Financial assistance for people struggling with the COVID-19 pandemic was first announced for employees and then later for the self-employed. But, what about small businesses who trade through Limited Companies?
Since you are (technically) not self-employed, you are not able to make a claim under the Self-Employed Income Support Scheme (SEISS).
However, if you meet certain conditions, you should be able to furlough yourself and reclaim 80% of your PAYE salary through the Coronavirus Job Retention Scheme (CJRS).
The scheme is designed to support employers whose activities have been affected by coronavirus and you must have been on the company’s PAYE payroll on 28 February 2020. An employee has to be furloughed for a minimum of three weeks to qualify.
Typically, a director will be paying themselves a salary of around £8,400 per annum, so around £700 per month.
If you are not able to work because of COVID‑19, the government will pay the company 80% of this amount, plus the employer’s NIC (13.8%) and pension contributions (3%) on top.
Unfortunately, though most of you will also be extracting profits out of your Limited Company as dividends, this is not covered by the Job Retention Scheme.
Can directors work while furloughed?
You cannot work for the company whilst you are furloughed. That sounds obvious but this can be a problem for small companies where there is only one director, as certain statutory obligations could arise during the furlough period.
However, we understand that the government has confirmed that such statutory duties can still be performed and would not count as doing work for this purpose.
Your employer, the company, will need to classify you, the worker, as “furloughed”. This must be a formal notice and sits alongside your employment contract. You can then make your claim through HMRC’s online service.
We recommend that you obtain expert tax and HR advice. Lubbock Fine’s HR Consultants can ensure this is done correctly for you.
If you would like to discuss any of these matters further or you need advice, please contact our Partner Russell Rich at firstname.lastname@example.org, our Senior Manager David Portman at email@example.com or your usual Lubbock Fine contact.