A million self-employed people are unable to access coronavirus income support

Hundreds of thousands of small business bosses have called on the government to review qualifying criteria so they can access vital income support. 

More than a month after the Chancellor’s initiatives to support the self-employed during the Covid-19 crisis were announced, there are still vast numbers of small business owners and sole traders who don’t qualify for a grant from the Self-Employment Income Support Scheme.

Grants are allocated based on profits over the past three years, leaving 151,000 people who started working for themselves between April and December 2019 unable to apply for financial help.  

There are likely to be thousands more who started self-employment in 2020 who aren’t covered by these statistics but also missed out.

Meanwhile, another 431,000 started self-employment between April 2018 and March 2019 according to the Office for National Statistics so they too will not have a full year of earnings on their tax return. 

While they may still be eligible for a grant, it may not reflect their current earning potential.

Other groups are also missing out on income support as they fail to qualify for the grant, such as those with profits of more than £50,000, or for whom self-employment makes up less than half their income.

Furthermore, 14 per cent of the self-employed economy are sole directors of limited companies and 10 per cent are sub-contractors; the majority of those who sit within these groups will also not be eligible for the grant.

The scheme is currently designed for self-employed workers to apply for taxable grants to combat loss of income due to the coronavirus pandemic. 

They are worth up to 80 per cent of your profits, capped at £2,500 a month and income is taxable. As it’s a grant, it means you don’t have to pay it back.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: ‘The number of self-employed people left out in the cold could be close to one million. 

‘This scheme is far more generous and wide-ranging than anyone ever expected, but as the Chancellor Rishi Sunak himself has already admitted – it won’t cover everyone. Hundreds of thousands of people will slip through the net, and will need to fall back on alternative schemes, savings or benefits to get them through the crisis.’

Who is eligible for the grant? 

Grants are decided on profits from the past three years and you must have filed a tax return for 2018/19 and been self-employed prior to 6 April 2019. 

For those who missed the self-assessment deadline for this year, the Government extended this to 23 April. Unfortunately, even if you only have a few months’ self-employment, this will be counted as total profit for the year.

Those eligible must also earn more than 50 per cent of their total income from self-employment for either their 2018/19 tax return, or the average of the 2016/17, 2017/18 and 2018/19 tax returns.

Annual trading profit must be less than £50,000 – again, for either the 2018/19 tax return or an average over the last three years. 

Pay outs are expected to start from June and will likely be backdated to cover March, April and May in the form of a lump sum. The scheme is set to last at least three months.

Unlike the employee scheme, those who are self-employed can keep working and do not need to prove coronavirus impact – all who qualify will receive it. 

Small Business Rate Relief grant loophole

Meanwhile one-off grants of £10,000 are being offered to small businesses that already pay reduced business rates to help them meet their ongoing business costs. 

Those who qualify for Small Business Rate Relief or Rural Rate Relief will be able to get the funding which is awarded based on rateable value.

Local authorities will contact small business owners rather than them having to apply themselves and guidance will be issued on how to claim the grant.

However small businesses in ‘serviced offices’ are missing out because of a loophole in the scheme, meaning shared offices without a business rates account with their local authority will not receive the grant.   

Almost 12,000 people have signed a petition against the scheme’s current rules which mean £1billion worth of support across the country is being denied.  

‘Put simply, if you don’t have a business rates account for your business with your local authority you get nothing. It’s a very unfair situation,’ said office expert Jonathan Ratcliffe of Offices.co.uk.

The loophole means that if you occupy serviced office space where rates are included (bundled into the serviced package) you are not eligible for the Covid-19 support.

Ratcliffe continued: ‘Small businesses across the UK are fuming and at no fault of their own, because their choice of office type dictated whether they got a £10,000 cash grant or not.   

‘We are in no way criticising Chancellor Rishi Sunak, he’s had to make some complex decisions in a very short time period. But small businesses in shared workspaces have slipped through a loophole and missed this cash lifeline.’

The petition calls for Government to urgently investigate the loophole which signatories claim is unfairly penalising small businesses typically made up of one to 10 employees in small serviced office spaces across the UK.

The amount of grant money being missed out on is staggering, according to some quick estimates pulled together by Offices.co.uk for This is Money.

Their calculations indicate that up to £185million could be being denied to businesses in central London alone. Figures range from £16.5million in Oxford to £61million in Birmingham to £94million in Manchester. 

Piranavan Vimalraj, co-founder of ONE Global Mobility based in a Regus office near Reading, said: ‘£10,000 would have genuinely been a lifeline for our business. As it stands, that lifeline has been dangled in front of us and then taken away due to what can only be described as a gap in the policy.’ 

Jenny Pawsey, who sub-lets an office in Oxford, added: ‘The grant would enable us to … get back on our feet when the world is starting up again. Our business is a very viable one, and we’ve been going since 1964, but like everyone our cash flow is suffering.’ 

A third of firms fear going under 

Meanwhile a survey from the UK200Group has revealed 30 per cent of small business owners don’t expect to survive the current crisis due to concerns over lack of support from banks and their inability to access loans.

The data, which reflects the views of 1,200 SMEs who are clients of accountants and lawyers from the trade association, found that many SMES believed banks were struggling to approve loans due to a combination of lack of clarity on the new schemes from the government, increased demand and reduced resources due to the lockdown. 

Until this week, which saw the Coronavirus Job Retention Scheme open, this issue was heightened due to grants to cover furloughed staff costs not yet being available and thus the pressure on cashflow for small businesses was starting to reach breaking point.

Declan Swan, chief executive of the UK200Group said; ‘Our concern is that many small and medium sized businesses will simply run out of cash which will result in many very good small businesses failing. 

‘This is avoidable, however the grants and schemes that have been made available are not easily accessible or understood. Our experience is that many business owners need guidance on what’s available and support to help them with their grant and loan applications.’