“You will not face this alone,” said chancellor Rishi Sunak at the beginning of the pandemic as he announced a package of financial help for Britain’s workers – one that, despite his words, bypassed many in travel, leaving them very much on their own.

The National Audit Office estimates 2.9 million people have fallen through gaps in the government’s support schemes, including many in travel, such as agency owners who can furlough staff but get no help themselves and homeworkers who are recently self-employed.

For these people, things might be about to change after parliament’s Public Accounts Committee (PAC) got involved. The all-party group of MPs has called on HMRC to “urgently explain” why some taxpayers were not able to access government support during the pandemic.

In its report on HMRC’s performance covering 2019 and 2020, published on 20 January, PAC highlights the fact that HMRC has dished out £80 billion to businesses and the self-employed during the pandemic, but that “quirks” in the tax system have meant whole groups “have not had a penny” … “while some large companies that have taken taxpayer support have continued to pay out dividends and high executive salaries”.

The committee said: “HMRC should, within six weeks of this report, publish an explanation of why it can’t help those freelancers and other groups that have been excluded from receiving any support, and set out steps it can take to overcome those obstacles.”

PRESSURE GROWING

Six weeks takes us to 3 March – Budget day – when, hopefully, Sunak’s reluctance to address the issue will change.

In addition, the Treasury Committee last week questioned professional bodies on the matter, so Sunak is feeling the pressure from outside parliament and within.

The cause has also been taken up by pressure group Excluded UK, which highlights those caught in the trap. Among them are:

• An estimated 710,000 limited company directors. Due to fluctuating income, many pay themselves through yearly dividends plus a small salary, typically below £750 a month. This made the government reluctant to support them, because of the difficulty of assessing income accurately. Directors who receive salaries through PAYE can be furloughed and apply for an 80% grant of their salary, but this is often a small part of their income.
  
  
• The newly self-employed: An estimated 200,000 people set up businesses after 6 April 2019 and do not have the three tax returns required from 2016-19 to access the Self-employment Income Support Scheme (SEISS).
  
  
• Around 225,000 business owners with trading profits of more than £50,000. There is no such cap on furlough eligibility, only on the level of pay-out.
  
  
• Also excluded are those with a PAYE/self-employment mix with less than 50% of income from self-employment.

In a letter to small businesses minister Paul Scully, Travel Counsellors’ chief executive Steve Byrne wrote of “hard-hit franchisees”.

Byrne said: “I write on behalf of all of them to seek government support for the small self-employed business owner. Whilst the SEISS scheme has supported some, businesses that have been recently set up and may be operating via limited companies as directors are excluded. There are around three million of these businesses in the UK and these include travel entrepreneurs who have received no financial support during this pandemic and continue to face very challenging months ahead.”

Hope on the horizon?

There are strong signs at least some of those affected will receive support in the Budget.

On the same day as the PAC report’s publication, the Treasury Committee heard from accountancy experts, who all predicted some change of policy. A key trigger is the 31 January deadline for self-assessment tax returns.

Richard Wild, the Chartered Institute of Taxation’s head of tax technical team, said the 12 million expected returns would bring information “to either expand or refine the support available”. This included those who started self-employment in 2019/2020 and are filing their first year’s accounts.

“You could extend eligibility to include those,” he told the committee.

Wild said he understood measures introduced last March had originally been envisaged as short-term, “but for some people, by the time you get to March/April time, it will have been a year without support. I think it’s quite surprising that we haven’t done more to fill those gaps”.

There may then be help on the horizon for those who, for example, set up as homeworkers and were ineligible for support because they did not have the requisite three years’ accounts for the SEISS grant or for company directors like agency owners and those earning more than £50,000 who also fell through the gap.

For the latter group, the Association of Chartered Certified Accountants has proposed a SEISS scheme for SME directors, based on company profits, not dividend assessments. “We have spoken to HMRC and Treasury, they have been positive,” Glenn Collins, the ACCA’s head of technical advisory and policy, told the committee.

“We don’t want them left behind; they inspire entrepreneurs of the future. While there’s hope, directors will keep businesses running, but there does come a cutting-off point.”

He warned those earning more than £50,000 could miss out again, but Caroline Miskin, tax practitioner support and private clients at the Institute of Chartered Accountants in England and Wales, said there was “no practical reason” for the £50,000 limit.

“It was purely a policy decision,” she said. “It could have been designed capping the grant rather than income and tapering away above £50,000. My understanding is it was intended to exclude very high earning groups from support, but it has caught people who aren’t particularly high earners.”

The pressure for Sunak to act is even greater when the devolved governments’ actions are taken into account. Northern Ireland, for example, introduced the Newly Self-Employed Support Scheme (NSESS) and the Limited Company Director’s Support Scheme (LCDSS) on 21 January, which both provide an initial one-off taxable grant of £3,500. Wales launched a similar scheme last summer.

AGENTS’ STORIES

Despite these regional initiatives, travel is littered with those who have fallen through the gaps of the UK government’s schemes.

Lesley Jarvis, a limited company director/owner of Finesse Travel, has been in business for 22 years and as well as mainstream travel, the firm specialises in Formula 1 packages.

“I’ve paid taxes all my life and had no income since March and because I’m paid mainly in dividends, very little furlough,” she said.

“I have all my normal monthly expenses, Atol, tour indemnity insurance etc – over £850 per month.  I specialise in Formula 1 and last year I lost over £20,000 where the flights went ahead but the race didn’t, so I wasn’t due any refunds from the airline but had to refund my clients.

“I just feel my whole life is about trying to beg for money that I feel I actually deserve. I’m volunteering three to four days a week at a vaccination centre, it’s something positive and it keeps me sane.

“I have applied for the Additional Restrictions Grant (ARG), but because I work from home, I haven’t had access to a lot of the grants local authorities have been paying out.

“I’d like to see some sector support and for the government to look at dividends, because they’re taxable income and HMRC have all the records. All I want is for us to be treated fairly.”

Julie Croucher, who runs tailor-made specialist agency Travel with Jules said: “Three million have been excluded and they’re not paying us any attention. People are being urged to take on apprentices – we can’t even afford to save the jobs we’ve got.”

Croucher said she had taken out a “substantial” business loan pre-Covid which added to the pressure. Before rules became more flexible, she was unable to claim furlough because she had to continue working to refund clients.

“I can’t pay myself dividends as there’s no money in the company, I’ve (now) part-furloughed myself but still have to pay taxes, NI etc on the whole payroll – all the staff are furloughed.

“Even though I’m working, I’m not working for financial gain of the company, any work I am doing is rebooking. We worked through the night in the first lockdown. We moved bookings from last April/May to the same dates this year; we’re now cancelling them again.”

Helen Furlong, a PTA at Midcounties Co-Operative Travel, is based in Wales, where they have had “a little more support”.

“My husband and I are directors of our small, two-person family limited company paid a small wage and dividends.

“I could not go on furlough until the rules changed on working part-time in November because I had to work to refund or reorganise all our bookings and I’m still doing so.”

Anita Mandl runs AM Travel World, a small-group tours specialist and has a sideline as a freelance guide.

“I seem to have fallen short of all the different forms of government support,” she said.

“Furloughing myself was not an option and SEISS did not work for me because I did a freelance PAYE job, so I had two sources of income.”

Mandl’s earnings for PAYE freelance work were more than the remuneration from her limited company, falling foul of the government’s “50/50” rule.

“It’s been one year with no business but also a year where I had to refund all my clients who had paid for trips for the summer and autumn of 2020,” she said.

“I refunded money I had not got back myself and did the right thing by each and every client. I have survived on my savings and handouts from my family.”