Director of my own company - do I qualify for the 80 per cent salary?

[cucumber66]

I’m a director of my own limited company and ordinarily earn about 28k per annum. However, since the virus hit business has dried up and I’m facing serious financial difficulties.

From what I gather, I’m also classed as an employee of my company and am paid my monthly salary through the payroll. There are no other directors or employees - it’s just me.

I can’t get hold of my accountant tonight to check whether I’m eligible for the 80% government grant and am feeling anxious as to whether I can claim this. It could be the difference between my business surviving or going under. Does anyone know?

We are in the same position. Iv just read through the last 13 pages which has helped me to clarify that we can’t do much else than apply for a business loan. Has anyone done this successfully yet? I’m worried it will take so long to arrange we will struggle before it gets agreed. Looking at borrowing enough to pay off business debts and wages for 6 months but have no idea how much we can actually have. Phone lines are understandably not an option so have just had to punch the figures into an application form and hope for the best.

I really think the way they've done it has sewn a lot of resentment and division and they'd have been much better off doing a universal basic income for while the crisis was on.
100% this!

Also, it's odd that the IR35 rules seem to be designed to push more SE into incorporating, since clients will not want the risks associated with IR35 if they can hire a LTD company instead.

Yet, the way the Tories have mistreated these Sole Director/Employee companies in this crises will do the opposite, making companies fold and pushing more into SE status, whilst making it clear to the SE that they should avoid incorporating at all costs.

As usual the Tories seem to be cutting off their noses to spite their faces. Such incompetence!

The new IR35 rules in force from 2021 do not do that though, ddc. They have resulted already in many companies who use limited companies which are contractors to become full time PAYE employees and they have chosen not to u se any contractors including those with limited companies.

IR35 from about 1999 only applies to companies. It has never applied to sole traders. However tax law from at leat 50 years ago has always had tests to work out who is self employed (I clearly am as a sole trader advising lots of companies every day) and who is really an employee.

Placemarking

@ddc70 You do realise it was Gordon Brown and Labour who botched up IR35 in the first place 20 years ago? It was also Brown who introduced a series of tax reliefs/incentives which only applied to small limited companies NOT sole traders, which was why tens of thousands of window cleaners, dog walkers, etc became limited companies.

Both main political parties have messed up small business tax, probably because they've not taken the time, nor listened to experts, to actually understand the issues involved.

It's now the end client and not the contractor who decides whether the contract is inside or outside of IR35 and if they make an incorrect decision they could find themselves responsible for any unpaid tax further down the line. As a consequence many companies have made blanket decisions not to use People employed by their own Ltd Co's either pushing them onto their own payroll or to umbrella companies. In answer to the original question though yes you can furlough and claim 80% of your PAYE, not dividends. You must not do any type of work for your company while furloughed though.

It's now the end client and not the contractor who decides whether the contract is inside or outside of IR35 and if they make an incorrect decision they could find themselves responsible for any unpaid tax further down the line.

Which is how the original proposal was planned for 20 years ago, but Brown bottled it and decided the decision was for the contractor to make - that worked out well didn't it???

Of course, the far simpler way of dealing it would have been to tackle the real problem which was the doubling of NIC due to both employee and employer NIC which is the root cause of the whole issue.

There have also been other attempts to sort out the problem such as "see through" rules where a contractor/freelancer would pay the same tax/nic regardless of whether they were a sole trader or limited company, but there was no appetite from the Treasury to even consider those ideas when put forward by the accountancy/tax bodies nor similar proposals offered up by the office of tax simplification.

The Treasury/HMRC bear a large share of the blame in this whole sorry episode which has now spanned over 20 years and several different governments.

The Dogsmother - for the private sector that is not yet the law. The change will come in about 12 months' time but you are right many have already stopped all work for contractors who work for them for longish projects in anticipation.

THe whole problem with IR35
and the reason it has been fought every millimetre of the way
is that
the big companies save on

• sick pay ~ holiday pay ~ ERS NI ~ Pensions ~ maternity pay ~ expenses allowances

and the contractors receive none of those

the top bosses win
the middle guys lose

To everyone on this particular page (13)...

Thanks for correcting me when needed. The reason I’m here is that I know very little about this stuff - couldn’t be further from my area of expertise - so I’m here in hope of gleaning some knowledge. If if your input is really informative, so thanks for taking the time and please do keep it up.

I know the petition is a long shot but maybe our voices will be heard in Westminster if we keep trying.

No problem. I think we have lawyers and accountants on the thread and quite a few of us on MN.

ddc
I was just about to say ....
Xenia is a lawyer. A couple of us are CCAB accountants
dealing with IR35 is a regular job for us

@Xenia You are quite right. I am a recruiter who has worked with IT contractors for many years. I've been having conversations about IR35 since it was first considered, about 20 years ago. In the sector I work in, City of London/Financial Markets there have been a lot of blanket decisions which pretty much quashed the contractor sector then we got Covid. It will happen in 2021 but in the meantime companies are still advertising the few opportunities around as inside or outside of IR35.

So is this thread dead? Has everyone giving up on the government helping us with equal diligence as everyone else?

#notinthistogether

ddc
Dividends will never be topped up by the government.
Directors cannot furlough themselves.
but
Credit card interest is frozen for three months
most banks are offering almost free overdrafts to businesses and people
name and shame any who are not
and Rishi tore the banks a new one about the small business loans.

There are lots of options open to us but we have to be entrepreneurial about it.

Directors cannot furlough themselves

Where have you seen that? The guidance we've seen is that directors can furlough themselves if they've been taking a salary, obviously can't undertake their usual work but can discharge their director's duties.

There's a section on company directors here:

www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme#employees-you-can-claim-for

max
The guidance we've seen is that directors can furlough themselves if they've been taking a salary, obviously can't undertake their usual work but can discharge their director's duties.
statutory duties
"To be eligible for the grant, when on furlough, an employee cannot undertake work for, or on behalf, of the organisation." This includes providing services or generating revenue.
So nothing that actually keeps the business going ...
Filing Accounts and annual returns and HMRC compliance
but NOTHING revenue generating - like answering email and running the website

I suppose it depends on the nature of the business then. For DH that'll be do-able as his industry has essentially died just now and is unlikely to come back to life before the furlough scheme ends.

Max
But he is not allowed to do ANY work for his company - such as dealing with forward queries.
I would be very very careful before putting a sole director on Furlough

ListeningQuietly we have little choice really. But as he's a freelancer with no jobs, as I've said I can't see it being an issue.

Yes, and it is very very unfair on those who have paid loads of tax, declared every penny and are sole traders so they cannot even claim the PSC director's salary of say £8k a year just because they in a sense did the right thing, did not incorporate and declare all their income so are tipped over £50k, whilst tax evaders under £50k who are sole traders get the free money and PSC companies (some of them formed to reduce tax get furlough).As ever you get kicked in the teeth for doing the right thin and paying more tax than others. Yet next year we sole traders on over £50k will be paying much higher taxes to pay for tax evaders' and tax avoiders' 2020 free money.

I have heard that there is nothing in the rules to stop a company director furloughing themselves and then freelancing for another firm? Has anyone else heard this? Going to ring my accountant today to ask if this would be an option for me.

ging, I am not sure the full rules are published yet so we probably do not know but Lewis Silkin solicitors have taken the view probably correctly that if your employment contract does not prevent your taking a second mob (many of them do) and your furlough terms and conditions do not prohibit a second job then you can do so.

If I were Sunak I would make sure the rules ban that as it is bit unfair that loads of people get zero (eg self employed sole traders, no company on over £50k as against a personal service company director on say £20k a year PAYE wage who can get furlough money - we think) and others will almost have been able to double their salaries as they are getting paid plus they are getting a full time wage plus over time working for Tesco or someone else.