‘Millions’ slip through Covid-19 financial safety net

MPs have accused the Chancellor of failing to help over a million workers excluded from coronavirus support schemes, despite his pledge ‘to do whatever it takes’ to ensure no one would be left behind

The Treasury select committee has published an interim report as part of its inquiry into the economic impact of coronavirus.

This identified a number of groups it says have fallen through the main government support schemes, notably the coronavirus job retention scheme (CJRS) and the self- employment income support scheme (SEISS).

They include new starters; the self-employed above the trading profits threshold; limited company directors; freelancers and short-term contractors; the newly self-employed; and those on PAYE working in the bar and restaurant sector and receiving tronc payments.

The report stated: ‘Hundreds of thousands of individuals are suffering financial hardship through no fault of their own. Either their unfortunate timing in starting a new job, or their employer’s choice of timing in submitting paperwork to HMRC, will have made them ineligible to be furloughed and unable to claim support.’

The committee recommended the government find a way to extend eligibility criteria to all new starters, perhaps by further extending the cut-off date to 31 March, or widening access by accepting alternative forms of evidence that can demonstrate an individual’s employment, such as a signed contract of employment.

It also called for action on what it termed the ‘cliff edge’ cap for SEISS applicants, and said the government ‘must find a practical solution to supporting hundreds of thousands of limited company directors who are missing out on support because they pay themselves in dividends.’

There were additional recommendations support for PAYE freelance workers equivalent to 80% of their average monthly income earned in the first 11 months of the 2019–20 tax year, based on their PAYE tax record in year, and for an amendment to CRJS to include tronc payments made via PAYE when assessing a worker’s earnings for eligibility.

The committee noted:’ When challenged about gaps in support the Chancellor has often cited the administrative difficulties in addressing issues given the speed with which he has to act. However, he has now extended the schemes and therefore has more time to tackle these complexities.’

In his response to the committee’s recommendations Chancellor Rishi Sunak said: ‘I have adapted the CJRS and SEISS as far as is possible.’ 

He cited amendments to the original plans designed to help those on parental leave or serving as military reservists and the extension of the CJRS to part-time working.

On the issue of the newly self-employed, Sunak said accepting returns for 2019–20 risked creating an opportunity for an individual or an organised criminal gang to file fake or misleading returns to claim the grant.

Sunak said he had carefully considered the case for providing a new system for those who pay themselves through dividends, but had reached the conclusion this could not be done because unlike CRJS and SEISS, which use information HMRC already holds, it would require owner-managers to make a claim and submit information that HMRC could not efficiently or consistently verify to ensure payments were made to eligible companies for eligible activity.

Sunak said: ‘The government has assessed the proposal made by IPSE that HMRC adopt a “pay now, clawback later” approach in this instance, and concluded that such an approach would be highly resource-intensive to ensure appropriate compliance.’

The Chancellor said the cut-off date of the CJRS could not be moved beyond 19 March due to the practical implications of monitoring such an extension, because of the risk of abuse.

With regard to tronc payments, Sunak said they cannot be included when calculating payments for the purpose of the CJRS where they are made at the discretion of the employer or a client.

‘This is because the objective of the CJRS is to help employers whose operations have been severely affected by coronavirus to retain their employees and protect the UK economy.

‘To achieve this, the grants compensate employers for the payments that they are obliged to make in order to avoid the need for redundancies.

‘Covering discretionary payments would go beyond the objectives of the scheme. Therefore, where tronc payments are nondiscretionary, they are included when calculating payments for the purpose of the CJRS,’ he said.

Mel Stride, chair of the Treasury Committee, said: ‘The Chancellor has effectively drawn a line under helping the million-plus people who have been excluded from support for four months.

‘Despite stating that he will not pick winners and losers when it comes to sectors and businesses that need support, the Chancellor has done this when it comes to households and individuals. 

‘The Chancellor said that the schemes were designed to be open and accessible to as many people as possible, but the committee remains to be convinced that more people could not have been helped.

‘The Chancellor initially told those at risk of losing their livelihoods that they would not be forgotten. While the government is clear that it is moving on to the next phase of its recovery plan, it cannot just turn its back on those who are suffering.

‘The committee urges the government to re-think its position.’

Gaps in Support

Chancellor’s response

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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