A director was on £1125 a month all the way through 2019/20, except for October, when he decided to give himself a bonus of £10000. (Not my idea - he just decided to do it.)
He obviously didn't have furloughing in mind at the time but the question now arises, is his reference pay £1125 or £2034 (£22375 / 11) ?
The HMRC blurb says that the following should be included (inter alia)
* Regular wages
* Non discretionary fees.
The question is, is this a non-discretionary fee ? There's no evidence of a contractual payment and, imho, whatever the director might say now, it looked like he just fancied a few extra quid in his bank account.
Thoughts ?
Replies (14)
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I agree with Matrix, the bonus has naff all to do with CJRS, unless (unlikely) the director has a contract with his company which guarantees it.
It all depends how you (or the Director) word it IMO
Option 1 - I pay myself a salary of 22k a year for my Directors duties, it just so happens that I paid myself more of it in one month, a salary of 22k can most probably easily be justified
Option 2 - I pay myself a salary of £1125 a month for Directors duties, but paid myself a discretionary bonus of 10k
Two different outcomes, and when HMRC come knocking I think I can tell you which one the Director will say
maybe for next time you should have a quiet word with your clients about what exactly they tell you, either that or you should have started coughing loudly just before he said the B word!
out of interest would you have included it if he had said "I increased my salary this year by 10k"?
Another vote for ignoring the bonus from me, unless of course it's compulsory and in his contract (which you've said it isn't!)
It's become a bit of a cliché, I know, but ME TOO!!
The HMRC Guidance really couldn't be more clear:
"When you’re working out if a payment is non-discretionary, only include payments which you have a contractual obligation to pay and to which your employee has an enforceable right."
In all my years in tax I've never, ever come across a director of a company which he/she owned who has an employment contract with it. Without an enforceable contract you don't get to first base as regards it being non-discretionary.
The OP states that the director merely decided to "give himself a bonus of £10000" and so I assume from this must indeed control the company. No further questions, M'Lud.
Looks like per today’s update company directors are eligible as long as they meet the other requirements
https://www.gov.uk/government/publications/job-retention-bonus
Ignore bonus as not contractual.
Sounds like they don't need this extra bit of money if they were willing to pay £10k bonus.
If they're fixed rate then it's purely based on Feb pay (or last RTI before relevant date) which included no bonus so don't need to consider whether it was discretionary or not.