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The most common question clients are asking

following last nights announcements

Didn't find your answer?

I have been asked many questions by clients this morning but by far the most popular from small company clients is can the Directors claim the 80% of their own salary.  

The devil will be in the detail, but when the devil will we get the detail?

Replies (28)

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By wilcoskip
21st Mar 2020 09:53

And if the directors have been drawing minimum salary + dividends, can they increase their pay under PAYE to a level covering both? That's going to be an issue for many, I'd imagine.

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Replying to wilcoskip:
Psycho
By Wilson Philips
21st Mar 2020 10:00

Sorry, but I’ve continually warned directors about the potential adverse implications of taking a minimal salary - OK, not specifically the current problem, but generally the impact on earnings-related benefits etc. Very few of my clients have gone down this route so I’m finding it hard to be sympathetic.

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Replying to wilcoskip:
RLI
By lionofludesch
21st Mar 2020 10:03

wilcoskip wrote:

And if the directors have been drawing minimum salary + dividends, can they increase their pay under PAYE to a level covering both? That's going to be an issue for many, I'd imagine.

No. But they can always spend the tax money they've saved by paying dividends over the past 15 years.

The other side of the coin might be that HMRC may regret putting all those contractors on payroll.

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Psycho
By Wilson Philips
21st Mar 2020 10:05

Here’s another question - to which I don’t expect an immediate answer.

My understanding is that workers have to be formally furloughed for the employer to get the 80%. What about those cases where work still has to be carried out (eg looking after animals) but the doors have been closed - eg riding schools, zoos etc?

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Replying to Wilson Philips:
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By nrw
21st Mar 2020 10:27

Along a similar theme, what about companies whose revenue stream has temporarily collapsed, so their priority is cutting costs for survival but they (and their homebound workers) would far rather continue productively (eg developing software).

In order to qualify for PAYE relief it seems counter productive for all parties, not least the shattered economy, for those workers to be furloughed / sit on their [***] in order to reduce costs when they could productively WFH?

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Replying to nrw:
RLI
By lionofludesch
23rd Mar 2020 12:45

PAYE relief ?

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By coops456
21st Mar 2020 10:34

We've already had a client ringing (out of hours, naturally) to ask if he can increase the directors' wages to £2500 and backdate them. They currently take salaries of £1000 pcm and annual dividends of £100k+ each.

I am livid. The entitlement of the man!

It's a national emergency and he's only thinking about how he can screw the system. I bet he's stockpiled loo rolls as well, selfish greedy b*stard.

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Replying to coops456:
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By AnnAccountant
21st Mar 2020 12:13

I have had someone ask a similar question. I know for a fact that he has plenty of money.

I told him straight that I will not be helping anyone do anything that I consider immoral - which isn't a new policy for me.

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Replying to AnnAccountant:
Giraffe
By Luke
21st Mar 2020 15:48

My thoughts exactly, cheeky ******.

I am pretty sure my reply will be the same as AnnAccountant.

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By JB17
21st Mar 2020 10:57

Hi everyone, everyone’s brains as frazzled as mine after this week?!

We operate cafes/restaurants/pubs so I’m comfortable we can obviously claim the 80%.

What I’m unsure about is the other parts of our business:
1) retail outlet: we have 50 staff and currently only need 20 as we’ve reduced rotas and opening hours because of reduced footfall and to protect employee welfare with social spacing etc. If we officially furloughed 30 people but the shop is still open do we qualify? Instinct says yes but I am not certain.

2) our head office support function for the above has 10 staff and we probably only now need 5 until it all goes away. If we furloughed those 5 do we qualify?

Any advice or shared thoughts would be so very much appreciated.
Keep strong everyone.
James

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Replying to JB17:
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By AthollAccounts
21st Mar 2020 14:46

Same answer to both points. Yes you would have to furlough them and reduce staff pool available to 20 but would then qualify. From what I can find any worker you furlough will qualify even if you only furlough 1 and leave 50 working.

The only exception would be if you have more than 250 employees in which case you would not be entitled to anything.

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Replying to AthollAccounts:
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By JB17
21st Mar 2020 18:03

Re the 250 employees point I thought it applied to all companies regardless of size? We have over 250 employees employed across 8 different companies who are all connected. Do you have link to that particular extract? Regards, James

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Replying to JB17:
ALISK
By atleastisoundknowledgable...
21st Mar 2020 18:08

JB17 wrote:

Re the 250 employees point I thought it applied to all companies regardless of size? We have over 250 employees employed across 8 different companies who are all connected. Do you have link to that particular extract? Regards, James

It does apply to all companies. The 250 is I think for the £10k grant.

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By lesley.barnes
21st Mar 2020 11:39

My question is for my business rather than a client but could equally be a client. My son is my employee, his wife is a key worker working at a children's nursery so will continue to work. My grandson attends the nursery and would qualify to attend. There is a shortage of staff at the nursery currently 6 staff are self isolating. They have been told that his wife will be expected to work extra hours 12 hour days and take it back as leave at a later date to cover for sick colleagues. So no extra income.
If staffing levels drop to unsafe levels they have been told they will be the first to give up their nursery place as staff. My son will then stay at home to look after my grandson. He will take some work home but how much he will be able to do looking after a small child is debatable.
We still have work to if anything we are busier supporting clients. I wouldn't need to lay him off as things stand and he isn't sick. What happens in these circumstances unpaid special leave? I'm not hard hearted he will be paid no matter what happens but it will be an issue for other businesses that don't have cash in reserve. Do the employers falsely declare that the employee is being sent on furlough?

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Replying to lesley.barnes:
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By leicsred
21st Mar 2020 12:35

I read it as you can furlough any number of your workers, you don't have to close your whole business down. I would have thought you could furlough him if it is genuine that he isn't doing any work. As others have said the devil is in the detail, can you fluctuate the furlough? Different people in different weeks, or is it all or nothing? Either way is probably workable, but need to know which.

Also as someone has already said, there may be a bit of resentment that some people get paid for not working.

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Replying to leicsred:
Psycho
By Wilson Philips
21st Mar 2020 13:04

My view is that any business that has been instructed to close its doors, ie close off its income stream, should be entitled to the support for all employees, including those that are of necessity required to keep working - per my examples above. Otherwise you have the paradox of the employer putting everyone on furlough to get wages paid but with animals suffering and the business folding completely.

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Replying to Wilson Philips:
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By Norfolkfella
27th Mar 2020 10:40

Totally agree, also I have several clients who earn income from the hospitality sector, one for example sells holidays on behalf of second homeowners, despite a huge rush of bookings soon after the governments initial announcement, since the lockdown obviously situation changed. The bulk of their income comes from booking commissions, most other staff are employed on cost neutral basis (charged to homeowners for cleaning, maintenance, organising oil deliveries etc)

They are now effectively earning no income but there are several jobs that they are required to do for their homeowners (lock down houses, clean houses etc) some of these will be covered by revenue (negligible profit) and we are planning to furlough housekeeping staff after this weekend when the final holiday makers (who arrived before Monday) go home.

Then we have the reservation team, they could arguably still take bookings for any time in the future (so will be earning revenue) but until there is more clarity on this situation the bookings are drying up, so no revenue.

Presently the Reservation Team are busy rearranging guests for the next three weeks, non revenue generating but is a service to my client, once this task is done the majority could effectively be furloughed leaving one on normal salary to take new bookings who will be "earning revenue" probably not enough. The General Manager (not a Director) would also be providing services in managing staff, dealing with high level problem customers not happy to rearrange, organising return from Furlough etc, the Director (and owner) is not involved in the day to day running so cannot suddenly pick up these tasks.

So then this three week period ends and the Government extend lockdown for another 4 weeks, the client then needs to contact all those holiday makers and rearrange, not revenue generating but a service, so therefore to ask staff to do this would mean a huge cost with no revenue or risk that a post CV audit requests payback of all grants.

The flipside is my client could apply for assistance via CBILS but in what world does any of us as an accountant advise our clients to take loans just to meet the day to day running costs of a business when the future is so uncertain? Especially if the loan includes a Personal Guarantee.

A much better system would be to have just announced a set minimum monthly salary for all, and allow people to work and be paid for whatever hours they do, at least that way those sitting at home earning nothing would not be as well off as those doing the work.

Also lets look at accounting firms, we have probably never been busier answering clients and trying to advise when we have only just heard the same announcements, but in a months time if all of our clients have furloughed all staff and are no longer generating revenue what chance of us being paid for all this extra time?

I am not an accountant who charges by the hour but I am still concerned that all the extra time I am giving people out of goodness of my heart and to help out, will be worthless if I am unpaid for my March bills.

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blue sheep
By NH
21st Mar 2020 12:44

thinking a bit more about this logically - I would have thought it almost impossible for a Director of a one person company to put themselves on Furlough, I suppose technically it would be possible for them to do no work for a period of time, but what about answering calls, talking to customers, going to the bank, answering emails from their accountant, the list goes on.

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Replying to NH:
ALISK
By atleastisoundknowledgable...
21st Mar 2020 13:26

NH wrote:

thinking a bit more about this logically - I would have thought it almost impossible for a Director of a one person company to put themselves on Furlough, I suppose technically it would be possible for them to do no work for a period of time, but what about answering calls, talking to customers, going to the bank, answering emails from their accountant, the list goes on.

I agree - surely at least 1 Director must still be ‘working’ in every company.

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Replying to atleastisoundknowledgable...:
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By AthollAccounts
21st Mar 2020 14:52

I cant see how you could furlough a director, especially when the rationale is they would otherwise be laid. Directors on payroll wouldn't normally be able to claim UC, but I would image that's where they will have to go.

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Replying to AthollAccounts:
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By insolventnl
21st Mar 2020 16:44

AthollAccounts wrote:

I cant see how you could furlough a director, especially when the rationale is they would otherwise be laid. Directors on payroll wouldn't normally be able to claim UC, but I would image that's where they will have to go.

I agree to the above. Does not make sense for one man limited companies. However on the UC, I have been now questioned, well as a director, I will just not pay myself and hence should be able to claim UC. People seeking all loopholes to make money

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Jennifer Adams
By Jennifer Adams
22nd Mar 2020 10:37

I think you have to go back to the legalities of directors as per Companies Act 2006

For a company to exist it must have at least one director. - s 154
For a director to be deemed an employee they must have a contract - hardly any one man band companies do.

HMRC havent said so but I dont think one director companies will be covered.
And as someone said in a previous post - a director/owner still has to deal with the practicalities of running a business - chasing debts being one and even closing down if that is what is going to happen.

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By Gabor Kertesz
23rd Mar 2020 19:12

I have a related question. We have two directors in our company. One is myself, I am also the owner of the business. The other director is employed, we have a employment contract in place and he is paid 'proper' salary. Our business is seem to be loosing half of its income due to coronavirus, but we all hope that once it's all over we can get back to normal. Can he as a director be furloughed, and would our business entitled for the government funding? Obviously I would still continue working as director of the company. Also should this (hopefully temporary) change to be reported to company's house and get him unregistered as director of the company?

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By Caroline Stevenson
24th Mar 2020 11:50

Hi,

We are a non-profit (Company LTD by Guarantee) dependent on the hospitality industry to generate revenue.

As the hospitality industry has been forced to shut due to coronavirus, we won't be making any income (or really have anything to do) until this blows over.

We have 5 directors listed on Companies House but only one on the payroll (me).

Can the other directors make me furloughed, and pay me using the job retention scheme?

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Replying to Caroline Stevenson:
ALISK
By atleastisoundknowledgable...
25th Mar 2020 07:13

Probably. Do the other directors actually do anything?

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Replying to atleastisoundknowledgable...:
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By Caroline Stevenson
25th Mar 2020 16:04

Thank you for responding. And they do, yes.

When it's 'business as usual' I typically do the lions share (hence why I'm the only one on the Payroll) but in the current circumstances there won't be anything for me to do.

And even in business as usual they do perform some functions yes.

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By Simmi4345
25th Mar 2020 00:33

If directors have taken monthly dividends will the company get the 80% help? Or will they ask directors to put money back in to the business?

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By Redtongue
27th Mar 2020 11:38

Just a quick one and apologies if I've missed any answer. Two of us work at our bikeshop. We both take minimum wage. I have 1 share and am listed as a director, but take no dividends or benefits. I simply get minimum wage of about £1000 a month. Can I be fuloughed?

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