Coronavirus (COVID-19) Job Retention Scheme – Advice for Company Directors
The critera to qualify for the COVID-19 Job Retention Scheme (essentially funding 80% of salaries), is without doubt, stricter and less generous in the case of small company directors. Below I’ll discuss what can be claimed by this group of employees. The full guidance is the same as that for the non-director employees and is found here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
Job Retention Scheme: How it applies to company directors
- Directors can be furloughed if they’re an employee on PAYE and on the payroll on 28 February 2020
- The same restrictions to furloughing apply both to directors and employees. See here for the full list but of particular difficulty for directors is the requirement to perform no work whilst furloughed.
- In practice, a company may be so badly affected by the crisis that it goes into a ‘COVID-19 hibernation’ meaning that the director would have no day to day employment type duties (especially, income generating activity) but is still on hand to undertake their statutory duties as company director.
- Other companies might only be partially affected. In such cases, it might be practical to furlough all but one of the directors. This may especially apply to small husband and wife ran companies.
How much is the grant worth to directors?
- Employers can choose to pay a furlough salary of 80-100% but the government is funding only up to 80% (capped at £2,500). In the case of directors it’s likely that the company will want to continue to pay 100% of the current salary in the knowledge that 80% will be funded by HMRC later.
- Directors salaries are usually set quite low with the remainder of their remuneration being paid via dividends. Unfortunately HMRC will not be funding anything towards dividends.
- Presuming therefore that you earn a typical directors salary (often below all tax and NI deductions) of £719 per month. HMRC will fund approx £575 per month.
- The grant will be received by the company as taxable income and cannot be expected to hit the company before late-June 2020 or later.
- There’s no need to worry or rush to take action. If work has ground to a halt you will qualify for this scheme. Just apply the rules are best as you can formalise the arrangement later using our template letter to furlough.
- As for claiming the grant – please don’t contact HMRC. They’re of course extremely busy and are in the process of contacting employers.
My previous COVID-19 posts remain relevant and are:
- COVID-19 Job Retention Scheme (detailed guidance for employers)
- Coronavirus (COVID-19): Help for the Self-Employed – PER THE 26 MARCH ANNOUNCEMENT
- Help for the Self-Employed and other FAQ’s
- Can the Self-Employed go to work?
- What financial support is available for UK businesses? – NOW UPDATED
Enjoy saving tax?