4th April 2020 / COVID-19 Updates
Can a director put themselves on furlough?
Since the Coronavirus Job Retention Scheme was launched, one question, more than any other that we have been asked by a director of a limited company is…
Can I furlough myself?
We would like to share our current thoughts on this subject and why you don’t have to (completely) make your mind up just yet – the portal opens April 20th when claims can be submitted and this will be the crunch time for all claimants.
Basically, you are asking two questions…
1. Can I Furlough myself?
2. Can I claim back 80% of my salary from the government?
First Question… Can I furlough myself?
There has been much debate within the accountancy profession on this matter and we now have confirmation that the answer is “Yes”. The cautionary note is what could be deemed working as a director does have to carry out their statutory duties. Will some basic admin be classified as working? We think not but that is an opinion only.
Check out the official guidelines at the link below:
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
So, if you have found yourself in a position where you have no work and you believe that situation will last for at least 3 weeks, you will need to sign and retain a copy of a “Furlough Leave Agreement” and furlough yourself. The letter needs to be sent from your limited company to yourself (and the other directors if you need to). When you are able to make the claim you will need to provide the evidence that you have been furloughed.
Whilst, furloughed you are only allowed to carry out the duties of a director. You will find a full list of what those duties are here…
https://companieshouse.blog.gov.uk/2019/02/21/7-duties-of-a-company-director/
These guidelines were not issued with furloughing in mind so are open to interpretation – and therein lies the challenge that we have all been facing. However, we believe that maintaining the company’s statutory and financial records are the responsibility of the directors and can, therefore, be kept up to date plus some basic admin duties that are not to do with generating income for the business.
Please note our comment above that it is a considered opinion amongst our profession that carrying out the duties of a company director is not work in the true sense of the word. However, you must not do any other work in the business which would be seen as revenue-generating. The company must be seen, to all intents and purposes, to be closed for trading.
We also recommend that, if funds allow, you continue to pay yourself your normal salary only.
Second question… Can I claim back 80% of my salary from the government?
This is a question that does not need an answer now. The portal to make the claims will not be live until at least the end of April. When the portal is ready, you will be asked if you have met the conditions to make a claim and, if so, you will be able to complete the online form. If you decide you need help with this then please let us know…we are all in the dark with the portal until it is opened. Hopefully, by then we will have some further clarity on what “furloughing” means for directors so you will be clearer on whether you are eligible for a claim or not.
To be clear, any possible claim will only be for 80% of your salary and will not include any dividends you pay yourself.
We hope this email gives you some clarity on the position we are taking.
In summary, we believe the following is the eligibility criteria for a company director.
- The Government has confirmed a director can be furloughed provided they meet the basic definition of who can be furloughed e.g. must be an employee on PAYE and on the payroll on 28 February 2020.
- They must not do any “work” within the business during their furloughed leave apart from their statutory duties.
- The furlough period must be a minimum of three weeks.
- They must have signed a “Furlough Leave Agreement”.
M.A.D. Accountants are based in West Bridgford, Nottingham, and are specialists in tax and accountancy assistance for businesses and individuals. We're here to make a difference to your business and your life with no-nonsense, jargon-free advice and help.
