02 Apr Sole Directors & the Corona Virus Job Retention Scheme
What’s the Government’s furloughed scheme and how can you get the most out of it? Furloughed schemes are exclusively for companies that’ve been owned or managed previously.
How to Get the Most Out of a Limited Company?
There are over a million sole director/shareholder owner-managed limited companies in the UK. These don’t qualify as self-employed individuals (although they will complete an income tax self-assessment return).
Some remuneration goes through PAYE by way of salary, usually at a level just above the NIC threshold. The rest is taken as dividends. What are the next steps to make sure all the directors use the Coronavirus Job Retention Scheme? The simple answer is yes, but only based on their PAYE salary.
Take Care of Everything
What else do you need to take care of? Dividends are not included as part of the amount that you should claim.
What’s the other key issue as a director you ask? It’s simply that the director must stop working completely in the business for the scheme. We understand that statutory duties can be carried out but no services or revenue-generating work.
Some Frequently Asked Questions
Based on the information published so far by the government, please take a look at some frequently asked questions. We must stress that wait for further guidance so that comments should be seen as provisional and may change.
What can I claim?
You can claim a grant of up to 80% of your ‘regular wage’ or £2,500 (whichever is lower). This claim can be backdated to 1 March 2020, but would only be available from the date the director is actually furloughed. The scheme will last for at least three months.
By when does my PAYE scheme need to be in place?
The employers’ PAYE scheme must have been created and started by 28 February 2020 and you must also have a bank account in the UK. You must be on the payroll as of this date.
Can I claim if I work part-time in the business?
Yes, full-time and part-time directors on the payroll can claim.
What if my salary is paid annually?
ICAEW’s current understanding is that this should be acceptable.
What if I just reduce my hours or pay?
If the director is still working, even for reduced hours or pay, they will not be able to claim via this scheme.
How do I calculate my ‘regular wage’?
Your regular wage is the higher of the same month’s earnings from the previous year or the average monthly earnings from the 2019-20 tax year.
How to claim?
You might need to take legal advice on this, but as a minimum, we suggest that the company writes a letter advising the director that they have been ‘furloughed’ A copy of this should be kept on the file to support any claim. We suggest you to keep eye on our website in case this advice changes.
Wages must continue to be paid (along with tax and NI) to directors at least until the portal is up and running to make the claim for the grant at a minimum of 80% of their regular wage or £2,500 per month.
How is the grant accounted for in the company’s books?
As income subject to corporation tax.