Lobbyists, trade associations and experts have joined forces to urge Rishi Sunak to help company directors frozen out of government Covid-19 support.
A consortium of professional bodies has urged the chancellor to consider proposals for a “Directors Income Support Scheme” (DISS), which would mirror the Self-employment Income Support Scheme (SEISS) under which sole traders can claim up to £2,500 per month.
This is a last-ditch attempt for the Treasury to change its mind before this week’s Spending Review.
>See also: When and where to apply for the new 80% self-employed grant
Until now the Treasury has balked at helping self-employed directors of limited companies who pay themselves in dividends, claiming it would be too difficult to separate company income from passive income, such as property and shares.
This is despite company directors paying themselves through through dividends being the standard accounting structure used by around 2m small UK limited companies, ranging from those with sole owner directors to micro businesses, which collectively employ 7.5m people.
Some see the Treasury’s mulishness as a disguised attack by HMRC on self-employed company directors, who often pay less into National Insurance and pay corporation tax instead of income tax.
It is estimated that around 780,000 self-employed company directors have found themselves blindsided by no government Covid-19 financial support.
>See also: Self-employed Income Support Scheme (SEISS) to be doubled for November
Pressure group ForgottenLtd, Re Legal Consulting Ltd, Federation of Small Businesses (FSB) and the Association of Chartered Certified Accountants (ACCA), wrote to the Treasury saying that a DISS could be set up by drawing on details regarding trading profits and remuneration submitted by business owners to Companies House – largely through corporate tax returns – information which is already available to HMRC.
Capped at £2,500 per month, the taxable grants would be paid into the company, not to individuals, which the FSB said would minimise the risk of fraud. Property and investment companies would not be eligible.
The collective forecasts that the cost of its proposed scheme would be between £2bn and £6bn, depending on its scope, putting it on a par with the SEISS scheme, which cost around £7bn in its first three months of operation.
Georgina Broadhurst, co-founder of ForgottenLtd, said: “After eight months without meaningful support many businesses are on the brink of collapse or insolvency. Directors have found themselves having to take on debt or spend their life savings to stay afloat. The furlough scheme has supported their 7.5 million employees, but without financial support for the directors and the companies themselves, there will be no jobs for staff to return to by spring.”
FSB national chairman Mike Cherry added: “For months now company directors – who have dutifully paid corporation and dividend taxation for years – have been told by the Treasury and HMRC that helping them falls into their too difficult box. Our fresh proposal demonstrates that, in fact, putting together a support scheme for directors in line with what’s available to the self-employed is pretty straightforward – so much of the information needed is there in existing tax returns. These individuals are not statistics on a spreadsheet – they are real people with bills to pay and families to feed. It’s high time this government – which claims to be pro-enterprise – helps them.”
Last week, the Labour mayors of three of England’s biggest cities – London, Manchester and Liverpool – wrote to Rishi Sunak asking him to look again at the whole question of the 3m excluded from Covid-19 support, which includes company directors, PAYE freelancers and the recently self-employed.
Further reading
Checklist for going self-employed – a Small Business guide
