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Contracting and Coronavirus: How to Navigate a Pandemic as a Contractor

The recent outbreak of COVID-19, or more commonly known as ‘coronavirus’, has thrown the working world into turmoil; not only for the public sector, but also private. The UK government has responded, albeit a little late, with a Coronavirus Job Retention Scheme. But what exactly does this mean for contractors? Am I eligible to access […]

By Leanne Dempsey on 07 May 2020
Read time: 3 minutes

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The recent outbreak of COVID-19, or more commonly known as ‘coronavirus’, has thrown the working world into turmoil; not only for the public sector, but also private. The UK government has responded, albeit a little late, with a Coronavirus Job Retention Scheme. But what exactly does this mean for contractors?

Am I eligible to access the Coronavirus Job Retention Scheme?

The Coronavirus Job Retention Scheme is a temporary measure put into place by the UK government to aid businesses and employees during the pandemic. The scheme is set to be in place for three months, which begun at the start of March 2020. However, it’s unknown at this stage how long the scheme may actually be in place for, as this depends on whether lockdown measures are extended.

The CJRS allows employers to ‘furlough’ staff; this means staff are put on a leave of absence, but not terminated. The employer can apply for a grant from the government of 80% of the wage costs of furloughed employees, up to a maximum of £2,500 per month, plus any employer’s national insurance costs. Some companies are continuing to pay furloughed staff 100% of their salary, which means the government pays 80% and the company tops this up. In order to qualify for this, employees must have been on the payroll before March 19th 2020.

If you are set up as a limited company director, you are eligible to furlough yourself and claim up to 80% of your wage (up to £2,500). However, as a director, you may have decided to not pay yourself a full salary and instead take a smaller salary then top up your income in dividends, as and when is required. Dividends are not included in the government’s scheme.

80% of this amount is certainly not enough for an individual to live off, which makes this situation a little tricky. It also means that you would not be able to work at all, as you would be furloughed.

The CJRS is currently being assessed, as it’s clear it does not help everyone who needs it, there have been concerns raised by all of the industry bodies that the CJRS in its current form will mean that umbrella contractors will only qualify for 80% of national living wage, rather than their usual monthly pay.

What about the Coronavirus Business Interruption Loan Scheme?

This is potentially another option for contractors, particularly limited company contractors and PSCs – the Coronavirus Business Interruption Loan Scheme (CBILS). As this is a loan, however, you will be liable for the debt, which is certainly not ideal in these uncertain circumstances.

But these loans are hard to come by and more information needs to be known about them in order to see how helpful they actually are for contractors. Eligibility at this stage is difficult to outline and many applications are being turned down.

What about IR35?

The IR35 reform in the private sector was due to be put into place April 2020 – but the recent pandemic has had a huge impact on the regulation, meaning the new measures won’t happen until April 2021, an entire year later. This provides contractors and businesses with extra time to prepare for the changes, and although has eased the pressure on individuals, questions are still being raised as to whether the reforms should even go ahead.

I still need to meet with clients face-to-face: am I allowed?

If your work requires it, you are allowed to travel to clients to see them – however, you should ask yourself whether it is absolutely necessary before you take the trip. Most clients will understand that meetings can often be completed over video or telephone calls. If you need to make site visits, for example, maintain the two metre distance rule and keep your visits to a minimum amount of time. And most importantly, don’t shake hands!

If you require help and advice about your situation during the coronavirus outbreak, please contact a member of our team who will be more than happy to help.

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