Can company directors furlough under the Coronavirus Job Retention Scheme?
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“Can company directors furlough under the Coronavirus Job Retention Scheme?”
Many of our clients have asked us this question in recent days. To help them and other people in the same position, this post sets out our understanding of the situation.
First, a quick recap of the what the scheme entails.
What is the Coronavirus Job Retention Scheme?
CJRS is a scheme that is open to nearly all UK employers for at least three months, beginning 1 March 2020.
It allows you to claim up to 80% of your employees’ monthly wage costs, provided they are furloughed (on leave of absence). You can claim up to £2,500 per month, along with associated Employer NI contributions and minimum auto-enrolment employer pension contributions.
For more details, see our dedicated FAQ on the CJRS scheme.
Why would directors want to declare themselves as ‘furloughed’?
Many people, who are effectively self-employed, provide their products or services via a limited company (often called a personal service company). A significant number of these people have seen their work shrink or even dry up completely as a result of the coronavirus pandemic. These people want to know whether they qualify for any financial help via the Coronavirus Job Retention Scheme.
Similarly, some small companies are also struggling. Directors of these firms may be looking at using the CJRS as a way of supporting their own income as well as that of furloughed employees.
Can directors furlough under the Coronavirus Job Retention Scheme?
So, can company directors furlough? Although there was some initial confusion about this, Ben Kerry, head of labour markets at HM Treasury, has confirmed that directors can indeed furlough themselves.
In a CBI webinar, he said that being a director does not disqualify you from the CJRS scheme, as long as you are on the PAYE payroll. He added:
“[Directors] will have some statutory duties and obligations such as filling out their accounts, but they are still allowed to undertake their statutory duties while they are being furloughed.
“So that would not count as doing work… one of the key conditions of the furlough scheme is that the employee is not allowed to work for the employer.”
You can watch the full webinar here, but the relevant comments are 27m 21s in.
The key point, however, is that you can furlough yourself as a director, but you cannot work for the company during any furlough period. Nor can you undertake any profit-making activities. You can, though, fulfil statutory duties. These include keeping financial records updated, seeking legal and accountancy advice and ensuring any employees are treated in accordance with employment law.
What can I claim as a furloughed director?
You can claim the same as you would for any employee – 80% of monthly wage costs, up to £2,500 per month. Note, however, that your wage is your PAYE salary. It does not include any dividend income.
According to this article, directors of personal service companies paid themselves an average monthly salary of £719 in the 2019-20 tax year. This would equate to about £575 of monthly financial support via the CJRS scheme. The amount you can claim will of course depend on the PAYE salary you have been taking from your company.
How can I claim?
There will soon be a Coronavirus Job Retention Scheme online portal, where you can make claims under the scheme. It should be up and running around the end of April.
We know that in many cases, company directors will not qualify for much help via the CJRS. This is usually because they have drawn down most of their income as dividends.
To see what other help is available for individuals and businesses during the coronavirus pandemic, please visit our resource page. You can find it here: Covid-19 advice and updates for SMEs and the self-employed.
Of course, if you have any queries or would like further advice, please get in touch. One of our accountants would be very happy to help you.
About Jon Pryse-Jones
Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.
An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”
Jon’s appreciation for THP extends to his fellow team members and the board. “They really know how to run a successful business,” he says. He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.