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My heart goes out to those that do not have a full years accounts and those who are “one person companies”, notwithstanding the qualifying self-employed waiting until June for support to arrive

I mentioned last week that I would make a comment on the announced support for the “self employed” – the headlines and sharing of the bullet points from the government information pages has been done by everyone else, professionals and the media. So I thought I would have a look at it from another view point. If this gets boring and technical, please scroll to the bottom and read the conclusion.
Firstly, if anyone is tempted to comment about tax dodging, please don’t, I will cover the tax issues later in this article be nice and show some compassion.
Secondly, let’s try and get a grasp on the numbers:
There are approximately 3.5 million companies in the UK with One Director and there must be many more where the directors are a husband and wife team – I assert that many of those consider themselves to be “self-employed”. I also assert that many of them will be paid through a balance of PAYE and dividends. So may be covered by the support for employees (limited to their PAYE earnings – usually to the tax-free allowance level of £12,500), but under the longstanding government definition, they are not self employed and will actually “earn” and rely on more than that. If not why would you take all the stress of running your own business?
I cannot find figures on the newly self-employed that do not have a full years accounts, but there must be many.
I have been very impressed with the Chancellor Rishi Sunak, but I think his advisers have got the numbers wrong when he told us 95% of “self-employed” would be covered by the support package. Also, I felt that prefacing his announcement with a statement about tax inequality was less than helpful (again more about tax inequality later).
Based on the above my best and conservative guess is that 2 million will not be covered by the support packages. Whatever the number is, it is greater than the government definition says it is and it is a huge amount of households that will be facing difficult times.
The good news –the defined self-employed those who “run a business for themselves and take responsibility for its success or failure, aren’t paid through PAYE and do not benefit from employment rights” who have sufficient trading history and therefore tax returns, will benefit from the generous supports, equivalent to an employee, based on their declared taxable earnings (limited to those making under £50,000 profit and paid at a maximum of £2,500 per month) and can wait until June. I have included declared taxable earnings because I think there is a need to challenge the perception that the self-employed do everything for cash and do not declare it. If that is your perceptions please check the date on your daily newspaper for today, it must be at least 20 years old. The very small minority that do “cash jobs” cannot do it for long as there are too many checks and balances in place these days – can we shelve that part of the argument, I will look at the other perceived inequalities below.
Our tax system is not simple and it is not uniform, I therefore suggest that it is futile to judge sole proprietor directors or self-employed for utilising the most appropriate tax regime and following the advice of the professionals they rely on. Most proprietor directors and self-employed are not accountants and furthermore many do not understand the legal responsibilities relating to the type of company they run (although they should), on the whole they want to work and earn a living.
If we consider the actual figures, based on £0 to £50,000 “earnings” it becomes even more difficult, at some levels of earnings sole proprietor directors are worse off paying themselves £12,500 through PAYE and the surplus in dividend, those dividends are from post tax profit (corporation tax at 19%) and are taxed at 7.5%. They will always be worse off if they do not take benefit of the tax-free £12,500 through PAYE.
Conclusion:
Something needs to be done, to support this huge number of “companies” and the households they support, I truly believe that if this cohort are not supported when we eventually do have to restart the economy an essential cog in the machine will be missing.