I have a client who runs a livestock farm and an engineering business under his one limited company.
His engineering business has stopped getting any orders, this business makes money normally and pays his salary. My guess is this will continue so I can furlough him. The farming business, makes only losses, and the salary he takes is charged to the engineering business. His wife and daughter mainly attend to the animals (for free) but he also has to care for them, eg TB jabs etc. I have suggested he sells some of the animals but the market has dropped for his beasts by 50% and he is reluctant to sell, as he has been building this business and it has been a cash drain for three years. He and his wife have four kids and nothing will be available to them other than Universal Tax Credits should furloughing not be applicable. It feels very unfair as he has contributed a lot in Corporation tax for his engineering business over the years. Any help gratefully appreciated.
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How many businesses is it? You talk about it as two separate businesses but say it's one limited company. Is the farming even a business if it makes only losses?
This sounds like a mess that's been a mess for ages and it's just now it's causing a real problem, if these are treated as two separate businesses it seems strange that they're under one company.
Your client can't be furloughed if he's working for the business. Working doesn't include directorial duties but if the company is in the business of farming he can't do farming work.
If the company has made an overall loss in the current period you could shorten it to today, file a CTax return and carry it back for a refund of some of that corporation tax paid in prior years. Other than that and furloughing, universal credit is their best option, unless the grants to businesses receiving small business rates relief apply.
Thank you Duggimon for taking the time to offer guidance. It is two businesses under one limited company, a separate limited company was set up for the farming business but accounting has not been done via that limited company.
The farming business has only ever incurred losses, its a long story as to why the client has been investing in starting up a farming business but its for his children as they are special needs and he wants for them to have a job. This is a very kind man and he may well be away from the fairies in what he is doing but his heart is in the right place so I am just trying to help, as opposed to judging him because everything isn't in order.
The small business rates may be an option, I can't carry the losses back as the trade of farming is different to the engineering business (very profitable).
I agree that working to look after the livestock is not covered by directors duties. I will get him to look at Universal Credit, his wife is claiming some sort of benefits but I don't know what and he doesn't either. He has learning needs and I just want to help him, rather than judge him.
Thanks again for your supportive reply.
The statutory duties of a director include protection of the company's assets and the interests of creditors.
That would include feeding the assets and making sure the company didn't suffer losses that would leave less funds available to pay creditors.
Why are we being so strict here ? Coming, as it does, hard on the heels of criticism of the peelers for unlawfully preventing the sale of Easter eggs and hot cross buns.
Statutory duties aren't just about filing your accounts and confirmation statement.
Read through CA2006, s172, esp subsection 1.
