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The Job Retention Scheme and owner/directors

The Job Retention Scheme and owner/directors

Under the Coronavirus Job Retention Scheme, UK employers with a PAYE scheme can access support to continue paying part of their employees’ salary. This applies to employees who have been asked to stop working, but who are being kept on the payroll. These are described as furloughed workers. HMRC will reimburse 80% of their wages, up to £2,500 per month.

The Coronavirus Job Retention Scheme will cover the cost of wages backdated to March 1st and is initially open for 3 months. It will be extended if necessary.

If, however, you are an owner/manager or owner/director then the situation is more complicated – and that is likely to be the case with many small businesses in the heating and plumbing industry.

According to the Tax Research UK blog, owner/directors who “have to work to, at the very least, ensure that the payroll is processed (and that would seem inevitable) then they cannot, apparently, be furloughed, and as such be subject to the scheme, which is absurd if they have lost all their income. And they could end up in a worse position than the self-employed as a result, which is ridiculous. This government’s idea that those who run companies or are self-employed come from a privileged, and otherwise leisured class who can rely on other income for their support has to change, and very rapidly.”

According to the Institute of Chartered Accountants in England and Wales, many “owner managed company director/shareholders pay small salaries and the balance of income as dividends. The scheme does not extend to dividends. Only the salary is relevant to the scheme.”

In short, being the owner/director of a small business that can’t generate any income during the COVID-19 crisis could leave you in serious difficulties.

For more information on the Job Retention Scheme, click here

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