Support for your business – Update 5 covering self-employed and FAQs

Clarification for the self-employed and the payroll co-funding scheme

The Revenue Service have today, 13th April 2020, responded to our questions and issued clarification around who can claim for payroll co funding.

There has been confusion about how individuals classified as self-employed for social insurance purposes (whether self-employed or an owner manager of an incorporated business) can claim business support.  The Revenue Service advise that anyone classified as self-employed, even if they take drawings/a salary, should only apply for the grant. They should not submit a claim under the payroll co-funding scheme and to do so could be considered to be a false claim.

Any business proprietors who have received payroll co-funding, yet are considered “self-employed” by social security, are required to refund any amounts incorrectly received.

We understand that lots of you are very worried and will be upset and angered by this update, and we too were hoping the decision would go the other way and sole traders would be included in the scheme.  We are feeding this back to the States and we will keep you informed of any updates.

There is some hope in that the email from Revenue Service does also advise that the feedback that government has received on these initial business support measures has been heard, therefore consideration is being given to further support measures that could be introduced to support small businesses, in particular the self-employed. We anticipate these will be announced later this week/early next.  We will update you as we receive further information.

FAQs relating to the business support application forms:

As a business owner can I count myself as one of the employees on the Payroll-Co Funding Scheme as well as applying for a Small Business Grant?
Afraid not.  If you have less than 10 employees you can claim the £3,000 grant.

Who is eligible for the Payroll-Co Funding?
For pay to be eligible for reimbursement via the payroll support scheme employees must be:
•    Included in the quarterly employer returns submitted to the Revenue Service for ETI and contributions as an employee, with the employer responsible for employer’s social insurance contributions 
•     Have been employed by the business prior to 16 March 2020. 
Co-payments are not payable in respect of:
•    Self-employed persons liable for contributions at the self-employed rate 
•    Employees joining a business after 16 March 2020. 

I have been trading less than six months, it is a valid new business and my primary source of income.  The rules state I am excluded but can I still apply with additional supporting information?
Our advice is that you should submit a claim form and add additional explanation on your email when submitting.  Your claim will not be automatically agreed, it may be rejected and then reviewed separately.  We anticipate this process will take longer than the applications that fit into the criteria of trading for more than six months.

What is my Business Tax ID?
If you are a sole trader then this is your personal tax reference. If you are trading as a limited company then this is the Company Tax Reference.

What is the Employer Tax ID?
This is the reference on your quarterly ETI return. You can find it on your printed quarterly return.

The grant is only available to small businesses, how big is a small business?
A business that has 10 or fewer employees including the owner.

How do I work out my annual turnover?
Use your last set of accounts. If you are a new business or trading has changed significantly since the last accounts then add up all income receipts for 12 months.

How do I work out my estimated lost net income for next 3 months?
This is net income less direct costs (that stop if you cease trading), i.e. actual income lost in 3 months of trading.  Review your prior year accounts, income less direct costs (like materials) / 52 weeks * 13 weeks.
The States are trying to assess the level of business loss you have incurred in those three months. Therefore you need to provide the difference in profit between the current situation and the profit you would have generated without the Coronovirus impact on your business.

What is SOG Vendor Account
If you currently provide services to the states – check your paperwork with them for this number.  If you don’t have a vendor number just put ‘no’ and leave the field blank.

Some of my staff work 40 hours a week, some less than 35.  What do I claim on the Payroll Co-Funding Scheme?
Claim the hours in line that previously worked by an employee. If an employee previously worked 45 hours a week they can claim minimum wage for 45 hours a week. If they only worked on average 15 hours a week they can claim 15 hours a week.

When did the Payroll Co-Funding Scheme cover start?
It’s a month by month application for reimbursement of earned income (or weekly if you pay weekly), since 16th March.  I.e. each time you prepare payroll and pay staf f- submit the form.

I already submitted my form, but now realise I should not have included myself on the payroll?
Reply to all on your first email and attach a corrected form, noting that on your email.  If you have received payroll support for yourself and you are self-employed – notify them and ask next steps, which may be to repay.

Is the grant tax free?
Yes and it is a grant, not a repayable loan.

Is the Payroll-Co Funding taxable?
The amounts paid to the employer under the co-funding scheme will be treated as a business receipt and will be taxable. The full wages paid will be an allowable expense.

Are your previous emails on States of Guernsey Business Support measures easy to find in one place?
Yes of course!  See http://degaris.gg/articles/
In particular we provided guidance on cashflow planning which you may wish to revisit given this new guidance.


I would advise that you read the draft statement of practice dated today which will clarify matters, copied below.

If you need any help with your claim, or indeed to discuss a claim you have already submitted, please contact us.

Stay safe

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DRAFT STATEMENT OF PRACTICE

B17 – Payroll co funding scheme and grants to support business and the self-employed (sections 7 and 19)

Introduction

The Policy and Resources Committee have announced 2 measures to help employers and businesses in light of the lockdown imposed due to the Coronavirus (COVID-19).

This Statement of Practice has been published to confirm the taxable position of these measures.

1 – Payroll co-funding

This measure has been introduced to help businesses in specific sectors keep their employees on their books, during the period where they cannot trade, so that they will be in a good position to resume trading as soon as conditions allow.

The States will fund 80% of employee wages, based on the minimum wage, so long as the employer contributes a minimum of 20% to reach the full minimum wage figure. The employer can opt to pay more given many employees will be on higher wages.  The initial period of support is 3 months (13 weeks).

For pay to be eligible for reimbursement via the payroll support scheme employees must be:

  • Included in the quarterly employer returns submitted to the Revenue Service for ETI and contributions as an employee, with the employer responsible for employer’s social insurance contributions
  •  Have been employed by the business prior to 16 March 2020.

Co-payments are not payable in respect of:

  • Self-employed persons liable for contributions at the self-employed rate
  • Employees joining a business after 16 March 2020.

Employers should continue to operate the ETI scheme on all payment made to their employees, including on the monies paid under the co-funding scheme, deducting tax and social insurance and remitting this as normal. For example if an employee is paid the equivalent of Guernsey’s minimum wage, the employer will need to record the payment of £298 gross to the employee, deduct tax and social insurance as normal, and then actually pay the individual the net amount.

The amounts paid to the employer under the co-funding scheme will be treated as a business receipt and will be taxable. The full wages paid will be an allowable expense.

Where an individual is registered both as employed and self-employed for contributions purposes, they may attract co-payment agreements via the organisation in which they are employed.

2 – Grants to support businesses and the self-employed

A grant of £3,000 will be given to all businesses and the self-employed with fewer than 10 employees. This is designed as additional support to smaller businesses to be used in whatever way they deem appropriate. These payments, being a payment made by Government in these exceptional circumstances, will be treated as a casual receipt and as such will not be taxable, as provided for in section 19(b) of the Law.