Company directors and the #coronavirus Job Retention Scheme #COVID19

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

The government have reconfirmed that directors can be furloughed

There have been claims that the government have forgotten a group of self employed workers, those that act as contractors and operate Personal Service Companies. Some are treated as deemed employees within the public sector.

So let’s clarify a few points:

– Are contractors Self Employed? Technically no. If they were a self employed sole trader they cannot be a deemed employees or fall under IR35. And those working for umbrella organisations are employees of the umbrella.

– Are deemed employees actually ‘employees’ or ‘workers’. No, if they were actually employees, they would not be ‘deemed employees’. The term may be confusing, but to be clear they are not employees except for their own business or the umbrella or agency who has supplied them to the engager.

– Does paying tax confer employments rights? No, the payment of tax has limited relevance to confer all employment rights which fall under employment rights law as opposed to taxation law. After all there are millions of employees who pay no tax nor NICs but have employment rights and associated protections.

– Are dividends employment income? No, they are dividends from the profits of the business paid to shareholders. They do not form part of payroll earnings.

The government provide the following in relation to operating CJRS within their own business:

As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

This also applies to salaried individuals who are directors of their own personal service company (PSC).

PAYadvice.UK 4/4/2020

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