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Small Limited Companies - disastrous

Today's announcement

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I've been turning over the Chancellor's announcement in my mind and it gets worse the more I think about it.

HMRC have now confirmed that Directors drawing a small salary and dividends will not be included in the relief for self employed scheme:
https://www.gov.uk/government/news/chancellor-gives-support-to-millions-...

Therefore, any director who draws remuneration via salary or dividends is limited to 80% of what in most cases is going to be a salary of £12,500.  So far, quite bad.

However, while the Chancellor's speech explicitly stated that self-employed individuals can continue working and still qualify for this relief, the opposite rule applies for anyone who attempts to furlough themselves as a Director.  In order to qualify for the employee furlough relief, you cannot perform any work for the company with the aim of generating a profit.  Therefore in order to qualify for even the 80% of their £12,500 salary, clients are obligated to completely shut their companies down.  If they were to continue work while claiming the furlough rate, they risk HMRC making the accusation at a later date that they have claimed the furlough payment fraudulently.

There are going to be a lot of very worried and upset clients tomorrow.

Replies (14)

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By andrew1211
26th Mar 2020 20:13

For most, given this is only crumbs compared to other aid, will almost certainly furlough themselves and hope for the best. I am not sure how HMRC can prove they have worked or if they would be so bothered to do so as the amounts, as already mentioned, are relative peanuts. The Government clearly don't want abuse or outright fraud but given the crisis I doubt they would start to investigate such matters given they are funding this seemingly whatever the cost.

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By leicsred
26th Mar 2020 20:17

The Times has it explicitly stated that the SE NI will go up to equal employees. In the long run we may see more limited companies starting.

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Psycho
By Wilson Philips
26th Mar 2020 20:18

Again at risk of inventing stuff, an earlier post suggested that furloughed workers may voluntarily offer their services provided that they are not income- generating activities. This might be especially helpful for those that need to lay staff off but continue to have a need for presence on site for security etc purposes. Might a director therefore furlough himself but voluntarily carry out officer-only duties?

Who knows? I don’t.

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Replying to Wilson Philips:
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By andrew1211
26th Mar 2020 20:24

I doubt it...they cannot do any work.

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Replying to andrew1211:
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By fellowcraft
26th Mar 2020 21:05

Yes they can providing it is on a voluntary basis, and doesnt generate income for the company. Dealing with your statutory duties does not generate income for you. I'm going for it

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Replying to fellowcraft:
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By andrew1211
26th Mar 2020 21:19

Go for it if you want....it is still technically wrong. For example, if I furlough one of my team and they accept but they say, quite voluntarily and to be helpful, they can nip in now and then to collect the post and pass it on, check the office is ok, water the plants or whatever this is simply not allowed. Now obviously no one is ever going to know in all truth but that is the strict interpretation.

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By mikeyban
26th Mar 2020 20:32

But if the company is not trading and is no longer profitable the only route is to increase the salary... surely the one man band cos can therefore claim 80% of this increased wage as long as they are forloughed and not working on company business?

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Replying to mikeyban:
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By andrew1211
26th Mar 2020 20:59

Possibly as long as it is not back-dated.

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Replying to mikeyban:
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By Not Anonymous
26th Mar 2020 21:29

mikeyban wrote:

But if the company is not trading and is no longer profitable the only route is to increase the salary... surely the one man band cos can therefore claim 80% of this increased wage as long as they are forloughed and not working on company business?

If it is a one man company and the sole director/employee is furloughed how can the "employer" claim the 80%?

Who is going to be making the claim?

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Replying to Not Anonymous:
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By mikeyban
26th Mar 2020 21:41

The director would... if that is all he/ she is doing ... I hardly think HMRC would challenge this as it is only the mechanism to make the claim...

Claiming unemployment benefit doesn’t make you employed does it?

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Replying to Not Anonymous:
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By andrew1211
26th Mar 2020 21:43

Exactly right! Albeit unfortunate.....

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Replying to andrew1211:
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By mikeyban
26th Mar 2020 21:55

I am sorry the assertion that claiming that you have not been able to work ( ie you are furloughed) means you are working is illogical...

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Replying to Not Anonymous:
RLI
By lionofludesch
26th Mar 2020 23:10

Not Anonymous wrote:

mikeyban wrote:

But if the company is not trading and is no longer profitable the only route is to increase the salary... surely the one man band cos can therefore claim 80% of this increased wage as long as they are forloughed and not working on company business?

If it is a one man company and the sole director/employee is furloughed how can the "employer" claim the 80%?

Who is going to be making the claim?

Did HMG not say today that sole directors could be furloughed or did I dream that?

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Replying to mikeyban:
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By andrew1211
27th Mar 2020 08:18

Also I believe the 'claim' is based on the February salary not what you might decide to pay from now on.

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