Security experts caution against sharing your email password with anyone. But I would dearly love to entrust the chancellor, Rishi Sunak, with the password for the FT Money reader inbox.
He comes across as pretty trustworthy, and he has certainly taken unprecedented steps to help businesses and workers whose finances have been hit by the coronavirus. The problem is, many people are finding that neither of the two main government support schemes for PAYE and self-employed workers can offer them much assistance.
Last week, I asked readers who were struggling financially to send their stories to email@example.com (if you would like to do so, my offer still stands).
So far, we have received over 400 emails. I have read every single one. I’m sorry that I haven’t replied to you all individually, but I have taken on board all of your comments, your frustrations and your fears.
To give the people in power a flavour of what you’re going through, here are some edited extracts (first names only to preserve anonymity).
Many readers in their fifties and sixties had recently become self-employed as they moved towards a “portfolio career”.
Julie started her business as a sole trader last May — meaning she will not qualify for the self-employment income support scheme as she was not classified as such for the crucial 2018-19 tax year.
“I have worked for different businesses for 33 years and paid all of my taxes during that time. Now, I have no work and I cannot claim. Why can’t my employment history be a consideration? I have paid in more than some, but I can’t get anything when I need it the most.”
Although established sole traders can claim a grant equivalent to 80 per cent of monthly profits, directors of small limited companies (who consider themselves to be self-employed) cannot do the same on their dividend income.
I heard from a carpenter who is the sole director of his own limited company, yet cannot claim support as he is paid mostly via dividends — a problem many readers are grappling with.
“This rule has to be changed,” he says. “Sole traders that earn £49,000 working from home can claim and still work; people that are employed are getting 80 per cent of their wages to sit at home. It’s so unfair.”
Directors also feel they are being unfairly portrayed as tax dodgers.
“There is an implication that owner-managed single-employee limited companies like mine are run by crooks,” says Carrie. “Dividends are seen as dirty money and we are seen as not contributing enough to a system that doesn’t support us in the same way as regular PAYE workers anyway.”
Carrie’s was not the only email to point out that limited companies pay corporation tax, dividend tax and VAT (not to mention employers’ national insurance contributions on staff salaries). Plenty of others shared her final point: “We did not write the tax rules.”
This situation is galling for directors of small companies who are furloughing their staff, but cannot get any help themselves unless they decide to furlough the PAYE element of their pay. Doing this, though, limits them to carrying out their statutory duties as a director — and no more.
John wrote: “To get any support [as a director] I have to stop working altogether. Yet my sole trader competitors get support and can continue working. If the directors fail, the companies will fail and the furlough scheme will have been pointless.”
Mark, a small-business owner, says he has decided to “stand by his staff” and will be paying their furloughed pay out of his own savings, hoping these will not run out before the refund comes through from HMRC.
His business may have stopped but the overheads haven’t. Business rates have been trimmed but the rent must still be paid and other suppliers need bills settled. Many in his situation are very wary of taking on more debt. He does not qualify for any personal help as a director paid via dividends, yet has a family to support.
“How can they not see that we also need assistance to keep our lives on track, so we can keep our businesses on track?” he asks. “Small businesses bring in a lot of taxes and employ a big proportion of the population. Without us taking risks, who would be employing our staff?”
There were lots of emails from family businesses, where both the husband and wife were directors. This harrowing message from one couple shows how the options for saving their software business are drying up with their income.
“My wife and I don’t qualify for universal credit as we were saving to buy a house. We rent, so we don’t get a mortgage holiday. We don’t have a business premises, so we don’t qualify for a grant. The bank wants a personal guarantee to get a loan, which we cannot risk. And our [clients] stopped paying us in February.”
Single people are especially anxious about their finances. One female reader is a self-employed publisher earning just over the self-employed scheme’s £50,000 annual profit limit, so will not qualify for any assistance — even though furloughed PAYE workers earning more than her will.
“I am in disbelief . . . I live on my own and there is no second income for me to fall back on,” she says.
Readers also suggested some potential solutions they thought the chancellor and his team should consider.
Your questions answered
Claer Barrett will host a live video Q&A on Monday April 6 at 4pm UK time to answer reader questions about how government support measures for small businesses and individuals are working. Leave your questions for Claer in the comment section below. On Monday, view the session via the FT.com homepage or the FT's YouTube channel.
Directors say they can prove they receive less than £50,000 from limited company dividends and salary by asking their accountants to supply a copy of their accounts with a covering letter, backed up by a digital tax form (SA302) that is used as proof of income if they are applying for a mortgage.
Many felt they had no choice but to set up a limited company. Worries about IR35 have led to big firms insisting that their contractors and freelancers operate via limited companies. There are an awful lot of owner-directors earning much less than £50,000 a year in the film and TV industries. They are now left with no work, and no income.
But they’re not the only ones — plumbers, carpenters, electricians, lawyers, architects and consultants all require the benefit of “limited liability” protection.
Rebecca Seeley-Harris, whom you may have seen quoted as a tax expert on the pages of FT Money, incorporated her own company, RE: Legal, a few years ago. “I would happily un-incorporate and work as a self-employed sole trader, but only if my assets are protected,” she says.
Prior to setting up her own firm, Rebecca worked for the wonderfully named Office of Tax Simplification. She was part of the team that recommended an alternative scheme called Sepa — self-employed with protected assets. This would enable every self-employed person to protect their main asset — their home — in the event of future legal claims, without having to trade as a limited company.
“The idea was accepted by the Treasury, HMRC and the Department for Business — but then Brexit came along,” she says.
Tax reform will have to be a longer-term ambition. For now, the focus should be on saving as many viable small businesses and entrepreneurs who are falling through the cracks. A little help will go a long way, saving companies, jobs and livelihoods from swift and unnecessary destruction. But we haven’t got long before it’s too late.
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