Bear in mind that no-one is an expert on this subject. The Revenue are actively writing the rules and the systems as I write, so this is a best stab. There’s a good reason why it took the government a while to get anything together – anything universal would end up supporting those that didn’t need it. And any scheme which has tests and rules built in would end up excluding a percentage who would reasonably kick off about it. They reckon the scheme covers 95% of the self-employed but we’ll see. As expected – the 5% left out are not happy as are some of those who do qualify.

As we understand it, anyone can claim for a grant IF their average taxable profits in the last three years were below £50K OR if their taxable profits in 2018/19 were below £50K.

The grant will be based on 80% of your income included as taxable profits in the last three years (2016/17, 2017/18 & 2018/19) There will be a limit to this of £2,500/month.

So, imagine profits of

£16K (2016/17)              £20K (2017/18)          £30K (2018/19)

Average annual profits = £22K (£16K+£20K+£30K/3). You can apply for a grant of 80% of this on a monthly basis or £22K x 80% /12 = £1,760/month. But if you had profits of:

£16K (2016/17)             £20K (2017/18)           £87K (2018/19)

Average annual profits = £41K (£16K+£20K+£87K/3). 80% of this would be £32,800pa or £2,733/month. Here you’d be restricted to the £2,500/month limit, but still be able to claim despite a high level of profit in 2018/19.

Only you can’t apply for it. This is a don’t-call-us-we’ll-call-you system. They will do the maths entirely based on what was in those returns and will write to you (NEVER BY TEXT OR EMAIL) to let you know this. You’ll also be required to confirm that (a) your profits will be hit by the virus and that (b) you still intend to keep trading in 2020/21.

Sign and return it to them along with your bank details and they’ll pay you 3 months-worth at the end of June. No word about any subsequent months other than ‘this may be extended’. This will be an issue before very long as not all industries will return to normality at the same speed and public performances are not going to be first to un-lock.

Your Returns need to be up to date and they said that they would allow 4 weeks to people to get their Returns in. The truth of this is that they need to build a secure computer system to administer the scheme and it will take at least 4 weeks. The Revenue documents more or less say “leave us alone to get this sorted and don’t pester us”.

The scheme is a bit sledgehammer-y. What about someone who bought a new instrument during 2017/18? Someone whose income was reduced through ill-health or through maternity or just a couple of rubbish years? Someone whose income was rising sharply during 2019/20? The system doesn’t accommodate any of these subtleties and that will produce unfairness.

Seen from their side, they’re gifting £30Bn or so for the three months and there isn’t time or capacity to allow for individual consideration. But if you returned to making serious money after having a baby in 2019, it’s a bit of a kick in the teeth.

There are also substantial groups left out. If your average profit in the last 3 years was more than £50K, you get bugger all, unless you’ve dipped below £50K last year. The government have tried to portray this as fair by saying that the average income of those who thereby lose out is more than £200K. This is a bit of statistical cheating. They’re averaging someone with profits of £3M with 20 people on £50,001 to come up with their figure.

Most of those losing out will be only just losing out, which is bound to cause more aggro – better to have set a maximum of £2,500 with no £50K limit. If there are so few people disadvantaged, then paying a flat maximum shouldn’t have been a problem.

The other losers-out are those whose income is more employed than self-employed. They can get to claim under the furloughing scheme through their employer but there’ll be no replenishment of their disappeared self-employed income. This can work especially cruelly on those transitioning from employment to self-employment.

Note here as well that there is one important difference between the scheme for employees and that for the self-employed. Employees are explicitly barred from doing any work for their employers; the self-employed are urged to go right ahead and try and earn what they still can. The government’s money comes on top.

The government has been a little fork-tongued about those who are recent starters. If you’ve only filed a 2018/19 Return, they’ll work with and pro-rata that figure, subject to the other rules. But more than one government minister has said that they will look at what people can provide to support a claim. This goes against the idea that these people don’t have to make a claim and it could just be ministers wandering off-piste but I wouldn’t abandon hope of getting something if you started self-employment in April 2019.  Nor of including those on more than £50K but with a £2,500 limitation.


I’m well aware that there are a lot of people who operate as a limited company, pay themselves a salary which amounts to around £8,600pa, with the rest of their income coming in the form of dividends. This means they avoid having to pay employer NI (13.8%) or employee NI (12%) on their income but still get credited with the year towards their pension/benefit entitlement. Dividend income is now taxed in such a way as to claw back a little of that benefit, but as an arrangement, it has worked favourably for people – until now.

Companies don’t benefit from the self-employed support scheme. All a company director can do is furlough themselves, have their company pay them £576/month and focus solely on the gardening because like all employees, they aren’t supposed to work for the business whilst they are on furlough, although how they they then pay themselves and how this will be policed is a whole other puzzle. The government will reimburse that £576/month in the following month. But they can continue to draw money from the company as interim dividends, obviously limited by the company not having any fresh income.

The Revenue have said that they can’t work out what a company’s dividends are going to be and can’t separate them from any share dividends a taxpayer might have elsewhere. That I do understand. On the Returns submitted, there is a box which tells the Revenue the total of dividends received in a particular year. They don’t usually get a breakdown of dividends between those from their own company and dividends from BP or Severn Trent; just a total. Secretly they’re probably pleased at this as an outcome, because by and large they don’t like Personal Service Companies (one-man companies), which they see as manipulating the tax system.

Companies are entitled to the same raft of schemes that all businesses (including the self-employed) can shoot for including deferral of any VAT due from end-March to end-June inclusive, deferral of the second instalment of tax due on 31 July to 31/1/21 interest-free and a raft of measures based around Business Rates reduction which don’t apply to those who practice bassoon in the back bedroom.

There is also supposed to be an improved access to bank loans, with government providing guarantees to lenders and paying 12 months of interest and arrangement fees. But anecdotal evidence is that banks are not playing ball with this scheme, partly because they are very risk-averse and partly because their staff have been decimated/furloughed or working from home. Government bullying had better improve this or they’ll be hanging bankers in the streets (again).

I think it’s not impossible that the government position on all this may change, but it is a bit more technical for them to address and I can see that they may permit people with Personal Service Companies to make some kind of claim on that basis, but subject to the maximums being applied elsewhere (80% or £2,500/month, nothing for those on more than £50K). However that is utterly alien to the idea that this is a money distribution system, not a claim system. I wouldn’t put the chance of that happening at better than 1 in 4, unless they come up with something inventive.


The third category of people out there, are those whose income comes through an employment. Some people out there can continue to work for a boss where their activity can take place at home, online or in a socially isolated kind of way. Or perhaps because the work involves is deemed to be essential (in food, transport, health, etc). For those people, there’s a new normal out there and it must be very weird to still get dressed and go to work through empty streets or to make a drink and sit down in your PJs to translate a book or whatever, whilst the world is burning.

But for a huge slice of employees and employers, there is furloughing. If an employer has no work feasible, they would ordinarily make employees redundant, but to avoid this, the government is supporting employers to “furlough” them by supporting the employer to pay 80% of the wages up to a limit of £2,500/month. There are some rules that govern this though:

Furloughing is by mutual agreement (although the alternative is redundancy, so, yeah)

It must be for a period of at least three weeks.

Employees cannot be included who are merely working reduced hours or from home

Employees cannot undertake work for or on behalf of the organisation. This includes providing services or generating revenue.

If you have multiple employments, you may end up furloughed in one, but not in another.

The level of furloughed pay is the higher of your monthly average income in the last 12 months or what-you-earned-this-time-12-months-ago. So at end-April that will be your monthly average during 2019/20 OR what you earned in April 2019.

The £2,500/month limit is per employment so those with multiple employers may end up earning above this.

An employment can be back-dated to 28 Feb for anyone who has been made redundant. They can get re-hired and put on a furloughed basis. If furloughing began in mid-March then everything gets time-apportioned.

For some people, this is not a disaster. Because you’re losing the top 20% of your Gross Wage, you don’t get to pay tax/NI/student loan repayment on that slice you’ve lost.  So imagine someone on a wage of £3,000/mo. You will lose £600/mo Gross, but if they were paying 20% tax, 12% NI, 9% SL Interest and 3% into a pension then their net monthly wage actually goes down by £336. For some people no longer commuting to work, paying for child care in normal circumstances, this could actually leave them neutral or better off. The majority of the country earns money via a wage packet which is below £37,500pa. It’s only above that point that they start to lose more of their wage because of the £2,500 limit.

It’s possible that some people will fall into both the furloughing scheme and the self-employed one. For that, their self-employed profits must be the majority of their income for the last three years, but someone with average £30K profits and a £25K wage will get to receive 80% of the whole of their income. For me that’s where a moral dimension cuts in. The Revenue don’t have time and methods to avoid this and it would be good if there were some way people could restrict what they receive, or just hand it back.


So how does this thing work from the Employers’ point of view? Well here we are fumbling in the dark as much as anyone. The idea is that the Revenue will be giving an employer a taxable grant which covers 80% of an employee’s wage up to a maximum of £2,500 plus the Employer’s NI percentage on that wage plus the minimum amount which the employer would be putting in through the auto-enrolment pension system. That could amount to over £2,800.

The aim is that no employer should have to be out of pocket by keeping people on. That wage can be topped up by the employer if finances permit.

The wage is then put through the PAYE system – tax and NI is taken of it and the money paid to the employee in the usual fashion. The collective PAYE is then paid over to HMRC in the usual monthly fashion. So April’s furloughed wages are paid out and by 20 May or so, the PAYE has to be passed on. If there are no employees subject to the £2,500 restriction, the employer can then claim back for the net wages plus what was paid over in PAYE. Sadly the system is a brand-new one, no details are yet published and it won’t be open for business until the end of April at best. The PAYE that has to be handed over around April 20th on March’s payroll will still have to be paid.

The claim system will work to a 3-week cycle for some reason and you’ll be accompanying it with all the details to enable HMRC to put the money straight in your bank account but there will always be a period when you’re out of pocket. And there needs to be someone to administer this from the employer’s point of view. Does this count as a breach of the furloughing process to have someone operating payroll? Or to set up the reclaiming process which will undoubtedly involve a secure registration process of sending out codes to enter into a new HMRC website for the scheme?

Where EMTACS have handled people’s PAYE scheme we/I will endeavour to do this for those clients and I’ll be having a ring around to find out what people want to do.  But do bear in mind, this whole thing is in flux.