At the time of writing this update we are still waiting for written guidance on the conditions that a director who wishes to furlough themselves must meet. Until we have this guidance we are unable to provide further advice over and above what is documented below.
There’s been much debate on Twitter and Facebook about this tonight.
No financial support for sole directors
The crux of the matter is that a sole director of a limited company feels left out of any financial support measures that have been announced for the self employed.
Support for Self Employed
A sole director of a limited company is not self employed so cannot claim a grant through the coronavirus (COVID-19) Self-employment Income Support Scheme as this relates specifically to sole traders and partnerships. Read more about this measure at:
Throw away final paragraph
However the final paragraph of this support for the self employed says:
“If you’re a director of your own company and paid through PAYE you may be able to get support using the Job Retention Scheme.”
What is the Job Retention Scheme (JRS)?
The rules for the Job Retention Scheme (https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme) are evolving but what is clear is that it is in place to secure jobs for when the crisis ends.
As part of this financial support measure an employee is furloughed (granted a leave of absence) but gets paid with their employer receiving financial support to cover 80% of the wages.
While employee is furloughed
Once the employee is on furlough they will not be able to work but they can undertake training or volunteer subject to public health guidance, as long as they’re not:
- making money for their employer
- providing services to their employer
To be put on furlough the employer needs to write to an employee.
Practical application for a sole director
Firstly most sole directors are paid as an Officer (at less than the minimum wage) and not a Director. If they were an employee then they would need to write to themselves to put themselves on furlough.
This would leave the company without anyone working in it. Is that a business? Who then contacts the furloughed employee when the company is ready to start up again? Wouldn’t a director be trying to generate new work? Get new contracts? Make plans for when the crisis is over?
Clearly it all sounds a bit bonkers!
I understand that clarification on the matter is being sought from the ICAEW.
Advice until clarification is available
However and in the meantime it is my view that a director who is being paid as an officer (not at NMW and without a contract of employment) is not an employee and, as such, cannot be put on furlough. Unless and until there is a specific clause or clarification that says a director without a contract of employment acting as an officer & paid as such (under the NMW) can be furloughed & qualify for the JRS then we cannot and should not process payroll for them as a furloughed employee.
You can’t apply yet anyway
Just to say that the HMRC portal to make an application for the JRS should be available in April. By the time that the system is available we should have a definite answer on the what does and doesn’t apply to sole directors.
Don’t shoot the messenger
Hopefully we will get clarification soon. In the meantime we have to look at the rules as they are just now and that is what we’ve done. I’m sure that this isn’t what you want to hear. So urge you to contact @RishiSunak on Twitter as I can do little to change the rules myself.
Please remember that we have to take the rules and work with them based upon our experience and expertise. Sorry!