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Director's bonus

CJRS - does it count ?

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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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By Matrix
25th Jun 2020 14:17

I would suggest he is on fixed pay of £1,125 a month.

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Replying to Matrix:
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By Paul Crowley
25th Jun 2020 14:21

Well that is what February showed

Thanks (1)
RLI
By lionofludesch
25th Jun 2020 14:25

My thoughts too. But, as there's about £1500 of furlough money in it, I thought I should get a second opinion.

Thanks (1)
By SteveHa
25th Jun 2020 14:54

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.

Thanks (1)
blue sheep
By NH
26th Jun 2020 08:03

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

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@enanen
By enanen
29th Jun 2020 09:58

average the bonus

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Replying to enanen:
RLI
By lionofludesch
29th Jun 2020 10:48

enanen wrote:

average the bonus

I thought about it but, on reflection, considered it discretionary.

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Replying to lionofludesch:
blue sheep
By NH
29th Jun 2020 18:37

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"?

Thanks (1)
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By SimonStone
29th Jun 2020 10:49

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!)

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Replying to SimonStone:
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By raycad
29th Jun 2020 18:26

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.

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By accaaccountant99
31st Jul 2020 15:15

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

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Replying to accaaccountant99:
blue sheep
By NH
31st Jul 2020 16:14

yep, common sense

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By Plok89
31st Jul 2020 16:48

Ignore bonus as not contractual.

Sounds like they don't need this extra bit of money if they were willing to pay £10k bonus.

Thanks (2)
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By gillybean04
31st Jul 2020 22:00

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.

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