Director of a LTD company and coronavirus

[Beebers111]

Dh and I run a small business. I don’t draw a salary, he draws just over £12k per year. That’s it. I work elsewhere so have a salary from that.

We don’t qualify for the government help of 80% as far as I know as he isn’t ‘leaving his job’ however we can’t afford to pay him as there isn’t the money in the company.

He isn’t classed as self employed. But we are a lower income family (household income for us is around £25k per year in its entirety).

We already claim a small amount of tax credits which we are entitled to as dd is receiving dla.

I don’t think we are entitled to any help yet? Unless I reduce DH’s salary and claim more tax credits? We have to do something or we are going to be wiped out in about 8 weeks time.

Does anyone have any advice ?

Is there any work for him to do? If not he could put himself on 'furlough' which means he's not left his job but there is currently no work for him. Also would you be entitled to one of the grants for small businesses?
Contact your local LEP and they have links to all the help available.

He is an electrician so unless there is an emergency call out- no. I’ve suggested he try and get work elsewhere so we are looking into that.

I assume from what you say that your husband works for a limited company that you've set up? If so, the first step is to keep the company and yourselves separate in you head while you're dealing with this.

As far as I can see, it works like this:
Does the company have any work to do? If the company has no work to do because of the crisis, then it should lay off it's employee(s) and tell them to stay at home, and keep paying them. Then claim the 80% of the salary from the government to cover the majority of their wages. Presumably the company has to find the other 20%.

If there is work to do, then the employee should be doing it - from home, or out and about if its a key industry. They don't have to 'leave their job', they have to be laid off.

Check around on the government websites - there's sure to be guidance.

Hi Crabby yes that’s correct. We set up a ltd company on the advice of an accountant. I did a bit of freelance property work and paid into the business but didn’t withdraw anything.

So we have 2 directors only one pulling a salary.

Well, if the company has no work, even though he's a director, then his salary absolutely should be met by the government's 80% of salary scheme. In effect, the company has no work for him and can't pay him, so the government will step in to help. As I understand this, you can organise this via your accountant through your payroll.

You should also be able to claim for the grant. Local councils are sending letters to locally registered businesses. It's less clear what happens to businesses that don't pay business rates/premises so it's worth calling them to see how that works. I've been meaning to do some research on this myself.

I'm in the same position primarily living off dividends. I'm also an employment lawyer.

The self employment amendments are tabled but nothing yet for those who live on dividends. Currently the max he can claim is the £1,000 per month equivalent to the £12k salary he was drawing but only if he is furloughed which means he can't do any work.

The issue is, what if emergencies come in? My husband is similar, a trade that is now only providing emergency response. There is no other work...so no regular income.

Then he wouldn't be furloughed. If you are furloughed you are laid off and so not available to do any work. There will be fines and potentially more for those who try to claim a furlough payment whilst still doing some work. Its only going to be suitable for those who completely close their businesses

The company can claim 80% of the £12,000 to pay your husband. It cannot claim anything else as presumably he has been taking the rest of his salary in dividends to avoid paying tax and NI on it.

It cannot claim anything else as presumably he has been taking the rest of his salary in dividends to avoid paying tax and NI on it.

You still pay tax on dividends. Lets not start this nonsense.

You also need to bear in mind that furlough payments will only start to be paid out at the end of April once HMRC have the system up and running.

No his only salary is £12k we have paid NI. He hasn’t taken dividends because it’s a new company and we are struggling as it is. Our household income is £25k for two of us plus 4 children.

OK well in that case I'm afraid there is nothing available for him yet.

*Does the company have any work to do? If the company has no work to do because of the crisis, then it should lay off it's employee(s) and tell them to stay at home, and keep paying them. Then claim the 80% of the salary from the government to cover the majority of their wages. Presumably the company has to find the other 20%.

If there is work to do, then the employee should be doing it - from home, or out and about if its a key industry. They don't have to 'leave their job', they have to be laid off.*

This

Your husband is an employee of the ltd company.

But the company has no money in it. The furlough system relies on companies having enough money to pay the 80% until the payments start coming through. In this case the OP's DH will not have an income because he doesn't have funds in the company.

PP mentioned the grant. This is only available for those paying business rates so the OP's DH wouldn't qualify.

So the only thing we can do in the interim surely is to reduce his pay to the minimum NI contribution and try and claim further tax credits?

I don't know about the tax credit system I'm afraid.

I would say the only thing you can do at the moment is for him to try to find a job in an essential service.

So I am director of our ltd company but pay myself 10k a year. If they shut building sites there will be no money coming in, therefore I furlough myself for my paye salary. Which is to cover administrative duties. These will cease mainly as will have no invoices etc.

However as director I still have administrative responsibilities. Various returns that I will still have to complete. I can do those as part of my directors responsibilities can't I? They are only the legal returns, can tell hmrc I wont need to complete 1 for a while but the rest and the financial year end will need doing. Obviously I will pay myself for as long as possible but we don't have a massive amount in reserve and will still have VAT to pay in june.

Oh yes and we still have to pay our corporation tax which is about £5k wiping out the bank entirely.

I'm sorry if this isn't useful, but all supermarkets are crying out for workers, so are hospitals for porters etc. If he can, ask him to apply for those, in some cases people are being started in work the next day!

Could he try and get a job in a supermarket, they are all looking for staff. I saw Asda were even looking for home delivery drivers

Yes we would definitely do that. Because he has such a transferable skill as an electrician hoping he can get a job working in one of the essential areas such as infrastructure etc.

Various returns that I will still have to complete. I can do those as part of my directors responsibilities can't I? They are only the legal returns, can tell hmrc I wont need to complete 1 for a while but the rest and the financial year end will need doing. Obviously I will pay myself for as long as possible but we don't have a massive amount in reserve and will still have VAT to pay in june.

Yes you can still do this in your capacity as a director. Your legal role of director is separate from your legal role as employee. You just can't do any actual work at all if you are intending to claim the furlough payment. So if you make curtains no curtain making permitted. If you are an electrician no electrical work permitted etc.

These rules only apply to those working through limited companies by the way. Amendment legislation has just been tabled dealing with true self employed people but nobody who is an employee of their limited company is self employed.