Lead Forencsices

Posted by James Pearson on 20 Apr 2020

Job Retention Scheme – Directors Update

The Government has clarified that company directors and office holders are eligible for furloughing under the COVID-19 Job Retention Scheme, but many small business owners are still receiving minimal assistance.

HMRC guidance has been updated to confirm that the Job Retention Scheme – where the Government will fund up to 80% of the salary of employees who have been furloughed as a result of COVID-19 – will be available to company directors and other office holders.

For office holders, the furlough, and any ongoing payment during furlough, will need to be agreed between the office holder and the party who operates PAYE on the income they receive for holding their office.

For directors, the furloughing decision should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director or office holder concerned. Furloughed directors should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company, but they may carry out particular duties to fulfil the statutory obligations they owe to their company, provided they do no more than would reasonably be judged necessary for that purpose.

Whilst this clarification of the eligibility of directors and office holders is welcomed, it still leaves the hundreds of thousands of small business owners who take most of their income in the form of dividends. Currently, only salaries are covered, and most directors of owner-managed businesses take a salary of around £800 per month, taking any other business profits as dividends.

These directors can only receive £600 per month under the furloughing scheme and, once furloughed, cannot carry out activities to generate more profit so that there may be no more dividends to access. This group of taxpayers are left in the uncomfortable position of having to decide whether to try to continue to work (which may not be possible with the country in lockdown) or whether to try to survive on the small amount they can get.

Hopefully, a further scheme will be introduced, similar to the self-employed scheme, where the dividend amounts reported on previous tax returns by directors of owner-managed businesses is used to determine a monthly grant amount that can be claimed in respect of dividends. In the meantime, thousands of taxpayers are left with little support in the face of COVID-19.

Calculate 80% of your employee’s wages and claim online via HMRC here.

If you would like any advice regarding the job retention scheme and how it applies to directors or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or customerservice@taxinnovations.com

 

See also…

Directors and the Coronavirus Job Retention Scheme

UK Tax Residence – Impact Of Coronavirus

Coronavirus Job Retention Scheme [Updated]

UK Tax Residence – COVID-19 Activity