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Furlough bonus for owner managed limited companies

Can a director claim the £1,000 furlough bonus for himself as the only employee

Didn't find your answer?

The question is going to be asked a thousand times (and the devil will be in the detail), but in my view: surely not.

What do members on here think?

Replies (58)

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By Paul Crowley
08th Jul 2020 19:12

Do not understand the question

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Replying to Paul Crowley:
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By alfredpennypinch
08th Jul 2020 19:18

I assume it's along the lines of:

Can a director of an owner managed business who furloughed themselves qualify for the £1k employment bonus of they don't subsequently make themselves redundant?

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Replying to alfredpennypinch:
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By Paul Crowley
08th Jul 2020 20:01

Finally had the time to watch

My opinion is wait for the detail

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Replying to alfredpennypinch:
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By Echo761
13th Jul 2020 10:42

Exactly, it's as simple a question as that.

In short, I don't see why not. It appears to be a giveaway bonanza... not really thought through and certainly not the incentive to retain employees it was held out to be.

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By marysprads
08th Jul 2020 19:20

I agree - surely not.
OP, I think the question is related to owner managed Ltd company directors who have furloughed themselves over the last few months

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By Matrix
08th Jul 2020 19:24

Yes I was thinking the same. I doubt it will apply to Directors.

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By bettybobbymeggie
08th Jul 2020 19:30

**Edited** adding a summary.

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blue sheep
By NH
08th Jul 2020 20:00

Why not?

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Replying to NH:
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By Mr_awol
08th Jul 2020 21:35

Because it would be an absolute disgrace if they could, and morally repugnant if they tried?

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Replying to Mr_awol:
blue sheep
By NH
09th Jul 2020 05:29

Thankfully as professional advisers we do not need to concern ourselves with what you or I may or may not deem to be morally acceptable, the definition of which changes from person to person.
lets see what the guidance says

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Replying to NH:
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By Mr_awol
09th Jul 2020 09:19

You asked why not. I gave you reasons.

If it turns out that they are entitled then I will claim in accordance with the law for eligible clients. I do hope they are excluded though.

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Replying to Mr_awol:
By kenny achampong
09th Jul 2020 14:20

Why on earth would you think that ?

Employees and self-employed have been bailed out with 80% of their income. And the self-employed can even carry on trading as well. Whereas small limited companies doing exactly the same work can generally only get about £700 per month and can't work at all. It would take a lot more than a paltry £1,000 to even things up.

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Replying to kenny achampong:
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By Mr_awol
09th Jul 2020 16:25

kenny achampong wrote:

Why on earth would you think that ?

Employees and self-employed have been bailed out with 80% of their income. And the self-employed can even carry on trading as well. Whereas small limited companies doing exactly the same work can generally only get about £700 per month and can't work at all. It would take a lot more than a paltry £1,000 to even things up.

Limited company directors have also been bailed out with 80% of their income. What's the difference?

Oh, except of course they artificially suppressed their declared remuneration by pretending that they only 'earned' £8k a year, and supplemented that salary with investment income.

In fact though, the 80% emergency furlough support to keep things ticking over is nothing to do with this £1k 'bonus' which is aimed at incentivising employers not to make their employees redundant. Ignoring the fact that it's a pretty crap incentive, the fact is that the number of OMBs considering redundancy (and therefore likely to be incentivised against such action by any amount of money) is somewhere between 'few' and 'none'.

The government got slaughtered in the press because someone made a comment about weaning the public off of furlough but in fact responses like yours demonstrate the rabid way in which the British public will currently grab at 'free' money because they feel entitled.

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Replying to Mr_awol:
By kenny achampong
09th Jul 2020 16:40

And companies pay 7.5% dividend tax starting at £2K, self-employed 9% NI starting at £8K. It's still all tax on their income.

Worrying about what is earned and unearned income is irrelevant. The whole situation has been caused by successive government's smokes and mirrors policy of fiddling with NI rates to hide tax increases. And not everybody chooses to be a limited company, eg film, TV and IT workers are often forced into it.

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Replying to kenny achampong:
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By Mr_awol
09th Jul 2020 17:11

Those poor IT contractors. Forced to form a Limited company. Probably 'forced to' put the wife on the payroll, bung her some dividends via an A share, and run a Nissan Navarra as a company 'van' as well.

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Replying to Mr_awol:
By kenny achampong
10th Jul 2020 00:58

So let me get this straight. Because you suspect some people use tax avoidance/evasion, everybody who has been forced to try and live on £700 pm for 6 months, and then potentially nothing at all for the forseeable future, 'would be an absolute disgrace, and morally repugnant if they tried' to claim £1,000 in January ?

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Replying to kenny achampong:
ALISK
By atleastisoundknowledgable...
10th Jul 2020 06:21

kenny achampong wrote:

So let me get this straight. Because you suspect some people use tax avoidance/evasion, everybody who has been forced to try and live on £700 pm for 6 months, and then potentially nothing at all for the forseeable future, 'would be an absolute disgrace, and morally repugnant if they tried' to claim £1,000 in January ?

That’s pretty much the split of opinions, summed up perfectly in 1 sentence.

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Replying to kenny achampong:
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By Mr_awol
13th Jul 2020 10:49

kenny achampong wrote:

So let me get this straight. Because you suspect some people use tax avoidance/evasion, everybody who has been forced to try and live on £700 pm for 6 months, and then potentially nothing at all for the forseeable future, 'would be an absolute disgrace, and morally repugnant if they tried' to claim £1,000 in January ?

Oh do calm down dear, you'll give yourself one of your headaches.

How many people do you know that have actually been 'forced to try and live on £700 per month for 6 months' and have 'potentially nothing for the foreseeable future'?

Since my comment, even Primark have said that (as they have already brought their workforce back anyway) they don't intend to claim the £1k bonus for their 30,000 employees.

Then there's the other side of the coin - where people are whinging because employees and the genuinely self employed 'got more free money' than those who operate the model that pays in the least.

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Replying to Mr_awol:
blue sheep
By NH
13th Jul 2020 11:00

Like so many members of the public i am afraid you have been misled about small company owners, most of us on here are members in practice and understand all the issues and reasons why people incorporate, as well as established law in the area of taxation

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Replying to NH:
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By Mr_awol
14th Jul 2020 10:43

NH wrote:

Like so many members of the public i am afraid you have been misled about small company owners, most of us on here are members in practice and understand all the issues and reasons why people incorporate, as well as established law in the area of taxation

If you are in practice then I suspect that as you gain experience and pick up more clients you will get a more rounded view of the small company sector as a whole and you will probably then appreciate your current naivety.

Look down your list of small companies. Ignore any with distributable reserves over £100k (that's most of mine gone). Ignore any that have H&W on the payroll even though the spouse doesn't actually do anything, or makes only a token contribution (and particularly if spouse gets a load of dividend income too). Ignore any Personal Service companies.

If you have any left, these are your clients you have the slightest potential to feel sorry for. You might have the odd plumber, courier, etc but there is little reason for any of these clients to be operating via a Limited Company other than 'tax efficiency'.

Off the top of my head I can only think of a handful of clients - out of hundreds - that have genuine reasons for incorporation, are severely affected, and aren't able to obtain support.

Who is it you think are hard done by exactly?

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Replying to Mr_awol:
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By Echo761
14th Jul 2020 10:55

Mr Awol, I am so glad you are not my accountant... you could drive me off the edge of the cliff... with you at the steering wheel. Cheer up for goodness sake.

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Replying to Mr_awol:
blue sheep
By NH
14th Jul 2020 11:02

Hmm ok, sorry I assumed from your obvious hate towards small companies that you could not possibly be in practice, my mistake.
You may or may not have noticed that there has been a sustained campaign from recent governments to make the public think that all small businesses and landlords somehow need to be punished for paying hardly any tax compared to employees!
No, I am afraid I do not recognise your descriptions from our client base.
What I do see week in week out are small business clients, often with both partners having some involvement in the business seeking advice as to the best structure.
Sometimes the best advice is to incorporate, sometimes a partnership, sometimes a ST. And yes, of course, part of that advice has to be taxation, why on earth would you not consider that as a small business, along with all the other things.
So, yes, I do feel sorry for those clients that have chosen, in full compliance with the law, to operate in a certain way, who were told that no one will be left behind, and now have well and truly been shafted.
As a practice that supports a large number of small business company clients I fail to see how anyone could see otherwise.

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Replying to NH:
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By Mr_awol
14th Jul 2020 15:09

What hate for small business companies?

I think you are confusing acceptable tax planning (which I have no problem with) and a warped sense of entitlement to benefits/handouts (which I do).

For the record, I think the furlough scheme was very generous, needed to retain jobs, and whilst in my opinion far too many employees seem to have become overly attached to it, it was a great scheme that supported both employers and employees in retaining jobs so that a) employees were protected and b) employers had staff 'ready to go' as soon as the world reopened.

SEISS I was less enthusiastic about. For years the Self Employed have worn the "I don't get holiday pay, sick pay, etc" as some kind of badge of honour, ignoring the fact that they have a lower tax burden than employees - both in terms of percentage (NI) and in terms of the flexibility to offset slightly more costs against their income (particularly when it comes to vehicles etc). It was needed, I think, but I also expect the average s/e person to accept the risks as well as the rewards of being in business - and anticipate that at any given time they might face a lack of work, no income for a few weeks, etc. Sunak did say when announcing SEISS that along with added protection will come (eventually) a closer alignment of tax treatment and that seems fair.

Small Limited company owners operate in the most tax efficient way of the three (e'ee, s/e and Ltd) models, even though the dividend tax did level the playing field somewhat. They also have the added benefit of being able to control their tax destiny much better than the s/e. They have been in the sights of HMRC, quite rightly, for many years - and I have many borderline IR35 'contractors' who all have several hundreds of thousands of pounds in the bank and have quite frankly milked the system for years. These people don't deserve the help, most of them don't even need the help, but you seem obsesses with the 'fairness' of them receiving support because employees and s/e got it.

If people want a guaranteed income, safety net, and not to have to worry about feast and famine, then they should be employees. If they choose to run their own business (ST, Pship OR Ltd) then they deserve an extra reward in the good times but they must appreciate that this comes at the cost of losing some of the safety of being an employee in the bad times. We didn't have that.

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Replying to Mr_awol:
blue sheep
By NH
14th Jul 2020 15:37

Mr_awol wrote:

They have been in the sights of HMRC, quite rightly, for many years - and I have many borderline IR35 'contractors' who all have several hundreds of thousands of pounds in the bank and have quite frankly milked the system for years. These people don't deserve the help,


Dear o dear, and I don't suppose you have facilitated that yourself by offering tax advice to them, or profited at all from the fees you have charged them over the years......
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Replying to NH:
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By Mr_awol
14th Jul 2020 16:01

NH wrote:

Mr_awol wrote:

They have been in the sights of HMRC, quite rightly, for many years - and I have many borderline IR35 'contractors' who all have several hundreds of thousands of pounds in the bank and have quite frankly milked the system for years. These people don't deserve the help,

Dear o dear, and I don't suppose you have facilitated that yourself by offering tax advice to them, or profited at all from the fees you have charged them over the years......

Of course I have. But that's where you still aren't getting the point.

Save money. Avoid unnecessary taxes. I personally wouldn't go into or advise anything very aggressive (loan schemes etc) but general bog standard tax planning for OMBs such as low salary/high dividend, bring the wife/hubby in, A shares within reason and if done properly - it's all fine!

But if earning all this extra, don't moan if HMRC move the goalposts and you cant do it any more - simply accept you made hay whilst it lasted. Similarly, put a bit aside and don't come to HMRC if you have a lean spell.

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Replying to Mr_awol:
blue sheep
By NH
14th Jul 2020 16:14

we shall agree to differ - you've lost me now

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Replying to Mr_awol:
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By Echo761
14th Jul 2020 15:57

Do you work for HMRC Mr Awol, lol it appears so.

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Replying to Mr_awol:
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By Echo761
13th Jul 2020 10:47

And how exactly is your business structured? Do enlighten us. You do seem to have got out of bed on the wrong side today. Ha ha.

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Replying to kenny achampong:
By tonyaustin
13th Jul 2020 11:13

Then let contractors treat dividends as salary and pay the employer's NIC for 12 months to February 2020 then pay them the furlough grant for 3 months.

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By Wanderer
08th Jul 2020 20:33

It's all guesswork at present.
There was very little in the regulations to claim the CJRS that distinguished directors from non directors.
And at this stage no director could be first furloughed to avail themselves of the CJRS and therefore probably the bonus next January.
So if I guessed I'd say they probably will be able to qualify.

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By kestrepo
08th Jul 2020 20:38

I'm sticking my neck out to say my best guess is that it will apply to any worker who was paid Furlough and was reported to HMRC in a CJRS claim - including Directors. Further detail about the scheme will be announced by the end of July so we will all have to wait to see if I have to wind my neck back in again!!

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By SteveHa
08th Jul 2020 21:25

I'm gonna go with Rishi sitting with his finger on his chin, mumbling, "I never thought of that", and then some super complicated rules being tagged on.

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Replying to SteveHa:
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By Mr_awol
08th Jul 2020 21:37

Is there a way of giving him a nudge, in case he still hasn’t realised?

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By seitler
08th Jul 2020 23:59

I think directors may be able to claim this. Sunak was quite clear when he referred to 'all employees'
But I agree could be anomolous. A director on basic wage £600 pm (because he takes most out via dividends) so furloughs and gets £480. He only does it one month in April because he's keen to get back to work. he then pays himself as normal. He can claim £1000 now too ??

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By SXGuy
09th Jul 2020 06:51

"surely not" has nothing to do with it. Nor does your moral compass

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By AWeb72
09th Jul 2020 06:54

I don't see how at all. It was very clear this is to keep staff on instead of making them redundant. If the directors were going to make themselves redundant then the business was going to fold. The scheme is intended for business owners who are still trading but an incentive to keep staff on.
If any directors claim this then they should wait for the call/letter from HMRC when claims are later checked.

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Replying to AWeb72:
Psycho
By Wilson Philips
09th Jul 2020 07:47

Have you seen legislation or guidance that the rest of us haven’t?

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Replying to Wilson Philips:
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By AWeb72
09th Jul 2020 08:11

I have two ears and heard what it was intended for. If others want to twist the intention then good luck but await the claim back from HMRC.

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Replying to AWeb72:
Psycho
By Wilson Philips
09th Jul 2020 08:24

That might have been the intention behind the relief but it's going to be difficult to build that intention into the legislation - how are you going to prove that you were intending to make a worker redundant? The existing CJRS scheme was intended to help businesses retain employees without making them redundant - presumably you think that OMB directors should have been excluded from CJRS as well? But they are included.

I have quite a few OMBs that had absolutely no need of CJRS support in respect of their directors. Yet they were entitled to it so claims were made. I will follow suit with the Rishi Bonus- if the legislation says that they're entitled I'm not going to put them off claiming if they want to (my moral compass simply says that I will not actively encourage them to do so).

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Replying to Wilson Philips:
blue sheep
By NH
09th Jul 2020 08:38

Wilson Philips wrote:

- if the legislation says that they're entitled I'm not going to put them off claiming if they want to (my moral compass simply says that I will not actively encourage them to do so).


Somewhat baffled by that, on the one hand you would be happy to claim whatever your client is entitled to, but on the other hand you wouldnt encourage it, why on earth not, I thought as accountants we were in the business of helping clients to make as much money as they within the confines of the legislation.
I do wish people would stop saying what they feel is morally correct or not, morals has nothing to do with it.
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Replying to NH:
Psycho
By Wilson Philips
09th Jul 2020 09:56

I never said that I'd be "happy to claim ...". What I said was that I would not dissuade clients from claiming, which is quite different.

As for encouragement, what I meant was that I will be making all clients aware of the support once the legislation, Treasury directions etc are available. What I will be saying to clients is "You can make a claim for this", not "You should make a claim for this". It's entirely their choice (and that is what I will be telling them should any of them ask whether or not they should make a claim) and that way my morals do not, as you say, come into it.

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Replying to NH:
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By Mr_awol
09th Jul 2020 11:53

NH wrote:

Wilson Philips wrote:

- if the legislation says that they're entitled I'm not going to put them off claiming if they want to (my moral compass simply says that I will not actively encourage them to do so).

Somewhat baffled by that, on the one hand you would be happy to claim whatever your client is entitled to, but on the other hand you wouldnt encourage it, why on earth not, I thought as accountants we were in the business of helping clients to make as much money as they within the confines of the legislation.
I do wish people would stop saying what they feel is morally correct or not, morals has nothing to do with it.

I don't see what is wrong with having an opinion on whether reliefs or grants 'should' be available to various persons and/or sectors. In fact I'd much rather people adhered to the first fundamental principle (integrity in case anybody was wondering) rather than shrugged their shoulders and took the 'not my fault if the law allows immoral actions so I will help people milk the system for all its worth' approach.

Of course, there are other principles we are expected to follow and I do agree that we cant disadvantage our client just their morals differ to ours. We need to remain objective and provide a professional service which may sometimes go against our own internal sense of right and wrong.

As such, there is a balance to be drawn. Personally I'm sticking with the 'hope Sunak realises this and blocks it' approach. If I felt more strongly I might contact my MP and/or try to lobby for action. It may be that they are happy for contractors to get this because they didn't get much elsewhere and the cost is comparatively modest.

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Replying to AWeb72:
Stepurhan
By stepurhan
09th Jul 2020 13:12

I will claim or not based on the rules when they finally become available.

I can see the argument for directors being included though. A sole director who has been able to furlough themselves has literally had no income other than a low furlough pay. They have not been eligible for the SEISS grant, even though they operate as self-employed in many ways. The tax savings from operating through a company are severely limited these days, so the distinction means less than it once did.

Finally, would this not confirm what we keep drumming into clients? The company and the client are separate entities. The company is what has not folded and made the director redundant. If the company could not have survived the crisis without furlough pay support, then would it not have folded and thus made the director redundant? You're acting as if a decision forced on them by an economic downturn would be entirely their choice.

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Replying to AWeb72:
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By Gone Sailing
13th Jul 2020 22:00

@ Aweb72: that is my view also

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By Justin Bryant
09th Jul 2020 08:50

The Treasury/HMRC have been so incompetent in avoiding abuse in delivering these Covid related benefits that heads should roll, as they could have simply picked up the phone to someone like me to prevent any abuse very easily. This is just one of very many examples of their total incompetence.

Another example, with the £10 voucher thing, is what is there to stop you ordering main course, paying for that and then ordering & paying for dessert separately after that?

The list goes on and on.

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Replying to Justin Bryant:
By ireallyshouldknowthisbut
09th Jul 2020 09:08

I agree with Justin

On the £10 vouchers it would be worth for most businesses now the VAT is 5%, just pretending you have had a load of sales, claiming the £10/head and paying tax on the fictitious sale.

The subsidy would generally be greater than the tax on the takings.

The bounceback loan face is another one where the gov is going to lose billions to fraud.

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Replying to ireallyshouldknowthisbut:
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By Justin Bryant
09th Jul 2020 13:24

Yes. Apparently they used to test all these benefit schemes in Liverpool beforehand (as the locals there were good at finding loopholes apparently) to counter abuse, but here it seems no-one with any nous is even bothering to check potential abuses. What a joke!

BTW, this story confirms things are exactly as described above: https://www.bbc.co.uk/news/uk-politics-53348246

I guess (but he's so clever) DC is running the show.

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By pauld
09th Jul 2020 09:08

I thought the bonus applied for the period November to January after the current scheme is finished. I would have thought that nearly all directors/owners of their own business will be backing working by then and will not be claiming furlough for themselves by the end of October and so there may be very few directors that would qualify for claiming the bonus.

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Replying to pauld:
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By legerman
09th Jul 2020 09:25

pauld wrote:

I thought the bonus applied for the period November to January after the current scheme is finished. I would have thought that nearly all directors/owners of their own business will be backing working by then and will not be claiming furlough for themselves by the end of October and so there may be very few directors that would qualify for claiming the bonus.

It's for anyone furloughed, earning the LEL or more,who is still employed on 31st January,so doesn't have to be still furloughed at the end of October

Here's the HMRC guidance issued yesterday, further details will be announced by 31st July, and full guidance published in the Autumn. As things stand, Director's are included, but may change if HMRC decide they shouldn't be.

This is a one-off payment of £1,000 to employers that have used the Coronavirus Job Retention Scheme (CJRS) for each furloughed employee who remains continuously employed until 31‌‌‌ ‌January 2021. The bonus will provide additional support to retain employees.

To be eligible, employees will need to:

earn at least £520 per month (above the Lower Earnings Limit) on average for November, December and January
have been furloughed at any point and legitimately claimed for under the Coronavirus Job Retention Scheme
have been continuously employed up until at least 31‌‌‌ ‌January 2021.

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By bernard michael
09th Jul 2020 09:19

These are the rules

This is a one-off payment of £1,000 to employers that have used the Coronavirus Job Retention Scheme (CJRS) for each furloughed employee who remains continuously employed until 31‌‌‌ ‌January 2021. The bonus will provide additional support to retain employees.

To be eligible, employees will need to:

earn at least £520 per month (above the Lower Earnings Limit) on average for November, December and January
have been furloughed at any point and legitimately claimed for under the Coronavirus Job Retention Scheme
have been continuously employed up until at least 31‌‌‌ ‌January 2021.
Employers will be able to claim the bonus from February 2021 once accurate RTI data to 31‌‌‌ ‌January has been received. More information about this scheme will be available by 31‌‌‌ ‌July and full guidance will be published in the Autumn.
Note the last sentence

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