A coalition of small business leaders, tax experts and company directors have mapped out the measures needed to address a perceived Government shortcoming which has left thousands with no income support throughout months of Covid-linked disruption.
Many of those classified as self-employed by the Government have been able to claim grants covering the significant majority of their incomes if they’ve been impacted by restrictions since the Spring, and can continue to do so until April 2021.
By contrast, the Treasury and HMRC have stated that a comparable scheme for company directors would be impossible to establish because many pay themselves in dividends and there is “no way” to establish whether such income is derived from business activity or other investments.
ForgottenLtd, Re Legal Consulting Ltd, FSB and ACCA state in their letter to the Treasury that a Directors Income Support Scheme (DISS), founded on the principles underpinning the Self-Employment Income Support Scheme, could be established by drawing on details regarding trading profits and remuneration submitted by business owners to companies house – largely through corporate tax returns – information that is already available to HMRC.
Stressing the importance of companies to the UK’s economic recovery from, the groups warn that “hundreds of thousands have suffered severe financial hardship and are now at serious risk of closure. Up to 7.5 million of their employees are at risk of unemployment.”
They add that, without immediate assistance, “we will see fewer businesses in existence, and fewer jobs – these cannot be furloughed, as they won’t exist anymore.”
The collective forecasts that the cost of its proposed scheme would be between £2 billion and £6 billion, depending on its scope. Last month, the National Audit Office (NAO) forecast the cost of Government income support for employees to be £55 billion.
The latest statistics from the Department for Business, Enterprise and Industrial Strategy (BEIS) state that there are just under one million non-employing companies across the UK and two million that are classed as micro-entities (employing ten people or less).
FSB national chairman Mike Cherry said: “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.”