haven’t got three years of tax returns it will be based on whatever you have. Please note it is based on your income (pay), not your sales line.
So, good news for some of the self employed – particularly as you can claim the grant even if you continue to work. It isn’t, of course, likely to impact that many interims positively. The £50k ceiling and anyone with high fixed costs which may not get covered may well feel hard done by.
The scheme does not come into effect until June. As demonstrated on Radio 4’s Today programme this morning, that gap looks a significant cash flow hurdle for many of the 5 million freelancers in the economy. For those interims with low cash reserves currently, it could require a lot of agile manoeuvring for 3 months, assuming the government can implement to time… if you hold cash back to pay the July tax bill, that looks like a good place to start.
The approach is bad news for new interims. No tax return with an income on it, you won’t qualify. You must be in the self employed tax system to have access to the grant awards.
Are there any implications for IR35 in all this? Not directly, it would appear.
However; when all the (viral) dust has settled, there will be the small matter of recovering a money saturated economy in recession/depression. It should provide plenty of work in the ‘new normal’. This time, inflation looks much more likely than after 2008.
What is likely is increased taxation to start clawing back the rather large national debt + deficit. And the Chancellor made comment the other day about tax parity in the workplace for employed and self employed. What that means is for another day but it does not sound like letting go of IR35 and its flawed logic to me.