Freelancers and the Coronavirus Loan Schemes
Last Updated on 10 May 2020
The loan schemes are aimed at people who run businesses, where there is a problem with cashflow because of the pandemic.
This technically includes freelancers who are sole traders, in partnerships or run their own limited companies. All are types of business in the UK.
There are two main loan schemes:
- The Coronavirus Business Interruption Loan Scheme (CBILS)
- Bounce Bank Loans for small businesses
Bounce Back Loans are more likely to be taken up by small businesses such as sole traders and limited company freelancers as the amounts are small and the government will stand behind 100% of the loan.
The schemes are meant to operate like this:
- the government stands behind loans for 80% of the amount (or 100% for Bouce Back Loans), allowing participating banks or financial institutions to pass on favourable interest rates
- financial institutions offer ‘products’ to customers and negotiate terms for the loan
In practice, there are a number of reasons why loan schemes might not be attractive to freelancers:
- These are loans, not grants. Do you really want to get into more debt?
- Banks have been very slow to pass on the government backed money to customers.
- you usually have to be banking with a participating bank in order to qualify for a loan, and most banks would require a business banking account, even if you are a sole trader using a personal current account for your sole trader business
Originally the government set up CBILS on the assumption that banks would be the conduit for cheap money for small businesses.
Unfortunately for us, some banks saw this as entirely voluntary.
The Bounce Back Loans were the government’s response, as the amounts are minuscule in banking terms, but could be life-saving for a small business.
Other ‘keep now, pay later’ support
The government has brought in a few other tweaks to help businesses with cashflow problems.
- A sole trader who normally pays some income tax in July can defer payment due in July 2020. Unfortunately you still have to pay it but not until 31 January 2021.
- Any VAT registered business can decide to hang on to any VAT due to be paid between now and 30 June 2020. Unfortunately you still have to pay it, but not until 31 March 2021. Read my blog on this >
- There is a coronavirus helpline in HMRC to discuss delaying paying tax. This will be assessed on a case by case basis.
All these are technically open to freelancers who run the right kind of eligible business.
Read about these schemes on gov.uk:
- Coronavirus Business Interruption Loan Scheme >
- Coronavirus Bounce Back Loans >
- deferring payment of income tax on account (sole traders) >
- deferring VAT >
- HMRC’s Time to Pay scheme (trouble paying tax bills) >
Posted on 13 April 2020