If you operate your business as a Limited Company where you’re the only Director, owner, and employee, you’re probably wondering what financial support is available to help you deal with the financial impact of COVID-19.
Over the last week, the Government have announced a series of schemes aimed at supporting those whose income will be reduced as a result of COVID-19. These include:
- The Coronavirus Job Retention Scheme which encourages employers to keep staff on payroll, by providing a grant which covers up to 80% of their wages.
- The Self-Employed Income Support Scheme which supports Self-Employed workers
As we know a large proportion of our clients fall into the Sole Director category, we have devised a summary of the questions we’ve been asked on the above schemes.
If you have any further questions, please contact your Client Partner directly by email or by calling 01454 619900.
Are Directors of Limited Companies eligible for the Self-Employed Income Support Scheme?
Sadly, no. The Self-Employed Income Support Scheme is only open to Self-Employed Sole Traders who work for themselves in business or partners in partnerships. Unfortunately, this doesn’t include Directors, who are, technically, employees of their company.
So where does this leave Sole Directors who are struggling as a result of the COVID-19 pandemic?
Are Directors of Limited Companies eligible for the Coronavirus Job Retention Scheme?
It is now confirmed that if you are a Limited Company Director, you can be furloughed as an employee on PAYE, even if you are the sole employee.
To be eligible, you must however have taken a salary through a PAYE scheme on or before 28th February 2020.
For most Directors, this can be an issue as to be more tax efficient, most Directors of Limited Companies take a small salary from the company, with most of their income being from dividends. By furloughing yourself, the salary element of your income is likely to be relatively small, which might not look too healthy once reduced to 80%.
If you do choose this course of action, please proceed with caution and not continue to do work for the company, other than undergoing Director duties such as legal filing.
Can I pay my dividends payments as salary through PAYE instead?
This is the question that is making accountants everywhere wince, as it basically amounts to fraud.
HMRC will probably only consider what has previously gone through PAYE when they set out what the criteria will be for the calculation, anyway, so making any changes now is unlikely to make any difference.
What financial support is available for Sole Directors?
Unfortunately, there doesn’t seem to be a single solution available. The support instead, is available through different sources, and dependent on circumstances.
These include (but aren’t limited to)
- Deferred VAT and income tax payments
- Changes to accessibility for Universal Credit and Employment & Support allowance
- Statutory Sick Pay relief package for SMEs
- Business rates holidays, as well as the Small Business Grant Scheme
- Coronavirus Business Interruption Loan Scheme
- HMRC Time To Pay Scheme
To find out more, visit the Government’s website.