There’s been a lot of discussion recently about the financial support offered by the government and even more discussion about those who fall through the gaps. One of the hardest parts of lockdown for me has been giving bad news to clients who aren’t eligible for any help. I know how hard many have worked to build a business, just for the government to completely overlook them.

The government has consistently implied that only a small minority of people and businesses have fallen through the gaps, and in some cases they have portrayed law abiding businesses as tax dodgers (small limited companies). This was several weeks ago now, however it still bothers me. The government are responsible for setting the law and deciding what is fair, the taxpayer must then ensure they operate within the law. If the law has given some businesses a tax advantage over others then the government need to work on creating a fairer system.

In many situations the Coronavirus Financial Support has been incredibly generous and the amount given out by the government has been staggering. The problem is that in some cases it doesn’t seem fairly distributed. They have tried to avoid any abuse of the system by putting in a number of exceptions to avoid false claims for help, but these exceptions have caused a huge number of honest people to end up with nothing.

To demonstrate this I thought it would be helpful to run through a number of situations of people that have fallen through the gaps. (These people and occupations are fictional to protect personal data, but I know people in each situation and there will be thousands more in the same boat).

James is self-employed in the events industry and earned £50,001 in 2018/19.

Under the Self Employment Income Support Scheme James won’t be eligible for any help, despite his business completely disappearing due to lockdown, because he earnt more than £50,000 in 2018/19.

If James had earnt £49,999 he would be eligible for a grant of £7,500 in May and a further grant of £6,570 in August .

If James was operating his business through a limited company paying a small tax efficient salary he could be furloughed and would receive around £575 a month.

James’ only option will be to claim universal credit or take a bounce back loan.

Rebecca is a self-employed web designer who left her full time employment in September 2018 to start her own business. The business took off quickly and within the first six months she was earning the same monthly salary as in her employed role. Since lockdown many of her customers have been unable to pay and she has had no new enquiries.

Rebecca will also not be eligible for any help from the Self Employment Income Support Scheme. Despite submitting her 2018/19 tax return on time and now her 2019/20 tax return too, she is excluded from the scheme as her 2018/19 tax return showed her employment income being £1 more than her self employment income.

Rebecca can’t claim universal credit as her partner is still receiving 80% of his pay through the furlough scheme but as a family they are receiving less than half the amount they would usually be bringing in, she still has to pay all her business expenses on time, and their landlord is not able to give them a payment holiday. Her only option is a bounce back loan, but she feels uncomfortable borrowing money without being sure she will be able to pay it back.

Claire is a chef employed at a small restaurant. She left a previous job in March and started at another restaurant a few days later. Both businesses have been closed throughout lockdown.

Because Claire’s first pay day from her new job would have been 31st March her new employer is not able to furlough her as she wasn’t yet on the payroll as far as HMRC are concerned. They don’t have the funds to pay her so have had to let her go.

Claire’s old employer could bring her back and furlough her if they would like to – however they have decided not to. They were disappointed that she left to work for a competitor and see no reason they should help.

Claire’s only option is to claim universal credit. Unfortunately this doesn’t cover her living expenses so she is borrowing money from friends and family and using her credit card to try to make ends meet.

Michael is the only director of his limited company counselling business earning £35,000 a year.

Michael pays himself a small salary from his business and takes the remainder in dividends. He could furlough himself and receive 80% of his salary however he is concerned that if he does so he will not be able to do any work at all. Some of his clients will really struggle during lockdown without their regular counselling sessions. He decides to ask all of his regular clients whether they would like to continue with video appointments. The majority say they would not be happy with video appointments, but one client going through a very difficult time says she would like to continue. Michael now faces a difficult decision – he can either help his client but receive almost no income or furlough himself and get some help from the government.

He is frustrated because if he was a sole trader he could have claimed 80% of his usual profit  and continued to help those clients that really need him.

To demonstrate another element of the unfairness of the grants it’s also worth considering those who have legally been able to claim help despite an increase in business during lockdown.

Alex runs a small corner shop selling groceries. He has been very busy during lockdown as customers want to avoid crowded supermarkets and shop local and his income has doubled. Alex’s shop is eligible for small business rates relief so he has been able to claim a grant of £10,000 from the local council.

Will there be any changes?

There are still some MP’s petitioning for those who have missed out on support to receive some help, but as time goes on it seems less and less likely that anything will be changed. I really hope that for the over a million people who have been forgotten about there are further announcements to come.

Once life goes back to normal I hope that serious thought will be given to how systems can be improved in the future. We need to ask questions such as does Universal Credit provide enough support? Could we make a Universal Basic Income Scheme work? And how can fraud be prevented on tax returns (especially given that so many of the exemptions from the scheme came about because the government expected too much fraud to take place)?