As you know this has been a hot topic ever since the Coronavirus Job Retention Scheme (CJRS) was announced on the 20th March 2020.
Two things I must make clear from the very start. Firstly, we are on your side and we really want to be able to claim this for you, especially as for many of you this is the only government assistance available to you. Secondly, there is no concrete information out there. No matter who you hear it from and how sure they sound, there is nothing definitive out there at the moment.
We have each been through the HMRC guidance multiple times, we have read every website with relevant articles, we have spoken to the ICAEW technical helpline and we have seen tens if not hundreds of non-director scenarios.
This enables us to look at things in the round and we believe that Directors will be covered by the CJRS and that they can be furloughed and still undertake small admin duties like VAT returns, payrolls and communicating with us – but this will not include activities that generate revenue for the business. The reason we believe this is that the consensus is that a Director can be furloughed from the duties as an employee but they will retain their legal duties as a Director. Those legal duties include meeting legal filing deadlines i.e. VAT, payroll, accounts etc. We expect further guidance to come out on the CJRS that will confirm the above in due course.
However, the longer we wait for guidance the longer we are missing out on a Director being furloughed, so we need to take steps to get things in place now. These steps will also allow as much of the 80% claim to be made as possible if our thoughts above are not correct and admin is a disqualifying activity. See below actions that should be taken based on your company structure:
- Sole or multiple director, no VAT or payroll – furlough all directors for 3 weeks at a time (this is the minimum furlough period – return date should be set in furlough letter), after each 3 week period the director can come back for 1 day (we won’t be able to claim the 80% for that day) and then furlough themselves again. If a director needs to return to work during a furlough period this may invalidate that period so keeping them all short ensures minimal claim loss.
- Sole director or multiple director, monthly payroll and/or VAT – one director furloughed for fixed periods at time to return on set dates to ensure suitable admin days each month (please bear in mind 3 weeks minimum, return date must be set in furlough letter and we will not be able to claim for any days outside furlough), other director/s furloughed indefinitely (maximum 3 months (at this stage) with 24 hours’ notice to return to work) to be “called back” by other directors as and when
- Sole director or multiple director, weekly payroll and/or VAT – one director furloughed for 3 weeks at a time (same reasons as 1) and ONLY that director undertaking payroll/VAT admin in the hope we might still be able to claim for them when further guidance is announced as mentioned above – but do bear in mind that this may not happen so the furlough pay is at risk and may not be recoverable for this director only. Other directors furloughed indefinitely to be “called back” by other director as and when as per 2.
To be clear, before further guidance is provided and you are undertaking the above steps you should not be undertaking any admin duties, VAT, payroll or communicating with us when you are furloughed, unless you are the at risk director in scenario 3.
The above steps could also be adapted for admin staff that undertake bookkeeping and payroll.
We would recommend directors remain paying themselves the £8,632 minimum per annum to ensure state pension years are still clocked up. It’ll just be the 80% is funded by HMRC, the balance will be an expense to the company.
In short, furlough yourselves now for 3 weeks at least and hopefully we will have full guidance by the end of that period.
We have some template letters for directors so please get in touch.