Coronavirus update: Contractors

Contractors with public sector engagements in scope of IR35 off-payroll working rules

Contractors who are deemed employees according to the off-payroll working rules might be eligible for the CJRS scheme.

If the public sector organisation wished to furlough a contractor, they would have to confirm this with both the contractor’s Personal Service Company (PSC) and the fee-payer. It should be formally agreed that the contractor is to do no work for the public sector organisation during their period of furlough.

The fee-payer would be able to apply for the furlough payment of 80% of the monthly contract value, up to a maximum of £2,500, as well as the employer NICs on that subsidised wage. The fee-payer would then pay at least the amount of wage-grant received to the PSC, and report the payment via PAYE using the contractor’s details, making the usual tax and National Insurance contributions (NICs) deductions for contracts in scope of the off-payroll rules. The PSC would then be required to report the amount it pays to the contractor as deemed employment income via PAYE using box 58A on the PAYE Real Time Information return.

Where a contractor is continuing to receive payments from a public sector client (including through the CJRS or other any other scheme), income from this client should be excluded from any calculation of the reference pay for the purposes of the CJRS if the contractor also decides to furlough themselves as an employee or director of their own company.

VAT

All VAT payments due between 20 March and 30 June 2020 will be automatically deferred until March 2021.

This deferral will apply to all businesses and there is no need to contact HMRC. However, any business that pays VAT by Direct Debit must cancel it, otherwise HMRC may collect VAT due as normal.

For the avoidance of doubt, VAT returns should still be submitted on time as usual. For any business that is unable to file on time, a default surcharge may apply, though there may be grounds to appeal assuming it is COVID-19 related.

Self-assessment due 31 July 2020 

There was an announcement that Income Tax Self-Assessment payments due on the 31 July 2020 will be deferred until the 31 January 2021. However, it is not yet clear whether this covers everyone under self-assessment or just the self-employed. 

Currently we believe that directors, landlords, investors will still need to pay their July payment on account as normal. Those that cannot afford to pay will still be able to use the COVID-19 payment support service. 

If it applies, this is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period. 

Statutory Sick Pay

You can pay yourself two weeks of Statutory Sick Pay (SSP) if you need to self-isolate subject to meeting the minimum payroll requirement for SSP. 

The government will refund £94 per week, maximum £188, to your company and they will also refund SSP for staff of businesses for up to 2 weeks. 

Self-employed contractors 

Self-employed people can now access full universal credit at a rate equivalent to statutory sick pay. 

Mortgage/Rent 

For mortgage holders you can apply to your borrower for a 3 month mortgage holiday but remember interest will still be building. For renters you can request a month window from your landlord and they are not permitted to evict you during that window 

IR35

Hopefully you have seen our update on the deferral of the off-payroll rules. This came very late in the day so your contractual position may still be in doubt. The article includes suggested urgent actions you can make. 

Loan charge 

There has been no change to the government’s position on the loan charge. 

More information on these measures and more can be found in our Government Support for Businesses blog. For further advice please get in touch with a member of our Contractors and Independent Professionals team.