We are living through an unprecedented time, where a virus caught thousands of miles away has turned life as we know on its head, disrupting every part of our ‘normal’ life, both personal and professional. It is difficult to understand, to come to terms with.

The Government have put a lot of support in place for businesses and employees to try and protect jobs and the economy but there are pockets of individuals that have been left on their own.

The Coronavirus Job Retention Scheme has been applauded, a life line for many businesses. It allows employers to furlough their employees and claim 80% of their usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. This scheme includes directors, as directors they owe duties to their company which are set out in the Companies Act 2006 so they need to ensure they continue their responsibilities but anything deemed as generating revenue would mean they would not be eligible and we understand there may be inspections at a later date to ensure rules have been adhered to with the possibilities of fines being issued. It should be noted that even a social media post whilst on furlough could be deemed as generating income.

Cashtrak have a number of small, limited companies where the directors have just taken the minimum wage and topped up with dividends where possible, this sector is effectively a form of “self-employed limited company” which means they are only entitled to 80% of the minimum wage as dividends have not been included and they feel they are being left out of the support. They have been left with few options to assist them: loans, interest free overdrafts, payment reductions and holidays – but it seems these are more difficult to secure than it was made out. There is no other support package for this sort if business. It is not just the lack of direct measures which self-employed and employed alike have had, it is that most businesses affected by this were probably already working from their homes so do not even have the assistance of the rates incentives.

Some may say that these businesses have not paid in to the tax system as some others have, it is true that this section would have been paying less tax over the years, but who could foresee a situation like this befalling us? Looking at this sceptically, the lack of support being offered could be seen as an indirect ‘slap of the wrist’. But, if this is the case, why was the system allowed?  This section of businesses makes up a high proportion of the micro companies out there.

Politics is not our thing but presumably, initially, this system was set up to gain voting loyalty. Governments of the past set up and continued to allow a perfectly legal way to minimise tax expenditure, so many company owners have taken the advantage of this or been encouraged to do so by their tax advisors over recent years. If the Government were unhappy at the system allowing reduced tax payments then why has the system not been changed? Other than the recent down rating of the tax free dividend rate from £5,000 to £2,000 nothing has really changed.

The way the present Government are offering their support feels that they expect this sector to bounce back, so much so that deferment of VAT and HMRC’s Time to Pay Schemes are all that is needed to cover these businesses at this uncertain time. For some, that will be true, for others not so. Only time will tell how resilient these companies will be, we can’t see any further support being offered no matter how many petitions are signed.

What we do see is that when this is behind us and the financial effects can be totalled up a complete reform will happen which has already been hinted at by the Chancellor of the Exchequer. It will not be a matter of IF but a matter of WHEN. If we are unfortunate to ever endure such a pandemic again, the tax system will be in a position to treat everyone equally, but at what cost to us when we emerge?  No one can say, after all, we do not even know if this present situation will be weeks or months? Will there will be a system of differentiating between what we referred to as “self-employed limited companies”, or at least those with family member directorships and shareholders versus those with more complex set ups. This would be so that dividends can be treated as part of the salary for the former. This could be tricky because director status and shareholder are completely exclusive of each other and this section have just chosen to go down a route that is a way to save tax after all.

We do not envy anyone trying to work this out, the truth of the matter is that many businesses will be no more when this is all over and it will not be anything to do with having resilience policies in place or the ability to get money from the Government from grants. It will be due to the lack of pulling together across the spectrum of businesses. Also, the age old issue of being in the wrong place at the wrong time will have a factor.  There are larger companies with the ability to weather the storm that are not passing on help to smaller companies with payment holidays or reduced fees (unfortunately we have personal experience with this) and this could be pivotal to the survival of these companies.

What we do know is that we all have to learn from this, reflect on what we could have done differently before it all happened to prepare ourselves for a similar event. Businesses, Governments, individuals – all of us. Will this be something we can all do?  We don’t know but we would like this think we will sit back in a few years and look back on this as a good time, a time that taught us lessons we needed to learn and not one where all we were worried about was the Government not being able to help everyone.