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Self Employment package COVID19

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Will directors who work for themselves under a PSC and declare their earnings on their tax return by way of salary and dividends be eligible for the 80% package announced just now? Or will this package only be avaliable to sole traders?

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By Sarah P
26th Mar 2020 17:44

On the face of it no, I'm afraid. There's no support at the moment for that kind of worker, of which there are many...

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By Paul D Utherone
26th Mar 2020 17:51

https://www.businesssupport.gov.uk/self-employment-income-support-scheme/

The director of a PSC is an employee so will presumably fall within - https://www.businesssupport.gov.uk/coronavirus-job-retention-scheme/

Dividends are their investment income so this will be another pitfall of operating that way to save tax

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Replying to Paul D Utherone:
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By colinhigginson
26th Mar 2020 18:00

A furloughed worker is not allowed to work. A director can't do that as they have their legal duties in running a company.

I don't think they get anything.

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Replying to colinhigginson:
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By SXGuy
26th Mar 2020 18:53

Are the legal duties of a director constituted as working?

There's a difference between maintaining operation of a company and working to bring in revenue.

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RLI
By lionofludesch
26th Mar 2020 18:03

"The sting in the tail? The chancellor said he can no longer justify, after things get back to normal, that self-employed people pay less tax than the employed. But that is for another day."

I thought the tax rates were the same.

NI - different matter, obviously.

And, obviously, when he says "employed", he doesn't mean small salary big dividend directors.

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Jennifer Adams
By Jennifer Adams
26th Mar 2020 18:06

We've gone through this loads of times... a director is only an employee if he/she has a contract - which SME sole directors hardly ever

So nothing today for directors who take the small salary and dividends as they are not self employed

However... see here
https://www.icaew.com/insights/viewpoints-on-the-news/2020/mar-2020/coro...

"Owner/managed companies
2. Many owner managed company director/shareholders pay small salaries and the balance of income as dividends. The scheme does not extend to dividends. Only the salary is relevant to the scheme."

I think this ought to be confirmed by HMRC before we tell clients

>> also a client rang HMRC to ask whether landlords were self employed as was told that they would be covered by any self employed measures - which is not right as a landlord is an investor who is taxed as if self employed

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Replying to Jennifer Adams:
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By lionofludesch
26th Mar 2020 18:09

Jennifer Adams wrote:

>> also a client rang HMRC to ask whether landlords were self employed as was told that they would be covered by any self employed measures - which is not right as a landlord is an investor who is taxed as if self employed

Is he ?

Do they all pay NI ?

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Jennifer Adams
By Jennifer Adams
26th Mar 2020 18:06

We've gone through this loads of times... a director is only an employee if he/she has a contract - which SME sole directors hardly ever

So nothing today for directors who take the small salary and dividends as they are not self employed

However... see here
https://www.icaew.com/insights/viewpoints-on-the-news/2020/mar-2020/coro...

"Owner/managed companies
2. Many owner managed company director/shareholders pay small salaries and the balance of income as dividends. The scheme does not extend to dividends. Only the salary is relevant to the scheme."

I think this ought to be confirmed by HMRC before we tell clients

>> also a client rang HMRC to ask whether landlords were self employed as was told that they would be covered by any self employed measures - which is not right as a landlord is an investor who is taxed as if self employed

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By SB2703
26th Mar 2020 18:15

This is now on the gov website:

"Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes."

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Replying to SB2703:
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By lionofludesch
26th Mar 2020 18:20

SB2703 wrote:

This is now on the gov website:

"Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes."

I wish you'd all listen to me instead of drifting off into semantics.

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By fellowcraft
26th Mar 2020 19:04

Just because Director's salary is covered by the CJRS, doesn't mean that regular dividend income won't be covered in a future scheme. We might be jumping the gun here, but some clarity would be good, as a lot of people are on the edge.

We he referred to 'certain elements of the economy', I assume he was referring to PSC's not subjecting themselves to IR35, and he has unfairly banded all small company owners in that bracket.

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By seitler
26th Mar 2020 19:18

what is not clear is whether the self employed worker is allowed to work at all to qualify. We know that furloughed workers can't 'lift a finger' but what about the self employed. If they earned £50 in one month can they not claim the £2500 ?

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Replying to seitler:
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By lionofludesch
26th Mar 2020 19:34

Yes they can.

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Replying to lionofludesch:
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By seitler
26th Mar 2020 21:32

how do you know ?

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Replying to seitler:
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By lionofludesch
26th Mar 2020 21:46

I read the government blurb.

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Replying to lionofludesch:
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By seitler
27th Mar 2020 00:10

there must be some limits to what you can earn.

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By [email protected]
26th Mar 2020 20:20

As always the devil is in the detail
On the face of it the small Ltd Co Directors (whether PSC, IR35, or other) are out in the cold!

It does highlight the fact that the income tax system is broken! being employed, self employed or a director shareholder should be a commercial decision not a tax one. But for many years the decision has been driven by tax.
And before people start bleating "well they pay no tax" don't forget they DO pay corporation tax on ALL profits, then pay dividend tax aswell. (less the personal allowance that everyone gets)

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Replying to [email protected]:
RLI
By lionofludesch
27th Mar 2020 05:16

peter-AT-pschapman.plus.com wrote:

And before people start bleating "well they pay no tax" don't forget they DO pay corporation tax on ALL profits, then pay dividend tax as well. (less the personal allowance that everyone gets)

Very sad. But it's still a lot cheaper. That's why they do it.

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Replying to [email protected]:
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By enoryt010
27th Mar 2020 08:48

There is a note included on the gov.uk guidance on the self employment scheme that specifically mentions Directors of their own limited company.

They are not eligible for the self employed scheme, but they may be eligible if they have a PAYE scheme, they are on it, and they fulfil the other conditions of the Job Retention scheme.
It only applies to the salary element of their pay, but it is at least better than nothing.

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