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Rishi Sunak in action, 2021
Rishi Sunak_2021_HM Treasury

Sunak ‘does not recognise’ 3m excluded self-employed

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Chancellor Rishi Sunak has dismissed claims that 3m self-employed workers have been excluded from government support, saying that the figure is “not a number I recognise”.

5th Feb 2021
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Sunak responded to a question on the government’s lack of economic support for the excluded 3m by saying that he “didn’t think that it is right to describe those people as excluded”.  

In the letter dated 2 February 2020, the Chancellor poured cold water on any additional help for these workers when he wrote: “1.5 million of those people are not majority self employed; they are people who earn the majority of their income from being employed.”

According to Sunak, these 1.5m have somewhere between £2,000 and £3,000 in their returns which he said “is not the overwhelming part of their earnings”, and that universal credit and other support will be “significant in making up the difference”. 

He explained that the government’s decision was to help target the support to those who really need it. “If someone earns the majority of their income from employment, it is reasonable to assume that they will benefit from the furlough scheme, and that is how the majority of their earnings come in.” 

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Replies (60)

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By tedbuck
05th Feb 2021 18:44

There is another side to this story in that there are a number of s/e people who manage not to declare all their income and get away with it because HMRC are asleep and don't use their intelligence to look at a post code and wonder how someone earning £20k a year can afford to live in s £500,000 house. We have all come accross the builder,plumber or the like who will knock off the VAT if you pay cash it is a huge subculture, the fact that they then go on to claim benefits based on their low income means that the rest of us are being screwed twice.
Same as the footie players dodging tax on their enormous incomes by using tax avoidance schemes and wanting the ordinary taxpayer to cough up for free lunches when the ordinary taxpayer probably struggles to meet his/her expenses anyway.
Yes, I have sympathy for the honest self employed taxpayer who does the right thing and struggles to survive but there are many others who think evading tax is 'fair dos'. Why doesn't HMRC employ people who understand accounts and business to take a close look at these people and make an example of them - then the rest of us would not have to pay their tax for them.

Thanks (14)
Replying to tedbuck:
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By Ken Howard
05th Feb 2021 19:50

tedbuck wrote:

There is another side to this story in that there are a number of s/e people who manage not to declare all their income and get away with it because HMRC are asleep and don't use their intelligence to look at a post code and wonder how someone earning £20k a year can afford to live in s £500,000 house. We have all come accross the builder,plumber or the like who will knock off the VAT if you pay cash it is a huge subculture, the fact that they then go on to claim benefits based on their low income means that the rest of us are being screwed twice.
Same as the footie players dodging tax on their enormous incomes by using tax avoidance schemes and wanting the ordinary taxpayer to cough up for free lunches when the ordinary taxpayer probably struggles to meet his/her expenses anyway.
Yes, I have sympathy for the honest self employed taxpayer who does the right thing and struggles to survive but there are many others who think evading tax is 'fair dos'. Why doesn't HMRC employ people who understand accounts and business to take a close look at these people and make an example of them - then the rest of us would not have to pay their tax for them.

None of that is relevant to the 3 million excluded.

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Replying to tedbuck:
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By Red1960
08th Feb 2021 14:46

Short sighted, mean spirited whataboutery.

Hardly reflects well on the originator whichever way you look at it.

I wonder what your clients in the building and construction industries think about your real opinion of them?

Assuming, of course, that you had the inegrity to tell them to their face.

Bet you'd still take the fees though!

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Replying to Red1960:
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By Paul Crowley
08th Feb 2021 16:54

But the comment received 13 Thanks

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Replying to Paul Crowley:
Stepurhan
By stepurhan
10th Feb 2021 07:52

Paul Crowley wrote:

But the comment received 13 Thanks


Meaning what?

This sort of rhetoric has proved disturbingly popular, even when the claims made in certain newspapers about such things are proved to be palpably false. Given how widespread misinformation on this subect is, I consider 13 to be a low number of positive responses.

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Replying to tedbuck:
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By ds
10th Feb 2021 10:48

Given the alleged benefits of Artificial Intelligence and Data Mining, it beggars belief that HMRC would not be using these technologies to find likely tax dodgers and recoup unpaid tax. Having experienced tax systems in other countries, the UK is, just like its response to the Covid pandemic, incredibly tardy and behind the curve. Is it due to institutional disorganisation or done deliberately?

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By Paul Crowley
05th Feb 2021 19:33

Based on early discussions I really worry about the self employed who did qualify for SEISS
Having the trading income reduced by 30% but then getting the SEISS is going to lead to some HUGE tax bills.
Maybe better if the 4th payment is in the form of a tax credit, recoverable only after ye 2021 tax return submitted.
I foresee numerous insolvencies arising from such high tax liabilities starting Jan 2022

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By anthonystorey
05th Feb 2021 21:11

Many of the "excluded" are directors who have chosen to pay themselves a salary below the threshold for paying tax and national insurance contributions but take dividends instead at a low rate of tax. I don't see why these people should be entitled to SEISS grants. They can't have their cake and eat it.

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Replying to anthonystorey:
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By Jimess
06th Feb 2021 07:59

I would recommend that you do the maths on the figures. Where company profits are below £50K the differential in tax between a sole trader and a company director taking a small salary and dividends is minimal after you take account of the corporation tax paid by the company on its profit. A lot of self employed workers are forced down the company route due to protectionist practises by larger companies unwilling to give contracts to sole traders, or to directly employ people to carry out the work. Such contracts are often unfairly priced and when you take into account the expense of running a company and being fully responsible for the costs of provisioning of tools, health and safety matters, insurance, pensions, ongoing training etc, their net income is often comparably less than their employed counterparts, without the full benefits of employment rights. The only people on the winning side being the companies offering the contracts. These people often do not have much choice, and are not having their cake and eating it, but are genuinely struggling during this pandemic with very little support available to them.

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Replying to Jimess:
By tonyaustin
08th Feb 2021 10:20

I agree contractors are forced down the company route, which means the company receives the income. If the difference between taking salary and dividends is so small, why don't these contractors take a salary from their company equal to the net fees the company receives for their efforts? Those that did can now furlough and receive the Government grant based on salary. By using a company, these individuals are not self-employed, they are employees of their companies. If they had wanted to be self-employed, they should have turned down contracts that require them to operate through a company but the client would probably then have said they would be considered employees of the client if they did that. Another reason why the contractors should have paid themselves a salary is that, in those circumstances, the IR35 legislation applies, which deems a salary payment for tax purposes, even if legally declared as dividend.

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Replying to tonyaustin:
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By Jimess
08th Feb 2021 17:03

The IR35 does not apply to companies providing services for short term contracts - many of the clients I have in mind may carry out work for a specific project which often is very short term and then move on but cannot get "self employed" work in their field of endeavour unless they work through a company - either because agencies push them down that route to comply with requirements set out by their own clients, or because of the vagaries of the industry they work in. Projects folded or just did not start once Covid lockdowns hit leaving the companies and their directors without income other than a small amount of furlough pay to meet the directors salary, but still needing to meet other regular business outgoings. It is often difficult for directors of such companies to compute dividends in the manner you describe due to various expenses the company needs to incur - i.e provisioning of materials, vans, tools, training, insurance, travel and subsistence expenses etc which soak up the amount available for dividend. If the funds required for such items had previously been voted out as salary equal to net fees as you suggest, it would put the directors and the company in a rather precarious position.

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Replying to Jimess:
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By Red1960
08th Feb 2021 14:48

Well said Jim!

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Replying to anthonystorey:
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By paul.benny
06th Feb 2021 08:45

The directors you refer to are employees, and as such are not eligible for SEISS. As employees they can participate in CJRS - but because they have chosen to structure their income to have low salary, they can only claim modest CJRS amounts.

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Replying to paul.benny:
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By Paul Crowley
06th Feb 2021 13:14

Much more polite than I would have put it
Support really should be restricted according to the NIC contributions of the individual person needing support

NO NIC NO SUPPORT

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Replying to Paul Crowley:
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By Jimess
06th Feb 2021 15:48

That approach would push millions more out of support, even for CJRS as many part time employees do not earn above the appropriate levels to pay NIC, but still receive a contribution credit to their NI record. Likewise with self employed earners, the unpredictable nature of self employment can see profit levels move from year to year so some years may attract NICs and some years may not. The effort and expense that goes into earning those profits is still the same, one could say higher in years of lower profits due to the need to drive the business profitability up again. Should these people suffer because of the uncertainties of self employment? I don't think so.

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Replying to Paul Crowley:
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By djames
08th Feb 2021 10:31

What a ridiculous comment. There are literally millions of self employed taxpayers who have paid little or just a few hundred quid in NIC due to low earnings. There are single mothers and little old ladies whose only income could have been a domestic cleaning job. Are you suggesting that we do not support them? On your basis, more support should go to people earning over £50k, over £100k, even £1 million? You're not an MP are you?

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Replying to Paul Crowley:
All Paul Accountants in Leeds
By paulinleeds
08th Feb 2021 14:44

NO NIC NO SUPPORT!! What a load of rubbish!!

NIC is not a 'tax'.

These smaller limited companies pay dividend tax rather than NIC. The difference is negligible and should not exclude a person from CJRS just because they operate through limited company.

In this context of OMBs, dividends are not 'investment income' but 'business profits'. As such small director-shareholders should receive the equivalent of the SEISS.

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Replying to Paul Crowley:
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By why always me
09th Feb 2021 12:29

Dividend tax is essentially NIC under another name

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Replying to anthonystorey:
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By agillies
08th Feb 2021 10:30

That is no longer the case it used to be. HMRC introduced 7.5% dividend tax to cover the "lost" employee NIC. If you had a small Ltd company with 50k profits.... would you pay a salary to yourself to attract 13.8% employer NIC for paying yourself or would you pay 10k and a 40k dividend?

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Replying to anthonystorey:
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By geoffmw1
08th Feb 2021 10:40

I agree with you. Some of these have also missed out on building up state and personal pensions statutory sick pay etc by only looking at saving tax.

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Replying to anthonystorey:
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By Ian McTernan CTA
08th Feb 2021 12:14

Many of those excluded directors take a small salary to ensure the company has sufficient funds to run during the year and meets it's costs, such as employee salaries, etc and only at the end of the year decide how much they can take from their business after looking at everything and probably leaving a sizeable chunk in the company to ensure their company has sufficient funds to operate. On the other hand employees can furlough for a year and have zero worries about how the next business bill will be paid.

The company owner takes all the risk and often they work very very long hours and have little in the way of holidays- and will go without to ensure their employees get paid.

Dividends are taxed at a minimum of 26.5%, rising to 51.5% as soon as you hit the higher rate band: hardly low rates of tax.

Your attitude smacks of someone very ill informed.

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Replying to Ian McTernan CTA:
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By Mr_awol
08th Feb 2021 12:49

Ian McTernan CTA wrote:

Dividends are taxed at a minimum of 26.5%, rising to 51.5% as soon as you hit the higher rate band: hardly low rates of tax.

Your attitude smacks of someone very ill informed.

Minimum of 25.075%, rising to 45.325% at HR and a maximum of 49.861% at super-tax rate, actually. Your maths smacks of someone very ill informed ;)

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By Dean Hanrahan
06th Feb 2021 06:56

I started as a sole trader Sept 2017..I borrowed £12000 to buy a van and worked hard to start a small transport business..I bought another van in 2019 and have only just turned a profit of £19000 for the tax year of 2019-2020.(.I struggled for any income during the first lockdown and have struggled since)
Therefore I am entitled to nothing from the Seiss scheme..Is this fair when I see others claiming up to £7500 and still working full time? Just because I am newly self employed with lots of expense in the first few years does it mean I'm not entitled to anything..? It hurts me that I am left out with no explanation, when I see many people are having the best financial years of their lives thanks to Rishi....
The system is totally unfair and when I'm expected to pay extra tax in the coming years for nothing I am sure I will find ways of not doing so.

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Replying to Dean Hanrahan:
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By Paul Crowley
06th Feb 2021 13:22

Did you pay any tax?
Any NIC?

You chose to claim full tax relief on your vehicles
Not compulsory to claim in full

'The system is totally unfair and when I'm expected to pay extra tax in the coming years for nothing I am sure I will find ways of not doing so.'

This suggests you are intent upon improper actions. What sympathy can you expect if you declare improper actions

Good job HMRC do not read this stuff

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Replying to Paul Crowley:
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By Jimess
06th Feb 2021 15:50

Would an employee expect to have to provide their own van to enable them to carry out their work?

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Replying to Paul Crowley:
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By Ken Howard
06th Feb 2021 19:56

Paul Crowley wrote:

You chose to claim full tax relief on your vehicles
Not compulsory to claim in full

You are wrong on both counts if the poster you quoted was using the cash basis!

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Replying to Paul Crowley:
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By Ken Howard
06th Feb 2021 19:56

Paul Crowley wrote:

You chose to claim full tax relief on your vehicles
Not compulsory to claim in full

You are wrong on both counts if the poster you quoted was using the cash basis!

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Replying to Paul Crowley:
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By sammerchant
08th Feb 2021 09:59

Are you seriously suggesting that Mr Hanrahan should not avail himself of the tax reliefs? In fact, most of the vans are purchased, even by big businesses paying millions in CT, because of the CA relief.

I recall when Gordon Brown exempted the first £10,000 of profit from CT - every butcher, baker and candlestick-maker incorporated his business (following advice from his/her accountant!). Brown removed the exemption a few years later.

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Replying to Dean Hanrahan:
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By KenKLM
08th Feb 2021 12:49

I agree ... it is merely an accelerated tax allowance and it causes an anomoly in the claims which seems unreasonable . Not sure you have any chance of changing the system for this but I do agree this is not in the spirit of support .

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Jennifer Adams
By Jennifer Adams
06th Feb 2021 13:41

Rishi hasnt had to listen to the tears down the phone and sympathise with the clients who havent received anything whatsoever.

Many of mine in the entertainment industy - some working as forced' freelancers' as Jimess says

Perhaps I should send the Chancellor a copy of my article on the subject:
"Coronavirus - the clients who Rishi left behind"

https://www.accountingweb.co.uk/tax/hmrc-policy/coronavirus-the-clients-...

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By martinbf
06th Feb 2021 14:37

Rishi doesn't give damn about zero hours workers who are self employed.
Partner lost over £20.000 income due to covid!! No support for her under any of the seiss grants. Shocking.

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Replying to martinbf:
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By Paul Crowley
08th Feb 2021 10:24

Zero hours sounds like employment CJRS
If self employed SEISS

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By Swedish Chef
08th Feb 2021 09:50

"Not a number I recognise" is MPs bog standard response these days for anything they don't want to have to justify.

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By AndrewV12
08th Feb 2021 09:55

Its a tough one, luckily most are on the right side of the tracks, I feel sorry for those that are not.

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By Mr J Andrews
08th Feb 2021 10:12

Apart from the under-declarers , the lack of HMRC intelligence has probably neither picked up upon the increase in non-declarers in the past twelve months. Judging by what I hear in attempts to finding household repairs and maintenance the black economy is as rife as ever.
If the figure of 3 million isn't recognised , perhaps this is Rishi's problem.

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By K81
08th Feb 2021 10:20

I have several clients who are pensioners with just a state pension of around £8500 and earn around £4-5k in self-employment each year which helps top up their income. They are not entitled to any additional benefits/universal credits & cannot get the SEISS. I wonder how many of these people there are across the board.

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By raju m
08th Feb 2021 10:20

There are firms of accountants who have been advising small single shareholder companies to obtain bank loans upto £50000 under thr gov. guarantee scheme and spend the money and close the company down and then start again. These accountancy firms also have employees working full time and also claiming 80% furlough quietly.

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Replying to K81:
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By Paul Crowley
08th Feb 2021 10:25

About 20% of my clients

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Replying to raju m:
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By geoffmw1
08th Feb 2021 10:46

Are you seriously suggesting that accountants are making fraudulent claims?

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Replying to raju m:
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By geoffmw1
08th Feb 2021 10:46

Are you seriously suggesting that accountants are making fraudulent claims?

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Replying to raju m:
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By KenKLM
08th Feb 2021 12:42

If this is true and you are aware of those firms then I believe it is your responsibility to report it under your Money Laundering obligations ... particularly now you have posted such comments on a public forum ??

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By raju m
08th Feb 2021 10:20

There are firms of accountants who have been advising small single shareholder companies to obtain bank loans upto £50000 under thr gov. guarantee scheme and spend the money and close the company down and then start again. These accountancy firms also have employees working full time and also claiming 80% furlough quietly.

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Replying to raju m:
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By Paul Crowley
08th Feb 2021 10:29

And you read that in the News of the World newspaper?

If not how many have you reported?

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By BryanS1958
08th Feb 2021 11:03

He needs to go to Spec Savers.

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By Jane S-D
08th Feb 2021 11:47

Rishi should come and look down my client list. He'd find plenty of the excluded there. A handful of self employed earning just over £50k, a lot with half and half employed/self employed and falling the wrong side of the line. And a good few who left employment or education in 19/20 and set up on their own. All excluded through no fault of their own. And particularly galling for those earning over £50k from self employment who see their employed counterparts getting CJRS albeit capped.

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By Ian McTernan CTA
08th Feb 2021 12:22

Think this article's title is rather misleading.

Sunak didn't recognise the 3m figure because almost half of it is small part time self employed who have another source of earned income - which is based on figures he is supplied with.

What he is basically saying is that if you earned over half your money as earned income then you will either have still had that income or been supported by the furlough scheme: either way you're not too badly off.

It's the real excluded that need help, but you cannot help everyone and some will have fallen through the cracks.

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Replying to Ian McTernan CTA:
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By Ken Howard
08th Feb 2021 15:18

Ian McTernan CTA wrote:

Think this article's title is rather misleading.

Sunak didn't recognise the 3m figure because almost half of it is small part time self employed who have another source of earned income - which is based on figures he is supplied with.

What he is basically saying is that if you earned over half your money as earned income then you will either have still had that income or been supported by the furlough scheme: either way you're not too badly off.

It's the real excluded that need help, but you cannot help everyone and some will have fallen through the cracks.

Trouble is that it doesn't take into account people who DIDN'T have that second income during covid, i.e those who left jobs in 2019, or, took retirement in 2019 and received a pension lump sum, etc. They DON'T have a second source of income in 2020 as it either stopped or was a one off pre covid. The 50:50 rule is a blunt instrument that assumes the continuation of the "other income" which isn't the case for a lot of people.

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By North East Accountant
08th Feb 2021 12:36

Unintended consequences of a previously decided action.

Rishi has decided that those taking a low salary and dividends (possibly bringing the wife in too) aren't getting any help because they have done this.

We can moan all we like about how unfair this is but I can't see him doing anything about it now.

It will be even more unfair when he hammers these type of setups to pay back the massive bill he's been racked up.

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By KenKLM
08th Feb 2021 12:40

The worst case is the taxpayer who commenced trading prior to the pandemic but did not complete a 2018/19 tax return , nor did they have to , but find themselves completely excluded . This is wrong when you compare it to a PAYE employee who maybe started a job in January,2020 and has received full CJRS against a self employed person starting to trade on 6/4/2019 who gets zero . Also I have a client who put their 2018/19 tax return in 1 day past the SEISS deadline and has got zero . His own fault admittedly and stupid on his part but why a deadline ? Everyone needed the support . He has since put his 2019/20 return in on time ... make no difference ... it is still the rule that 2018/19 tax return must be submitted . What a nonsense and it is discriminatory in the same way directors with mixed salary and dividends are being treated shoddily .

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By moneymanager
08th Feb 2021 12:51

And what about serious, professional, unincorporated residential landlords who have been entitled to precisely nothing other than "mortage xxxxxx (I refuse to use that word), debt accumulation) while that degenerate Jennrick has the temerity to say that "government wished to thank landlords for their forebearnce" while the government mandates no eviction for non payment of rent and other reasons and an eviction process that can take two years if the wind's behind it, it's nothing less than state mandated theft.

I don't want government help, I want our lives back.

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