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OMB Ltd Company directors ARE entitled to 80%

It has just been confirmed company directors are entitled to 80% of their salary

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Daniel Barnett - Employment law barrister has been talking to Nick Farrari on LBC this morning, and has confirmed One Man Band Ltd Company Directors ARE entitled to claim 80% of their salary, however dividends will NOT be included in calculating the amount they will pay.

This means that a director who has chosen to take only £8632 per year as a salary WILL be entitled to claim 80% of 1/12 of this.

Those who take a higher salary will be capped at 2.5k to bring it inline with PAYE.

He also said, that those directors who ONLY take dividends as a wage, will more than likely fall under the Self Employed rules and as such will need to wait for goverment to annouce whether they will be planning any releif for the 5 million self employed in this country.

This does create an interesting question, if the government do decide to help the self employed, you might find a situation where directors who have paid themselves a higher rate of dividends could decide to claim via the S/A route, instead of the salary route, in order to increase the amount the government will pay.

However, you will need to bare in mind, that directors MUST follow the same rules as employees who have been furloughed, and this means, that they will NOT be able to do ANY work for their company during the period in which a claim is made.

So directors will only be allowed to claim, if they really do have to close their business down, simply being unable to afford to pay a wage whilst continuing to operate as a functioning director will not be acceptable to claim the relief.

Replies (17)

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By SWAccountant
23rd Mar 2020 10:22

Surely a Director's £8k salary is for their duties as a director and not as a fee-generated (contract for services versus of service).

Can I director furlough themselves in respect of director duties? These duties still need to be performed even if no sales are being done.

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Replying to SWAccountant:
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By SXGuy
23rd Mar 2020 10:29

Good question, I have no idea. I guess we could argue the toss all day long as to whether a director can perform their duties free of charge.

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By John Stone
23rd Mar 2020 10:24

Is this just this particular barrister's opinion or has this been officially announced? There is a difference.

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JEM
By jem
23rd Mar 2020 10:24

This doesn't bode well for directors who report low salaries with a higher amount on the March RTI return.

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Replying to John Stone:
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By SXGuy
23rd Mar 2020 10:28

Hasn't been officially announced, so I would treat as his opinion, which I guess would be more credible than ours.

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Replying to jem:
Giraffe
By Luke
23rd Mar 2020 10:30

jem wrote:

This doesn't bode well for directors who report low salaries with a higher amount on the March RTI return.

No, but then they have been using the system for years so can’t have their cake and eat it. I include myself in that.

I will not be helping any clients milk the system in this way.

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By johnt27
23rd Mar 2020 10:39

How long after this crisis unfolds do you think the fraud claims will kick in for abuse of this?

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Replying to johnt27:
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By SXGuy
23rd Mar 2020 10:45

Like everything, I guess where there is a will, there will be a way. Theres bound to be fraud going on, some people just cant resist.

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Replying to SXGuy:
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By johnt27
23rd Mar 2020 11:01

Let's just hope most accountants don't feel obliged/pressured into facilitating this

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By AWeb72
23rd Mar 2020 11:19

Until it's announced by HMRC, it's NOT officially confirmed is it? This is why I stick to only getting my advice from the gov.uk emails and the press conferences. Far too many people out there thinking they know it all and giving wrong advice. Seen it on Farcebook and Twatter (I am aiming this at the person on the radio, not the op!!!!)

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By bernard michael
23rd Mar 2020 11:24

This from the HMRC web site regarding the 80% wages grant
The purpose is to keep businesses operational and not closed
Therefore I don't think employees who are laid off will benefit and nor will the company
I love the last sentence
How to access the scheme
You will need to:
designate affected employees as ‘furloughed workers,’ and notify your employees of this change - changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

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By mikeyban
23rd Mar 2020 11:49

But ... the one change is that you can only take dividends if you are making profits... most will now not... so they can in my opinion legitimately change to a higher salary ( that have to under company law)..

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Replying to mikeyban:
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By sally1964
26th Mar 2020 16:18

Sure i read that they will look at the February salary submission and base the 80% on that.

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By ComanCo
23rd Mar 2020 13:20

I have offered my opinion here:
https://www.accountingweb.co.uk/any-answers/can-a-sole-director-claim-th...

Could be superseded by more concrete guidance from HMRC

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By Southbankdelboy
26th Mar 2020 14:49

So how does one define a functioning director? If they carry out directors duties such as arranging to file a Confirmation statement or accounts or keeping an eye on company finances to ensure that they are not trading whilst knowingly insolvent does that mean functioning?

Perhaps a pragmatic approach is required.

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By meadowsaw227
27th Mar 2020 12:25

Be careful of what precedents you set for the future !

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By Gone Sailing
03rd Apr 2020 14:52

What about directors who are directors as part of a tax strategy with full director's responsibilities?
How can they go from being a 'Director with director's responsibilities' to furloughing, and being a 'Director only with statutory duties'?

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