The Chancellor announced on March 26th the introduction of the SEISS, a taxable grant worth 80% of a self-employed worker’s average monthly trading profits up to £2,500. The grant would be available in June. On May 12th, the Chancellor announced that the scheme was to be extended for a second grant available in August but, with a lower cap on average monthly profits up to £2,190. Unlike the furlough scheme, those eligible for the SEISS can keep working whilst claiming the grant and it doesn’t stop you from claiming Universal Credit (UC).
The grant is available for those who can prove their business has been “adversely affected” by coronavirus such as being unable to work due to falling ill with coronavirus, or having business scaled down due to disrupted supply chains or a drop-in customer demand.
However, the Government’s eligibility criteria for the SEISS also includes:
- Average trading profits under £50,000 a year
- More than 50% of your total income supported by your self-employed work
- Tax returns filed for 2018/2019 and therefore you must have been self-employed prior to April 6th 2019
- You must not be a director of a limited company
In Scotland the Newly Self-Employed Hardship Fund was set up for those newly self-employed and facing hardship. This was to provide grants of £2,000. The fund is managed by Local Authorities, and applications opened at the end of April 2020, with recipients receiving funds in early May. The fund was for a one-off payment of £2,000.
Other funds available to self-employed workers and small business owners:
- 97% businesses reportedly experienced loss of income due to lockdown
- 68% businesses and self-employed workers thought the government schemes were either unfair or very unfair
- Of the respondents who received government help, 65% of respondents found that the grant was not enough to keep their business going during the lockdown period
- 50% of respondents, who have received the grant, believe that the amount they will receive from the second grant, due to the reduced cap on income, will not be enough to continue their business
- 46% of respondents believe that the end of the government support by the end of August will put their business at risk of closure
- Whilst only 22% said they have both received the grant and currently have employees, 77% of them said they will need to consider ending their employment with them by the end of August when the government support comes to an end
The economic impact of coronavirus has devastated small businesses and sole traders across Edinburgh South. This is especially so in sectors where government health advice prevents businesses from opening but where the financial support to stay closed is insufficient. As businesses reopen and attempt to drag the British economy through this crisis the responses to this survey indicate that both a refinement of the support packages must be considered.
- Rethink the ‘one-size-fits-all’ approach to scaling back the SEISS, so it can operate past August for certain sectors in step with public health measures the Scottish Government itself is imposing
- Revise the scheme to recognise the fact that self-employed people often build up savings to pay their tax bills or invest in their business, so the £16,000 savings bar is inappropriate for the self-employed workers needing to claim Universal Credit
- Design specific and ongoing support for freelancers working in sectors or areas that are prevented from working by Government public health rules
- Rethink the lack of support for sole directors
- Additional payments of the Newly Self Employed Hardship Fund
Survey Results, Analysis and Commentary
The survey ran from Thursday 25th June 2020 to Friday 24th July 2020 and was publicised by ian on his website and via social media accounts.
The survey received 59 responses. 48 respondents live or run a business within the Edinburgh South constituency (UK) and 11 in other areas on Edinburgh and Midlothian.
This survey uncovers the extent of the impact lockdown has had on self-employed workers and small businesses in Edinburgh. The self-employed workers who responded to this survey are spread across a over thirteen different sectors, industries and professions.
85% of respondents said that their business or self-employed income was their only form of employment and 97% reported that they have experienced a loss of income because of lockdown, highlighting just how important financial assistance from the government was to our self-employed workers.
70% have been self-employed or running their small business for more than five years and therefore run well-established businesses at the heart of our local economies and communities.
The public health measures put in place by the Government in order to contain the virus have had serious knock-on effects on our self-employed workers and small businesses. 10% of businesses had to close permanently due to lockdown because they lacked financial support. Only 32% of respondents were able to do any of their self-employed work between from 11th May.
The sheer number of businesses affected highlights the serious issues self-employed workers and small business owners face as we begin to come out of lockdown and restart our economy. Although changes to 2m social distancing rule in some circumstances should help more self-employed workers to return to work, there are still many issues facing self-employed workers which prevent them from returning to work.
Self Employed Support Scheme and Business support packages
The Government’s SEISS, designed to assist self-employed workers during lockdown with grants covering 80% of a worker’s average monthly trading profits until August in two sperate grants, has not lived up to expectations.
Self-employed workers have responded that accessing the grant has been a major hurdle. 68% of respondents have not received help from the SEISS with 66% of respondents saying the way the government calculated the grant was either unfair or very unfair. Of the people who did receive a grant, 68% the amount they received was not enough to sustain them throughout the lockdown period.
Whilst it is acknowledged that the SESS is not the only packages of support 29% of respondents were not eligible for any support, including UC.
The requirement that at least 50% of workers’ income is supported by self-employed work to access the SEISS is causing issues for pensioners and freelancers particularly. Several respondents claim they were refused access to the SEISS because their pension income is greater than their self-employed income or because they took a lump sum of their pension within the past two years – causing their self-employed income percentage to fall below 50%.
The reasons for being denied the SEISS or any other package vary however they largely fall into four different categories:
- Their income is above £50,000 a year
- They are a director of a limited company
- At least 50% of their income is not supported by their self-employed business(es)
- Self-employed through an umbrella company
One worker, who is self-employed through the Government’s Construction Industry Scheme (CIS) meaning they pay tax at source, made a mistake filling in their self-assessment and were therefore unable to claim SEISS despite HMRC having a clear record of tax paid.
Many also reported that because they had claimed UC before any COVID-19 scheme had been made available they were then ruled ineligible for any of the more generous support packages.
The end of the Self-employed Income Support Scheme
The Government’s decision not to continue the SEISS beyond August is causing considerable anxiety to those able to claim the SEISS. 55% of people in receipt of the first grant believe that the end of the SEISS by the end of August will also put their business at risk of closure.
Additionally, 45% said they will need to consider ending the employment of employees with them by the end of August when the SEISS comes to an end.
The inflexibility of the SEISS is also further highlighted by its wind-up date of August as specific industries such as entertainment, arts and tourism will continue to face considerable challenges coming out of lockdown – having a serious negative impact on their income. People are also worried that even when lockdown measures end they will experience a drop in custom due to the economic dislocation caused by COVID-19.