Self-employed income support scheme: Round two
As the second tranche of support for the self-employed opens, Philip Fisher looks at the scheme and some possible implications.
While the furlough scheme has been an undoubted success, proved by the fact that so many are already calling for its continuation beyond the proposed termination date in October, at least for those working in selected industries, the government’s solution for the self-employed has proved more controversial.
Before even getting into the nitty-gritty, it is worth considering the qualification criteria for the Self-Employed Income Support Scheme (SEISS). These were limiting and therefore many of the self-employed will not have been entitled to a penny.
Falling through the cracks
They exclude anybody with trading profits above £50,000 either last year or on a three-year average. It also takes out anyone who has the misfortune to have received more income from other sources than self-employment in the relevant qualifying period.
There has also been considerable publicity and anger surrounding the fact that those directors who receive the majority of their income by way of dividends have fallen through the net completely, along with some freelancers and those without a recent history of self-employment.
Even those that did qualify may not get the full amount. That is because the original payment was based on 80% of average profits (70% for the second payment) up to £2,500 a month for three months.
The accountant, the client
In this context, accountants will often have dual interests. First, many are self-employed, so they clearly worry about their own financial health and a large number will have been disappointed either at the level of the support offered or their inability to qualify.
At the same time, the profession’s lifeblood is its clients. Depending upon the constitution of any practice, a significant proportion will have been self-employed and is almost inevitable that a possibly large proportion of those will have found themselves suffering from hardship.
For those that were lucky enough to tick the right boxes, the first injection of self-employed support comprising up to £7,500 will have saved many businesses in the short term, even though it was pretty meagre.
Take two: As time goes by...
We are now approximately five months into the course of the pandemic, which means that those who qualified have effectively received no more than £1,500 for each month.
It is now possible to apply for the second and final tranche, which is a little smaller representing a lump sum of £6,570 at most. Very reasonably, this will only apply to those whose businesses that have been adversely affected since 14 July. Round two claims must be made on or before 19 October.
While additional funding sounds like good news, in fact, it may be anything but for many businesses, since this could be the moment when owners add up the numbers and realise that their trades are no longer viable.
Many will only have been surviving on the back of bounce back loans, supplementing their ever-diminishing capital/savings through bank loans/overdrafts or money injected by family and friends. In the worst cases, they may even be unwisely maxing out their credit cards.
Lifeline or devastation?
Most of these sources might now have dried up and, with many struggling to operate at more than half capacity, if that, the writing could be on the wall.
Depending on whether you are a glass half full or a glass half empty person, the prospect of receiving extra £6,570 could be cause for great celebration or floods of tears.
Most accountants will probably be able to survive, since their businesses have been diminished rather than destroyed. When it comes to clients, this lifeline may not be enough and there has to be a fear that its inadequacy could be the final nail in the coffin for many of the self-employed.