[Updated 16 April 2020]
Company directors do NOT qualify as “self employed” as they are office holders (unless they also have a separate self-employed trade, of course)
Directors may be able to access the Coronavirus Job Retention Scheme for themselves, if:
- There is a verbal or written contract of employment AND were on the company’s payroll (PAYE scheme) on 28 February 2020.
- The director is able to furlough themselves for at least 3 weeks because their services as an employee are not required due to the current coronavirus crisis.
- They only do statutory work for your company (such as filing your confirmation statement or your accounts), as covered by a service contract (separate to an employment contract).
- The decision to furlough a director must be formally agreed by the Board.
- The PAYE scheme must have been in existence on or before 19 March; the director must have been in the PAYE scheme at that date and an RTI submission regarding that director must have been made prior to 19 March.
Directors may then claim up to 80% of your salary (that element of their remuneration that goes through the company’s PAYE scheme). Since most directors pay themselves at the primary threshold for national insurance (£8,632 in 2019/20), this equates to £575 per month on average.
(This also includes directors of their own Personal Services Company or PSC)
Directors’ dividend income is NOT covered. This is arguably harsh because dividends are paid from taxed income (the company can only pay dividends from the profits after paying corporation tax) and directors then pay a further 7.5% of personal tax on dividends over £2,000.
Furthermore, many company directors cannot cease working in the company if they want their business to be in any way viable after the coronavirus lockdown, so it does seem somewhat inequitable that directors are prevented from working when the self-employed sole-traders and partners can continue to work and receive 80% of their average trading profit. Whether the government will remedy this remains to be seen.
However, for those who are able to effectively put their company into the freezer for a few weeks, this might help.
The government suggestions for plugging the gap include:
- Claiming Universal Credit
- Taking out a Business interruption loan (which are interest free for the first 12 months)
Since things are changing on a daily, if not hourly, basis, some of the above may change, be superseded or clarified in the future.
Please double-check any of the above before acting on them.