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Sole directors cannot be Furloughed

according to the HainesWatts Covid update sent out

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I received the daily update from Haines Watts today (very helpful) and they had some very interesting/cautious advice about furloughing directors of sole director companies (or all directors if more than one), brief extracts from their email state that; (and i am wondering if others think they are being too cautious ?)

What we are waiting for:

• It is not currently clear:

o whether, under Company Law, all directors may be furloughed as Company Law may require a minimum of one active/working director; and if so

o whether HMRC will always deem one director or a sole director to be active/working and therefore not eligible to be furloughed

• Specifically, relating to the above, it is not clear for directors:

o what activities HMRC will accept as falling within or outside of “statutory duties” (e.g. payroll, VAT returns, other tax returns, paying suppliers etc may all be deemed to be “work” rather than statutory duties)

and then further on it says;

What we are waiting for:

• It is not clear whether undertaking day to day administrative duties (such as authorising/running payroll, authorising or making payments to other persons, maintaining company records etc) will be seen “work” rather than “statutory duties” for the purposes of furloughing a director (see section 4)

Care required:

• If you are seeking to furlough directors, it would appear sensible to suspend all of their duties for the interim in order to avoid breaching the furlough rules

• It is likely that one director will have to remain “working” in order to deal with various administrative duties which are not deemed to be statutory duties, and therefore it would initially appear that not all directors can be furloughed.  This will have implications, in particular, for companies with only one director.

Replies (15)

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By James Green
22nd Apr 2020 11:03

This debate was had about 3 weeks ago.

I think the HW stuff is out of date.

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Replying to James Green:
Part on Dudes
By Partyondudes
22nd Apr 2020 11:05

Thankyou, i hope their advice IS out of date but that was the detail in their email sent out today - hence my concern!

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By andrew1211
22nd Apr 2020 11:17

Yeah I would tend to agree, it is out of date, goodness knows why they are only sending it now, or just trying to cover themselves in an entirely unhelpful way!

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By Wanderer
22nd Apr 2020 11:21

And what the above HW guidance quoted says, in summary, is 'We don't know'!

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By paul.benny
22nd Apr 2020 11:42

In such a fast-developing situation, it's somewhat irresponsible of them to be issuing out of date guidance. And tbh, the stuff on gov.uk is pretty good and I don't think firms like this can add much.

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By bernard michael
22nd Apr 2020 12:00

It's clear in the HMRC guidance that directors can be furloughed and they can only carry out their statutory duties as defined in the CA 2006
I also applies to salaried individuals who are directors of their own person service company (PSC)

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By valakot
22nd Apr 2020 12:27

bernard michael wrote:

It's clear in the HMRC guidance that directors can be furloughed and they can only carry out their statutory duties as defined in the CA 2006
I also applies to salaried individuals who are directors of their own person service company (PSC)


Does this include claiming the grant, does this include running the payroll?
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Psycho
By Wilson Philips
22nd Apr 2020 12:14

I keep repeating myself but I think the real hurdle is passing the enforceable contract/transactions test.

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By Cav60
22nd Apr 2020 12:22

HMRC acknowledge that Directors can fulfil their statutory duties - including activity which does not produce a revenue. So paying wages, suppliers, admin duties should be acceptable.

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By Cav60
22nd Apr 2020 12:22

HMRC acknowledge that Directors can fulfil their statutory duties - including activity which does not produce a revenue. So paying wages, suppliers, admin duties should be acceptable.

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By valakot
22nd Apr 2020 12:42

Cav60 wrote:

HMRC acknowledge that Directors can fulfil their statutory duties - including activity which does not produce a revenue. So paying wages, suppliers, admin duties should be acceptable.


Is claiming the grant also acceptable? Bear in mind that grant is income from tax perspective so claiming it would mean producing work to generate income. Or it would not?
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By Cav60
22nd Apr 2020 13:20

I would think HMRC would accept that, while taxable, applying for the grant is a necessary action to preserve the business, and potentially jobs and therefore should be acceptable?

It's not as if it's a commercial transaction - in the spirit of having an economy to return to, surely they would accept this as part of the director's duties?

Anyone else have a view?

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By alfredpennypinch
22nd Apr 2020 13:24

My view is that it would be absurd for HMRC to argue that claiming the grant makes you ineligible for the grant you're claiming.

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By andrew1211
22nd Apr 2020 13:31

agree totally...far too much miniscule nit picking on here

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By D.Stojkovic
22nd Apr 2020 14:03

Has anyone considered the possibility of a director going on furlough for the minimum 3 weeks then 'back to work' for a couple of days completing tasks such as bookkeeping, payroll processing etc then going back on furlough for 3 weeks and vice versa. Is that not a more safer option for those concerned about a director being furloughed.

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