Newly self-employed people will be breathing a sigh of relief today as the Chancellor confirmed that those who traded between and have completed a tax return for 2019 to 2020 are eligible for help.
The group, which includes more than 600,000 people who went self-employed last year, was unable to access the first three instalments as they had not yet filed a full tax return. But they can apply for the fourth Self-Employment Income Support Scheme grant.
But the self-employed who have made a profit of more than £50,000 in recent years still remain excluded from claiming anything under SEISS whatsoever, despite their being no similar earnings cap for the furlough scheme.
This is the case even for sole traders who paid income tax and national insurance in full on those previous profits – and can now prove that their earnings have crashed over the past year due to lockdown and restrictions hitting their business.
Chancellor Rishi Sunak listed a number of schemes to help SMEs and the self-employed today
SEISS applicants must also be able to prove that they plan to continue trading, or providing a service, beyond the end of the support, which is expected to extend until September 2021 with a fifth and final round of SEISS.
However, those now eligible for SEISS may not receive significant support given that it hinges on trading profits.
Rachel Flowers, of campaign group #ExcludedUK, said: ‘The early years of a business may see low to no profit due to high setup costs and overheads, yet may still be completely viable, and most importantly it won’t take account of the last year and the long-term damage caused to people’s personal finances and business debt.’
Furthermore, Rishi Sunak made no mention of support for the millions of self-employed, contract workers and freelancers that remain excluded from any Government help such as limited company directors, employees denied furlough, zero-hour contract workers and more.
Derek Cribb, chief executive of the Association of Independent Professionals and the Self-Employed, said: ‘We thank the Chancellor for listening to our calls for more support for new self-employed people and extending SEISS in-line with employee support.
‘Overall, this Budget presents a hopeful vision for many freelancers – in the midst of dark times. However, we urge the Chancellor not to forget still excluded groups such as limited company directors and look at new ways to support all parts of the self-employed sector.’
The fourth SEISS grant will remain at the 80 percent worth of trading profits basis while the fifth will depend on the amount of lost turnover.
With another five weeks of lockdown ahead of us before many of our non-essential services can finally open up again, this extension will be a lifeline to many self-employed individuals.
One of the biggest fears for the small business community ahead of today’s Budget was an increase in corporation tax, which would mean SMEs would be unfairly burdened with tax increases to cover the cost of Government support to date.
Higher taxes would have a detrimental impact on those already struggling to make ends meet.
Still no support for events firms
Alex Head said her events catering company, Social Pantry, has been severely impacted by Covid, with trade down by 89 per cent on last year and having to make 30 redundancies.
Social Pantry’s Alex Head said the business is down 89 per cent
Despite being in the hospitality industry, her business was not eligible for the VAT cut as she falls under an events company.
She was hoping to see cash grants, specifically focused on the events and the wedding industry announced in today’s Budget.
She said: ‘It has been extremely challenging. We have used furlough and CBILs but there has been no rent relief, a grant or rates relief for my catering unit.
‘High street hospitality looks to benefit from grants, rates relief and VAT but there is nothing for event companies. We are ineligible for the VAT cut or the business rates holiday.
‘The extension of furlough is helpful but the cost of national insurance and holiday is unaffordable when not trading.’
However, the Chancellor confirmed the increase would only impact larger companies and only from April 2023. For businesses with profits of £50,000 or less, a Small Profits Rate will be introduced, which will remain at 19 per cent.
Sunak said this would mean around 70 per cent of the UK’s companies will be completely unaffected by the hike.
Mike Cherry, of the Federation of Small Businesses, said: ‘The Chancellor’s commitment to ruling out tax rises until the recovery is underway is the right one.
‘Hikes on those who can bear it the least, with modest profits and large amounts of debt, are self-defeating. The reintroduction of a small business corporation tax rate with a taper is good to see.
‘The taper must be at a reasonable level, especially as directors of small companies have not received a penny in income support.’
Business rates holiday extended – but only for certain sectors
Meanwhile, Sunak confirmed the extension of the business rates holiday for all businesses in retail, hospitality and leisure through to the end of June.
For the following nine months, this will still be discounted by two-thirds, with a lower cap for those that have been able to stay open.
Furthermore the VAT reduction to 5 per cent for hospitality has also been extended for six months until the end of September, and will also not go straight back to the 20 per cent rate thereafter, but will be charged at 12.5 per cent for a further six months.
But while the continuation of business rates and VAT discounts is critical, it’s important that those in supply chains benefit from them, and not just those that neatly fit the definitions of frontline retail, leisure and hospitality.
It was also confirmed that the arts and creative sector will receive additional funding with the extension of the Culture Recovery Fund but this doesn’t cover live events, one of the sector badly hit but so far ignored.
The group #WeMakeEvents, which represents the live events sector launched a campaign last week highlighting the potential death of the sector if urgent help is not given.
Duncan Bell, of #WeMakeEvents, said: ‘The additional funding allocated to the Cultural Recovery Fund is also potentially helpful but DCMS and Arts Council England must ensure that the live event supply chain receives a fair proportion of the additional money allocated, which has not been the case in the past.
‘Critical barriers to recovery still remain and must be overcome. Most importantly, vast numbers of businesses and individuals in the live event supply chain remain excluded from support schemes and we urge local authorities to address this through the discretionary funds they have been allocated.’
Supply chain ignored again
Ed Mason, managing director of independent brewery The Five Points Brewing Company, said the past 12 months have ‘absolutely decimated trade’.
Ed Mason is managing director of Hackney’s Five Points Brewing Company
Sales in January 2021 were just 20 per cent of what they had been a year before and although brewing is an integral part of the hospitality supply chain, the firm has received none of the support that has been offered to the hospitality sector.
‘Pubs, shops and leisure have had a 12 months business rates holiday and grants distributed by the local authority – which has been really positive and which of course we support – however brewing has had no targeted support,’ he said.
‘We have focussed on developing our webstore and e-commerce to sell beer direct to the public online, and have had to negotiate with our landlords and suppliers to try and agree rent holidays and deferments.
‘We have placed the vast majority of our employees on the furlough scheme which has at least protected their jobs and avoided mass redundancy so we are pleased to see that extended.’
‘But sadly, there was no targeted support for firms like ours. The freeze in alcohol duties will be welcomed by our drinking customers, but do not help breweries while the VAT rate of 5 per cent only applies to food and soft drinks sales.’
Ed said the team will have to find a way through, to continue to be innovative, to drive online sales and mail order business, while also asking landlords and suppliers to be patient and understanding.
He added: ‘We will continue to feel the impact of pubs and restaurants being shut, without being able to access the support that they are able to receive. Sadly, this is far from over.’
Furlough extension and Help to Grow
As expected, the furlough scheme was also extended to September, well beyond the end of the projected date for the reopening of society which is in June, according to the ‘Roadmap to Recovery’.
This will avoid the inevitable redundancy time-bomb that would have been created had it ended later this month, according to Paul Struthers of Sage.
He said the focus should now be on how to create confidence for growth so that jobs can return, and businesses can thrive, which Sunak touched on with the announcement of the new Help to Growth scheme.
The scheme is designed to help small businesses scale up digital adoption, which should help towards economic growth and job creation.
Struthers added: ‘The Help to Grow scheme is the innovative approach we’ve been calling for. Two-thirds of businesses want to invest in technology but until now 60 per cent have not been able to do so.
‘Providing support to SMEs to invest in their futures will stimulate growth and job creation for the long term.’
Meanwhile, the Chancellor also announced plans to boost the UK’s position as a leading global hub for international business.
For fintech specifically, this includes a new fast track visa to help fill the skills gap and encourage world class talent to continue to work in the UK.
Adam Dunnett, of ZEDRA, said: This will be a turning point for the sector, and is intended to reduce bureaucracy when hiring.
‘In theory, it will allow the sector access to a diverse pool of talent so the UK fintech scene can hire the best people and continue to be a leader for innovation and entrepreneurialism.’
Viktor Prokopenya, a tech entrepreneur and fintech venture capitalist based in London, said Covid has created opportunities to ‘build back better’ in this sector, and the new policies announced today should help to maximise its potential.
‘Sequel’ to CBIL schemes and Super Deduction
Another lifeline announced for businesses is the introduction of the Recovery Loan scheme.
This replaces the current Coronavirus Business Interruption Loan scheme and will allow businesses to borrow between £25,000 to £10million with an 80 per cent government guarantee.
It is more tailored for the current situation millions of business find themselves a year on from the start of the Covid-19 pandemic but greater detail is needed on around who can borrow, the scheme criteria, and rates, plus security from borrowers.
Anil Stocker, of fintech business lender MarketFinance, said: ‘These will enable businesses to plan for the future, rebuild their working capital and strengthen balance sheets. They can now look beyond stop-start lockdowns and plan for the future.’
Sunak also announced the introduction of the new £25billion Super Deduction which some commentators say is the biggest positive news coming out of the budget.
Fidelity’s Tom Stevenson said this could encourage a two-year investment boom and is a clever innovation.
‘Deducting 130 per cent of an investment from taxable income is the equivalent of a 25 per cent marginal tax cut.
‘Cynics will call it a distraction from the main measure, but it incentivises job creation and productivity improvements, both of which will be essential if we are to grow ourselves out of this £400billion pandemic black hole.’
‘The devil will be in the detail’
Dominic Cools-Lartigue, founder of eatery and social space, The Tramshed Project, said the business has only been able to trade for six weeks since signing the lease to its site in Shoreditch in August 2020.
‘The week before we opened the 10pm curfew was announced which severely impacted our revenue considering we had a 1am license,’ he said.
‘This cost us about £5,000 per week in revenue alone. When the lockdown was announced in early December we had to cancel £50,000 of booked revenue for the week ahead.
Dom Cools-Lartigue is founder of The Tramshed Project in London
The Tramshed Project has been selling meal kits to make ends meet, which has brought in some revenue but is not enough to cover losses.
Dom said it is encouraging that VAT on food, business grants, furlough, and business rates holidays have all been extended as not doing so would have been disastrous for hospitality businesses across the country and in turn would have led to further trouble for the wider economy.
He added: ‘These measures will simply prop the business up in the short term and give us a fighting chance. We still need the vaccine roll out to continue at pace, for there to be no set back to the roadmap, and for strong consumer confidence when things finally open, so we can trade at the levels we need to make up for the losses of the past year.
‘The announcement of the Super Deduction looks encouraging for capital expenditure for a new site we’re considering opening. Obviously the devil is in the detail, however this looks like a promising measure which could stimulate growth.’
Other excluded sectors
Meanwhile, start-ups and scaling up businesses were also missed out in today’s Budget.
Emma Jones, of small business support network Enterprise Nation, said: ‘For enterprise to flourish, start-ups should be encouraged, and small firms given the confidence to grow.
‘Today’s Budget offered critical support to the self-employed and smallest of firms until September, but we would have liked to see more of an emphasis on ways in which smaller firms can trade their way back to health through making sales at home and abroad.
‘Hopefully this will be delivered through a consumer comeback from the great British public.’
Small Business Essentials
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