The Government has confirmed that those who pay themselves a salary and dividends through their own company are not covered by the Self-employment scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating a PAYE scheme.
The Coronavirus Job Retention Scheme requires that an employee is ‘furloughed’; effectively stood down. There has been some debate as to whether Directors could be furloughed as they could not meet the criteria of ‘not working’ (providing services or generating revenue). Although not officially confirmed it is understood that a Director will be allowed to fulfil their statutory obligations as directors (e.g. official legal filings to companies house etc.) whilst furloughed. On this basis in appropriate circumstances Directors may be furloughed and claim under the Coronavirus Job Retention Scheme.
Points to note:
- To be furloughed there is a minimum of 3 weeks you can’t work for your company but you can continue to fulfil any statutory responsibilities as a Director e.g. official legal filings to Companies House etc.
- Your actual salary before tax, as of 28 February 2020 will be used to calculate the 80% funding This will vary depending on your salary arrangements.
In the typical Directors case a salary of £719 per month (£8,628 pa) would give rise to 80% funding of £575. On a salary of £1,042 per month (£12,500 pa) funding would be £833.
- If a higher salary was being declared then the funding will be based on this higher figure subject to a cap of £2,500 per month
- For those we prepare the payroll for – tell us if you are furloughing yourself and any employees – we’ll need the date effective from and how much is being paid.
- To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication – Directors should also keep some written evidence of the decision to furlough and the date it applies from. Keep this written evidence or email to us for our records.