In June, The Talent Manager wrote to the DCMS Covid-19 Economic response department with proposals to address objections raised by the Government as to why it was unable to extend financial help to the tens of thousands of freelancers who have fallen through the cracks of the JRS and SEISS.
We thought there were some relatively simple workarounds. You can read our proposals here read it here.
We also queried a claim made by the Government that self-employed people whose profits were more than £50,000 - and therefore ineligible for the SEISS - had average total income of more than £200,000. This stat had been cited by the Chancellor Rishi Sunak - and others - to justify not raising the SEISS cap, even though there was no comparable cap on the JRS, and even though independent surveys in our sector found that over 90% of those excluded from the SEISS due to this cap earned £90,000 or less.
Here below is the Government's response.
Director, DCMS Covid-19 Economic
Response Department for Digital,
Culture, Media & Sport
100 Parliament Street
London, SW1A 2BQ
www.gov.uk/dcms
enquiries@dcms.gov.uk
Matt Born
The Talent Manager
6 Waterson Street
London
E2 8HL
10th July 2020
Dear Matt,
Thank you for your reply and for your continued engagement on the Self-Employment Income Support Scheme (SEISS). I have engaged with HM Treasury on the points you have raised in your previous letter.
You will be aware that the Chancellor of the Exchequer announced a final extension of the SEISS on 29 May, and confirmed that there wouldn’t be any further changes to this scheme. Eligible individuals whose businesses are adversely affected by COVID-19 on or after 14 July will be able to claim a second and final grant when the scheme reopens for applications in August. This will be a taxable grant worth 70 per cent of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total. The UK continues to have one of the most generous self-employed COVID-19 support schemes in the world. Indeed, by midnight on 21 June, 2.6 million
individuals had claimed grants worth £7.6 billion in total.
The eligibility criteria remain the same for this final grant, but I want to thank you for your constructive suggestions about how to tackle the delivery constraints. These are familiar to the HM Treasury and I can reassure you that the Government has considered the practical delivery issues concerning the Self-Employment Income Support Scheme (SEISS) very carefully and engaged with stakeholders to see whether these issues could be overcome in a timely manner. The Chancellor has always been clear about the need for the SEISS, and other schemes, to be deliverable and help as many people as practical in a timely way whilst recognising that a scheme set up at a rapid pace would not be able to support everyone - hence this is just one element of a comprehensive package of financial support.
The Government has continued to work with stakeholders and carefully considered the case for providing a new system for those who pay themselves through dividends. This is a very complex issue for several reasons and, unfortunately, HMRC cannot simply rely on a certified letter from accountants. The information would still need to be verified and HMRC could not efficiently or consistently verify this to ensure payments were made to eligible companies, for eligible activity. The Government has also considered the suggestion that HMRC could adopt a ‘pay now, clawback later’ approach. However, such an approach would be highly resource intensive to ensure appropriate compliance, and there is a high risk that incorrect or fraudulent payments could not be recovered, ultimately at a cost to UK taxpayers.
You also suggest that HMRC could rely on 2019-20 Self Assessment returns if these are submitted by a specified date. For the reasons set out previously, the design of the scheme minimises the risk of fraud and relying on 2019-20 Self Assessment returns would create significant risks from fraudulent operators and criminal gangs. It would again be very resource intensive to ensure appropriate compliance and the Government would face calls to allow everyone to have their 2019-20 tax returns considered because this might, in some cases, increase the value of their grants. It creates an opportunity for fraudulent activity through returns where no trading activity has taken place, where trading profits have been
inflated to increase the size of the grant, or where trading profits have been reduced to below the £50,000 threshold in order to become eligible
.
I recognise the point you raise about those in the creative industries having a mix of income from employment and self-employment. However, the Government has been clear that the design of the SEISS, including the eligibility requirement that an individual’s trading profits must be no more than £50,000 and at least equal to their non-trading income, means it is targeted at those who are most reliant on their self-employment income. It would be very complicated and resource intensive to deliver a scheme that tried to take account of special cases for all those with a mix of incomes from different sources. Inevitably, there would be many others who also feel their case is particularly deserving.
You also asked about the analysis by HMRC that shows those who had more than £50,000 from trading profits in 2018-19 had an average total income of more than £200,000. Total income refers to all sources of income, including from pensions, property, savings, dividends, and earnings from employment. It is not a reference to the turnover from which the trading profits are made.
I do hope this letter, and my previous letter, demonstrate the seriousness with which the Government has looked at these issues. As ever, we will continue to engage with HM Treasury on behalf of stakeholders.
Yours
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