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Can a sole director claim the 80% relief

Can I claim the 80% relief? I am employed by my own company.

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A friend who owns a LTD company and pays himself a salary of £719 per month and a dividend of £7,500 per quarter has been advised by his accountants to change his payments to a monthly salary of £3,000 backdated to 1st March and pay himself no dividends to enable him to claim the 80% wages cover from HMRC to protect his business income in case no new work comes in. Can sole directors who are also employees of their own companies do this and benefit from the relief?

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By paulamani
23rd Mar 2020 13:12

In his announcement, the Chancellor was specific that the Coronavirus Job Retention scheme is meant to cover wages of employees “who are not working but are furloughed and kept on payroll, rather than being laid off”. If your friend currently has work but wants to use the scheme protect his "business income in case no new work comes in" then that is contrary to the intention of the scheme (putting aside the fact that it has yet to be confirmed categorically if one man band ltd company directors will be entitled to claim). Any accountant advising their one man band ltd company clients to increase the salary in order to be able to claim under this scheme is jumping the gun. Until we get further guidance or see what information will be requested via the portal, I would err on the side of caution.

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By Cheshire
23rd Mar 2020 13:13

This Q has been asked and answered, with the little info any of us have got, a fair few times over the last few days - see all the other posts.

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By ComanCo
23rd Mar 2020 13:18

I am having clients ask the same thing.

My opinion is that the job that the director carries out would only be furloughed if the limited company work has already dried up completely. I would not entertain a fiddle that tried to obtain a grant even though the company was still generating income.

Most companies are outside IR35, and therefor the directors want to demonstrate that they are self-employed. It is in the nature of self-employment that continuity of work is not guaranteed and often project based. Therefore a grant application could be inconsistent with self-employment status.

Directors who are sick could consider recouping the SSP for the first two weeks of sickness. If the period without work continues for prolonged period, consider closing the company, registering as a sole trader and claiming Universal credit.

Since I am not a benefits person, I do not know whether the last strategy would work.

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By AWeb72
23rd Mar 2020 14:42

This question is multiplying quicker than coronavirus

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By ComanCo
24th Mar 2020 08:52

There have been some clarifications from HMRC. A furloughed worker cannot work. Only directors not working would be eligible for the claim.
more can be read here:

https://www.linkedin.com/pulse/hmrc-clarifications-coronavirus-job-reten...

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By Matrix
24th Mar 2020 10:04

A construction company client has furloughed all 3 Directors and stopped all work.

I agree that it would be hard for a sole Director company.

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By lisa65
24th Mar 2020 13:37

Thank you so much for all the comments received so far. They are really helpful in this challenging times.

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By seitler
25th Mar 2020 23:42

I think there's bound to be anti avoidance legislation on this. And changing the remuneration package by switching back to a salary at the expense of a dividend may well be caught.

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By ComanCo
26th Mar 2020 21:57

This has now been clarified "Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes." https://www.gov.uk/government/news/chancellor-gives-support-to-millions-...

However, consider that the company cannot generate income which would indicate that the sole director was working, for any period during for which the grant is being claimed.

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Replying to ComanCo:
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By lisa65
28th Mar 2020 16:03

Thank you ever so much for sharing.

The comment by the Chancellor is very easy to miss since it is towards the bottom of the "Self-employment Income Support Scheme (SEISS)" announcement.

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By coops456
29th Mar 2020 13:07

This was also confirmed by HM Treasury in the CBI webinar on 27/3/20, which can be listened to here (albeit with poor sound quality) https://www.cbi.org.uk/articles/daily-coronavirus-webinar-job-retention-...

In brief:
Limited company directors, who are employees of their own companies, are eligible. Whilst furloughed, directors must only carry out statutory duties like accounts and payroll – any revenue-generating activities will fail the JRS requirements.

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Replying to coops456:
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By paulamani
29th Mar 2020 15:53

If directors can be furloughed but still continue to carry out statutory duties, isn't one of the statutory duties of a director to "promote the success of the company"? And isn't profitability/generating income a measure of this? But that contradicts the guidance that has been published so far. The government needs to clarify what directors of small businesses can and cannot do to be eligible for the scheme.

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Replying to paulamani:
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By ComanCo
29th Mar 2020 17:09

paulamani wrote:

If directors can be furloughed but still continue to carry out statutory duties, isn't one of the statutory duties of a director to "promote the success of the company"? And isn't profitability/generating income a measure of this? But that contradicts the guidance that has been published so far. The government needs to clarify what directors of small businesses can and cannot do to be eligible for the scheme.

If a director has been paid a salary up to the national insurance threshold of £719, the reclaim is £575.20 a month. In practice, as soon as lockdown ends, most directors will sooner get back in business than claim the grant.

Why provoke the regulator into further clampdowns such as dividend taxation and IR35?

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Replying to paulamani:
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By ComanCo
29th Mar 2020 17:26

paulamani wrote:

If directors can be furloughed but still continue to carry out statutory duties, isn't one of the statutory duties of a director to "promote the success of the company"? And isn't profitability/generating income a measure of this? But that contradicts the guidance that has been published so far. The government needs to clarify what directors of small businesses can and cannot do to be eligible for the scheme.


Duty to promote the success of the company is defined here:
http://www.legislation.gov.uk/ukpga/2006/46/section/172
That definition includes "the impact of the company's operations on the community and the environment,"

I would be underwhelmed by an opportunity to profiteer from the grant, and I would likely lose face with clients for trying.

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By Gone Sailing
30th Mar 2020 12:37

A challenge for accountats will be to advise for 2 shareholder / director companies which are spouse/spouse CP/CP.
Where the company still has income, but one spouse / CP furloughs.

It's the client / company that makes the claim, not the accountant.

EDIT:
Oops: just spotted this:
https://www.accountingweb.co.uk/any-answers/furloughing-spouse-who-is-a-...

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