24/03/2020 by Andrew Brealey - Brealey and Newbury Accountants 0 Comments
Coronavirus - Furloughed pay Limited Companies Directors, Personal Service Companies etc.
We are being asked a lot about how the coronavirus measures announced so far apply to limited companies, and the employment status of the directors.
To clarify, if your business is run as a limited company, the directors are employed, not self employed. As far as we understand therefore, company directors should be entitled to the same 80% of their wages paid by the Government as normal employees. However, as most company directors salaries are kept low for tax purposes, and we assume that dividends will not be taken into account, the amount of support will be low in comparison to the normal monthly drawings from the company you might make.
With this in mind, it might be worth considering the Coronavirus Business Interruption Loan Scheme https://www.british-business-bank.co.uk/ourpartner...
One saving grace is that unlike many accountants who set the directors wages at the lower class 1 NI threshold of £8,632, we have never done this, as we believe paying a small amount of National Insurance, but still gaining entitlement to all benefits and state pensions is more beneficial. In the light of that, you will receive 80% of £12,500 rather than 80% of £8,632.
Details of the online portal which is being set up to reclaim the salaries paid are still not yet available.
For the time being, if you have stopped working, we would adivse that we designate you as furloughed workers and continue to pay wages as normal. Whilst there is no obligation for the emoloyer to make up the additonal 20%, it makes sense to do so for directors, as the tax relief will still be claimable at the company year end.
Further updates on how to claim the money back will follow when they are announced.