Can Directors designate themselves as furloughed and claim 80% of their salary?
There has been little official guidance on this subject, and what there has been has often been contradictory.
Here we try and set out what is currently known.
A claim can be made for inactive employees.
- Directors are employees so no problem on this one.
- Are Directors inactive / not working? They still have a company to run, decisions to make, employees to furlough, accounts to do etc. Even if the company is not currently trading, Directors have a role to fulfil.
Statement by Chancellor Rishi Sunak
The chancellor in talking about the help available for self-employed made reference to Directors:
“Those who pay themselves a salary and dividends through their own company are not covered by the scheme1 but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.”
Published 26 March 2020 from:
1 This is the chancellor explicitly saying that Directors cannot use the self-employed scheme, which is no surprise, as Directors are definitely not self-employed.
The good news is that the chancellor says Directors will be able to claim under the Coronavirus Job Retention Scheme (CJRS) in respect of their salaries.
Statement by HM Treasury (HMT)
Ben Kerry of HMT in speaking to the CBI sought to draw a distinction between the role Directors fulfil as Directors, and the role they play as employees.
“[Such a status and position] does not disqualify them from being furloughed so long as they are on PAYE, payroll,” “They will have some statutory duties and obligations such as filling out their accounts, but they are still allowed to undertake their statutory duties while they are being furloughed.
“So that would not count as doing work…[which is key because] one of the key conditions of the furlough scheme is that the employee is not allowed to work for the employer.”
Commentary by ReLegal Consulting a specialist in employment related issues
Whilst not official advice, this is a useful interpretation of what the CJRS will mean for Directors:
“A director’s role as an officeholder is separate and distinct to the role as an employee, even if the individual fulfils both roles.
“So if the individual is an employee of their limited company, then they would be furloughed as an employee, not a director.”
Now a word of caution
It has been noticed the government has revised its published guidance wording, saying Personal Service Companies “may” be able to get CJRS support, from Personal Service Companies ‘could’ get the support.
You can, then you might not, then you can again…
Martin Lewis has grappled over the weekend with the question of Directors claiming CJRS. Not sure what his source is but he now appears confident that Directors can claim.
First there was this:
Then there was this:
And most recently this:
Our conclusion, at least for now, is that it does look like directors will be able to claim under CJRS. However, at best this will only be for salary (which for most Directors will be very modest) not dividends. It will also only be available for those Directors who have genuinely ceased work in the sense of trading activities. The Government have reiterated time and again that claims will be subject to audit by HMRC. You can expect false claims to be punished heavily.
The Government have not yet finished fleshing out the practicalities of the CJRS nor is the portal by which a claim is made yet released. So this may all change, but if it does we will keep you updated.
If you have any queries on this please email email@example.com.
Please do not telephone payroll as they are trying the very best to process wages.
Blow Abbott Team