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COVID-19: CIS contractor / self-employed guidance

Paul Malley

Paul Malley | Managing Director

Thursday 4th Jun, 2020

Help for the self-employed

At the end of May the Chancellor announced an extension to the Self-employment Income Support Scheme which may be of help to some of our CIS contractors, depending upon their circumstances.

The original scheme described how the Government would make a grant to self-employed workers based on their previous earnings over the last 3 years, worth up to 80% of earnings and capped at £2,500 per month.

To be eligible you needed to have annual profits (business income less business expenditure) of less than £50,000 per year. Workers’ Self-Assessment Tax Returns were the key evidence on which the calculation would be based.

During the summer the Chancellor announced that eligible businesses would be able to claim a second grant in August.
The grant was worth 70% of average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.
The eligibility criteria were the same for both grants, and individuals needed to confirm that their business has been adversely affected by coronavirus.
Now as part of his ‘Winter Economy Plan 2020’ announced in late September, the Chancellor has explained that there will be a further taxable grant payable to those currently eligible for the SEISS who are continuing to trade but are suffering lower activity due to the virus.

Calculated in the same way as the original, this initial sum will cover 3 months worth of profits for the period from November to January 2021. This time it is worth 20% of average monthly profits up to a total of £1875.

An additional second grant will be available for eligible self-employed individuals, such as CIS contractors, to cover the period from February 2021 to the end of April next year depending upon circumstances. No details of this additional grant are available yet.

We are waiting to hear further details on how claims and any applications are to be made for this initial grant but we assume it is likely to follow the processes adopted for the payment of the earlier grants.

This new tool was launched on the 20th April and has been developed to help businesses and self-employed people across the UK identify quickly and easily what financial support is available to them during this time. According to Government, it takes minutes to complete the online questionnaire which will then provide you with a list of financial support you may be eligible for. You can access the tool here.

The deferral will apply for VAT payable between 20 March and June 2020. Although VAT returns will still need to be filed, businesses will be given until 5 April 2021 to pay what has been deferred for this period. This will be managed automatically by HMRC who will still continue to process VAT refunds for the period. If you are affected and normally pay your VAT by Direct Debit don’t forget to cancel your mandate for the period.

In the Winter Economy Plan by the chancellor in September 2020, the government announced they will give businesses who deferred VAT payments to March 2021 the option to repay the deferred liability in instalments over the 2021/22 tax year rather then requiring a payment in full by 31 March 2021.

On 27 April the Chancellor announced the introduction of a new fast track loan scheme for small businesses. The scheme, which promises vital cash injections to keep small businesses operating, offers loans of between £2,000 and £50,000 with a 100% guarantee for lenders by the Government. The maximum amount a business can borrow is up to 25% of the business turnover or £50,000, whichever is highest.


The key features of the loan are:

  • No repayments are required for the first year
  • Interest free for the first 12 months
  • Affordable 2.5% rate of interest per annum applies to the remainder of the loan term
  • No fees charged on arrangement
  • Loan term available of up to 6 years (early repayments are allowed)
  • In September 2020 it was announced businesses will be given the option of repaying their loans over a period of up to 10 years
  • Businesses can also move to interest-only payments for periods of up to 6 months
  • Or take a payment holiday of up to 6 months

Loan applications opened on 4th May 2020, you apply online via a short, standardised application. Unlike the existing Coronavirus Business Interruption Loan which has been slow in being taken up, only 80% guaranteed and geared towards larger businesses, there will be no forward-looking test of business viability and no complex eligibility criteria.

These loans are aimed at small to medium sized businesses who need a quick cash injection to help deal with the negative impact of COVID-19. The loan can be used to pay any ongoing businesses running costs, however the loan cannot normally be used to pay dividends to the shareholders.

How to apply

The loan can be applied for online directly to any of the participating lenders which are listed here. You can then approach a suitable lender via their own website.

Contractors who have a tax liability in excess of £1000 for a tax year are required to make a payment on account of the same amount for the following tax year. So, if you had a liability of £5000 for the 2018/19 tax year you would be required to make a payment on account for the 2019/20 tax year of £2500 on 31 January 2020 (which you would have paid by now), and a further payment on account of £2500 on 31 July 2020. It is this second payment on account which is being deferred until 31 January 2021.

No interest or penalties for late payment will be incurred for the deferred period and again no application to HMRC needs to be made.

From the changes announced in September 2020 it was confirmed more time will be allowed for tax payers to pay taxes due in January 2021, which builds on the deferral provided in July 2020. Taxpayers with up to £30,000 of Self-Assessment liabilities due will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months.

For those CIS / self-employed individuals who have employees, the government’s Coronavirus Job Retention Scheme (CJRS) enables you as their employer to continue to pay your employees a certain percentage of their wage if they are unable to work due to COVID-19. However this only applies to employees not yourself or any sub-contractors that you may work with.

Please refer to the government guidance regarding the Coronavirus Job Retention Scheme.

See the above section regarding COVID-19 Self-employment income support scheme, for more information on the financial help available to you.

All businesses and self-employed people in financial distress and with outstanding tax liabilities due to the COVID-19 virus may be eligible to receive support through HMRC’s ‘Time to Pay’ service. So if you are in that position you are encouraged to call their dedicated helpline – 0800 024 1222.

Keeping our contractors informed

It is worth pointing out that this scheme is not applicable to limited company (PSC) contractors. Further help and advice regarding limited company (PSC) can be found in our guidance page. Or if you’re an existing PayStream client, please contact your dedicated accounts team via email.

We are still navigating the new legislation regarding the financial help available to our umbrella company contractors, as it’s not clear in the guidance issued so far. As soon as we have more clarity we will update accordingly.

We appreciate that this is a difficult and challenging time for everyone so we will endeavour to keep you updated on all the latest developments as events unfold. Our preferred method of communication during this time is email so if you’re an existing CIS contractor please email our Customer Care Team on customer.care@paystream.co.uk

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