Many of our clients are in this position; they run a limited company, act as a director and pay themselves a small salary topped up by dividends.
This presents a problem….
As far as we can see, these businesses and individuals do not come under the self-employed scheme above (unless they also have an unincorporated business, the profits of which make up more than 50% of their total taxable income as reported on their tax returns).
This is difficult to do in practice as whilst other employees can be furloughed (and they must not do any work at all for the duration of the furlough) a director still has responsibilities. However, we think a director who is an employee of the business can be furloughed under the scheme (assuming the business is making no sales due to the crisis) and the Government will cover 80% of the wages but as most directors put earnings through PAYE scheme of around £720 per month, 80% of £720 is quite small and provides little income support for the individual.
Note that the 80% of pay, excludes dividends – they are not treated as income for this calculation as they are not part of the payroll.
What else might you be entitled to if you fall into this category?
• A business with premises (registered with the local authority) might receive a cash grant of either £10k (for premises with rateable value < £15k) or £25k (leisure, retail and hospitality businesses with rateable value of between £15k and £51k)
• Deferral of VAT payments for the next 3 months
• Deferral of income tax payments due in July 2020, deferred until January 2021
• Consider a claim for Universal Credit and Working Tax Credits (or additional Child Tax Credits where you have minors living with you); these can be applied for online.
Do we think the Government will do anything further to support limited company owners in the above position?
Currently we can’t see them making any further support available for this category but efforts are underway to lobby Government about this group of people/businesses. HMRC have said however that they cannot save every business nor every job.