What help is available to small limited company contractors during Coronavirus?
The government has introduced a range of measures to support the economy during the Coronavirus pandemic – including the Coronavirus Job Retention Scheme (to furlough employees) and the Self Employment Income Support Scheme. No dedicated support has been announced for small limited company directors and limited company contractors (sometimes referred to as PSCs), however there are some options available to directors of these companies.
How can the Coronavirus Job Retention Scheme help limited company directors?
The main option available to small limited company directors is to enrol in The Coronavirus Job Retention Scheme, which will allow you to furlough yourself and any other salaried employees. The PAYE element of the salary you receive as a director will be assessed and up to 80% paid (up to a £2,500 a month limit).
It's important to note the support is assessed on the PAYE salary you receive as a director, and dividends are excluded from the scheme. As many freelancers and contractors operating as a limited company choose to be remunerated in the form of dividends rather than salary, many limited company directors are finding they experience a significant reduction in income, even with this support.
Can I continue working under the Coronavirus Job Retention Scheme?
If you choose to furlough yourself, you aren't allowed to work for your limited company whilst you claim under the scheme – this is different to the Self Employment Income Support Scheme which allows you to continue working. However, you can continue your statutory duties as a director of the company.
You can also work for other companies – so you may wish to consider undertaking some short term work.
How long can I be furloughed for?
The minimum period is 3 consecutive weeks and the scheme currently runs until the end of October.
How do I apply?
To apply for the Coronavirus Job Retention Scheme, visit the GOV.UK.
When do I have to apply by?
The Coronavirus Job Retention Scheme closes to new entrants on 30th June. If you plan to furlough yourself or any employees, it's important to do so by this date; from this date on, you will only be able to furlough employees that have been furloughed for a 3 week period prior to 30 June.
Are there any other options available to limited company contractors impacted by Coronavirus?
Small limited companies are eligible to apply for a Bounce Back Loan, which offers a loan of up to £50,000. The government guarantees 100% of the loan and it is interest free for the first 12 months, after which the interest rate changes to 2.5%.
Your business will need to be based in the UK, established before 1st March 2020 and have been adversely impacted by Coronavirus. Find out more about the Bounce Back Loan Scheme.
Universal Credit is also available, although this is a means tested benefit so not every director will be eligible.
Is any dedicated support planned for small limited company directors?
There have been calls for the Self Employment Income Support Scheme to be extended to include limited company directors, however there is no indication from the government that this will happen. IPSE are campaigning for the government to re-evaluate their for limited company directors during the Coronavirus outbreak.
For more support for limited company freelancers and contractors, visit our COVID-19 support hub.