Coronavirus: Sole trader help 

The coronavirus (COVID-19) outbreak has seen the global economy facing unprecedented times. In the United Kingdom, ‘lockdown’ measures have left many working from home, with some unable to work at all. 

However, though the advice and procedures are clear for those employed within companies, confusion mounts amongst those whose work takes the form of a sole-trader business. Below we discuss the procedures in place to protect sole traders in the outbreak, as well as how they can take action to rectify any financial difficulties you may be facing during this time.

If you are sick and unable to work

If sickness means that you are unable to work, there are several options available to you to gain financial support. If you have previously paid a sufficient number of National Insurance contributions, you may be eligible to receive Employment and Support Allowance (ESA).

The government have made changes to the application process for ESA in light of the COVID-19 outbreak, meaning that you will now be paid on the first day after the claim is processed, instead of after the usual eight-day period.

You will need to complete an ESA 1 form, and attach a ‘fit’ note provided by the NHS 111 service. You should receive the first payment within three weeks. Click here to find out more about eligibility for claiming ESA. 

If you have experienced a drop in business

If your level of business has fallen due to the outbreak, and you are making less money than usual, you may be eligible to receive financial support through Universal Credit.

This relies on you and your spouse/partner having savings of below £16,000. The amount you are entitled to depends on your household income, amongst other factors.

Universal Credit will provide payments to cover the cost of housing, childcare, as well as a basic allowance. For further information, visit the government website.

What if I cannot meet my liabilities?

If a drop in business means that you are unable to keep up with your liabilities, or you are struggling with debt related to your sole-trader business, you may require the help of insolvency professionals. With the expert guidance of an insolvency Practitioner, the below options can help to manage your situation, and settle outstanding liabilities.

• Individual Voluntary Arrangement (IVA)

If you are struggling to make payments on outstanding debts during the COVID-19 outbreak, an individual voluntary arrangement (IVA) may be the answer. Under the guidance of a licensed insolvency practitioner (IP), an arrangement can be made between yourself and your creditors as to how much of the outstanding debt you can afford to repay over a set period. Your income will be evaluated, and a monthly payment plan will be drawn up based on what is deemed to be affordable in your situation.

• Consider raising finance

If you feel as though your current financial position is temporary, and that cash-injection would aid in getting things back on track, raising finance may be a solution. With the help of a finance broker, you can explore the options available to you, and discuss the best way forward to help with your position. Wilson Field offers a range of services to assist companies and sole traders in raising finance. To explore these in more detail, visit our dedicated website here.

• Bankruptcy

If your income is unable to support the repayment of your debts, you may choose to write off the outstanding balance through bankruptcy. The period of bankruptcy lasts one year, during which your debts are written off, and you are protected from the legal pursuit of your creditors. If you own any high-value assets, these may be sold off during the bankruptcy period to provide a financial return to creditors. Bankruptcy stays on your credit history for a substantial period, and can affect you on a professional level.

In summary

The COVID-19 outbreak has brought with it uncertainty for both businesses and individuals, especially those who are self-employed or sole traders. The social-isolation measures imposed by the government are bound to have an effect on business, which can lead to a drop in income, and therefore difficulty meeting liabilities.

If you are sick, and unable to work, you may be able to apply for government benefits such as the Employment and Support Allowance (ESA), or universal credit, depending on your eligibility.

If a drop in business has left you struggling to meet liabilities, you may require further assistance from insolvency professionals. Processes such as an individual voluntary arrangement (IVA) can help you organise the repayment of outstanding debts by breaking this down into affordable monthly payments. The terms of such agreements will be agreed by your creditors, alongside insolvency professionals, who will evaluate how much of the outstanding debt you are financially able to pay off over the period.

If your income is insufficient to meet the terms of such an arrangement, bankruptcy may be an option to write off what you owe, and protect you from legal action from your creditors.

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