The Self-Employment Income Support Scheme is one of the most generous COVID-19 support schemes in the world, but I have received complaints from constituents who do not qualify.
Individuals, including members of partnerships, were eligible if they had submitted their Income Tax Self-Assessment tax return for the tax year 2018-19, continued to trade, and had been adversely affected by COVID-19.
Around 95 per cent of those with more than half their income from self-employment in 2018-19 may have been eligible for this scheme. It pays a taxable grant worth 80 per cent of the average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £7,500 in total.
Alternatively, those who paid themselves a salary through their own company, were eligible for the ‘furlough’ Coronavirus Job Retention Scheme, available to employers, including owner-managers, and individuals paying themselves a salary through a PAYE scheme.
The main complaint I ‘ve been getting is that those people who pay themselves a dividend from their company rather than a wage, are not covered.
The difficulty is that incomes from dividends aren’t wages, they are a return on investment, and are taxed differently because of that.
Even setting aside this difference of principle, under current reporting mechanisms, it is not possible for HM Revenue and Customs to distinguish between dividends derived from an individual’s own company and dividends from other shares that they possess.
The Government did consider providing a new system for those who pay themselves through dividends, but this is much more complex. The information required by the other support schemes, is already held by HM Revenue and Customs.
A dividend scheme would require owner-managers to make a claim and submit information that HM Revenue and Customs could not efficiently or consistently verify to ensure payments were made to eligible companies, for eligible activity.
Some of my correspondents suggested that that a ‘pay now, but clawback later’ approach could have been taken, but that would have required manual and highly resource-intensive procedures to ensure compliance, and there would still be a high risk that incorrect or fraudulent payments could not be recovered.
The proper recourse for those who do not qualify for the schemes is to fall back on Universal Credit, which has performed incredibly well, in paying out on time for a surge of millions of new applicants.
The difficulty is that you cannot qualify for Universal Credit it if you have savings of more than £16,000, and this is where the perceived unfairness lies. None of the Covid-19 schemes are subject to a savings threshold, so I can quite understand the disappointment of those who’ve worked so hard, but don’t qualify, and are now having to live off their savings, whilst others are receiving help.
Should the savings threshold have been raised, or suspended, during the pandemic?
It sounds easy, but it raises questions about hundreds of thousands of applicants denied Universal Credit because of their savings before Covid-19 even came along.
Does the very existence of a savings threshold discourage thrift by penalising the thrifty when they run in to hard times?
But then you wouldn’t want to see millionaires claiming Universal Credit even if they had lost their job.
Equally, one of the reasons that we save is for “a rainy day” as my Granny used to say. And isn’t losing your income that rainy day?
Nothing is simple, and nothing will ever be 100% fair