Restart Aid vs Bridging Aid: an explainer for freelancers and self employed

As the pandemic continues to plague small business, freelancers and the self-employed, the German government continues it’s program of support. One of the ongoing questions has been around the business owners needs for a restart aid or a bridging aid - due to the differentiations in help provided. In a country where being a freelancer can also mean being subject to big fix costs, or none at all - because the freelancer spectrum is so big - it can be really important you understand the nuances. So, that is what this article will discuss today! When the Corona aid was first announced, it was relieving but also confusing: how was it all going to work? Well now the different types of help are clear. So, let’s begin with a quick overview:

Bridging Aid III Plus

With the Bridging Aid III Plus, the federal government is supporting all companies affected by the corona pandemic, self-employed persons and freelancers in the funding period from July to December 2021 in covering fixed operational costs from a sales decline of 30 percent. The conditions correspond to those of Bridging Aid III. A restart bonus is also granted. The application is submitted via auditing third parties. The application deadline for initial and amendment applications for the funding period July to December ends on March 31, 2022 (extended). Since October 22, 2021, third parties checking can also change account details. The relevant deadline has also been extended to March 31, 2022.

​​The Neustarthilfe & PLUS

The Neustarthilfe Plus follows on from the Neustarthilfe with higher advances and covers the funding periods July 1 to September 30 and October 1 to December 31, 2021. The funding conditions for both funding periods are identical. Neustarthilfe Plus continues to support self-employed individuals, corporations, cooperatives, non-employed and short-term employees in the performing arts in coping with the economic consequences of the corona pandemic. The application period for the funding period July to September 2021 ends on March 31, 2022 (extended).

The application period for the funding period October to December 2021 ends on March 31, 2022 (extended). The deadlines for requests for changes and changes to bank account details have also been extended to March 31, 2022. It is very important to note that the two funding periods must be applied for separately. Recipients of the restart assistance who submitted their application as a direct application and have already received approval or partial approval are obliged to prepare a final invoice online by December 31, 2021 at the latest. In spring 2022 you will receive a notification from the licensing office responsible for you with information on whether and how much you have to repay.

If the information is incorrect, it has been possible since November 9, 2021 to withdraw the final invoice and submit it from scratch in the application portal. The deadline for any repayment due for the restart assistance ends on June 30, 2022.

You can get even more detailed information just on the Neustarthilfe here.

How do Bridging Aid III Plus & Neustart Assistance work together?

The restart aid is an independent program within the 3rd phase of the federal bridging aid (bridging aid III). Therefore, self-employed persons and corporations/cooperatives can either take advantage of the restart aid or the reimbursement of fixed costs as part of the bridging aid III. It is not possible to claim both grants:

• Self-employed persons and corporations/cooperatives that have applied for or received Bridging Aid III are therefore not eligible to apply for the new start aid.
• Self-employed persons and corporations/cooperativess that have applied for or received the restart allowance cannot apply for reimbursement of fixed costs under bridging allowance III.
• An exception applies to corporations with partners who hold less than 25 percent of the shares in the corporation: If a solo self-employed person as a natural person has made use of restart assistance, a corporation of which he or she is a partner can at the same time make use of bridging aid III if the self-employed person holds less than 25 percent of the shares in the corporation. If he or she holds 25 percent or more of the shares and has already made use of restart assistance, the corporation cannot apply for bridging assistance III.

Applicants are given a subsequent right to choose between restart aid and bridging aid III. After submitting your application and approval of your application, you can switch from restart assistance to bridging assistance III and vice versa in order to select the program that is more advantageous for you.

All applicants who are eligible to apply in both programs can make use of the right to vote. The prerequisite is that an application for one of the two programs has already been submitted and approved. In addition, the applicant must make a declaration that any claims under the originally selected program will be waived. Upon receipt of the waiver, the original notification loses its effectiveness. The right to vote can initially be exercised until the end of the application period on October 31, 2021 (phase one).

In individual cases, the right to choose can also be exercised in the period of the final billing of the restart assistance or in the period of the final billing of the bridging assistance III (phase 2). In these cases, the application is submitted in a partially automated process that has yet to be specified. Exercising the right to vote in phase 2 is expected to be possible at the end of November 2021.

Further information will be announced here in due course. Please note that after you have sent the self-declaration for the final settlement of the restart assistance, you can no longer choose to switch to bridging assistance III.  If applicants have already made the decision to exercise the right to vote, it is advisable to implement this in phase 1 due to the likely simpler application process.

So, how exactly do you vote?

Phase 1 (by the application deadline October 31, 2021):

Applicants who want to exercise the right to vote must submit an application in the program they want to switch to. In doing so, they must indicate in the relevant sections of the application form that they have already submitted an application in the other program, that this has already been approved, and that they now want to make use of the option and waive the funding under the originally selected program. In addition, applicants must state the application number and the date of the notification of the program originally used in the new application.

All other information to be provided corresponds to the respective application data for the first application. After submitting the self-declaration for the final settlement of the restart assistance, the subsequent option to switch to bridging assistance III can no longer be exercised. If applicants switch to the restart assistance by direct application, they are requested to inform the third party through whom the application for bridging assistance III was submitted.

Phase 2 (in the period of the final or final settlement):

During the final accounting period, those applicants who did not use the option in phase 1 are given the opportunity to switch to the other program. In these cases, the application is made in a partially automated process that has yet to be specified, e.g. via the service desk. The exact process is still being designed. After submitting the self-declaration for the final settlement of the restart assistance, the subsequent option to switch to bridging assistance III can no longer be exercised. A final or final account must be made in the program to which the applicant switched after exercising the option.

If the option is exercised and the application has been made for the program to which the applicant wishes to switch, it is no longer possible to switch back to the other program selected first. This also applies if the funding is lower in the newly selected program or if, after submitting the application, it turns out that there is no entitlement to apply for the newly selected program and the application therefore cannot be approved.

It is therefore urgently advised to only use the option after thorough prior examination. It is recommended to seek advice from an auditing third party.

Also worth noting

The restart aid will only be offset against other corona-related grant programs of the federal states or municipalities if the funding purpose and funding period overlap and would result in overcompensation without this offset. This is ensured by the relevant federal states/municipalities. Payments received from insurances due to operational restrictions, which cover the same period as the requested restart assistance, are not offset against the amount of the restart assistance.

So that the subsidy now fully benefits the self-employed, it is not taken into account in the advance tax payments. In the income tax/corporation tax return and, if applicable, the trade tax return, however, the subsidy is to be recorded as taxable operating income or revenue. As a so-called "real subsidy", the restart aid is also not sales taxable . So there is no sales tax. If applicants only have income from incomplete or short-term employment relationships the obligation to submit an income tax return for the 2021 assessment period can arise solely from the receipt of the restart allowance.

Making a final decision

A fundamental difference between the programs is that the funding amount for the restart aid depends directly on the turnover in the reference and funding period, while the funding amount for the bridging aid III is also linked to the amount of fixed costs in the funding period. A change from the restart aid to the bridging aid III could therefore be advantageous, among other things, in cases in which the fixed costs in the funding period are higher than assumed in the original application.

In addition, as part of bridging aid III, the eligibility of investments in digitization was subsequently introduced. If corresponding investments were made during the funding period, a switch from restart aid to bridging aid III could also lead to higher funding.

A change from Bridging Aid III to Restart Aid could be advantageous, among other things, in cases in which the fixed costs in the funding period are lower than assumed in the original application. In principle, the amount of funding in both programs depends on the decline in sales during the funding period. If the decrease in sales realized in the funding period deviates significantly from the expected decrease in sales, it may also be possible that, contrary to the original expectation, the other program in each case is more advantageous for applicants. Hopefully, after reading this blog you feel a little more prepared to tackle the question!