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Are Directors Being Left Behind?

The Chancellor yesterday announced plans for the Self-employment Income Support Scheme to support self employed businesses. Although we were hopeful it may help most of our clients, we were saddened to see the following paragraph in the guidance:


“Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.”


This paragraph effectively means that clients who are currently on a salary and dividend remuneration package will not be able to apply for this grant. The one major issue here is that in order to take advantage of the Job Retention Scheme, you need to be furloughed which means you have to stop completing any work for the company.


Having to stop work for your company is something most, if not all, directors will not be able to do. This could be through either wanting to keep working or just trying to keep the business going, through marketing or offering support to other businesses.


As we type, we are still waiting for confirmation what constitutes work. Although we believe a director could complete administrative duties and be furloughed, they cannot complete any income generating work (this could include marketing). This is moving all the time and once we have received officially clarification we can advise accordingly.


There may be a way for companies with multiple directors to leave one to complete all the tasks, but, with directors’ salaries likely to be low, 80% of this amount is not going to come close to what they would normally receive.


So what can we do now? The advice from the Government is for directors/businesses to take advantage of the other measures already outlined. These include business rate grants, VAT deferrals, time to pay agreement (for tax), business interruption loans, personal mortgage holidays and Universal Credit.


Most of these measures include either deferring or incurring more debt and, at this time, business owners need to decide if increasing debt is right for them. We know that there are going to be many upset directors’ out there (we are one of them) who feel they are ‘being left behind’. However, we have to play the hand we are dealt.


With that in mind, we have discussed this at MATCH and, instead of thinking about furloughing ourselves for 80% of our minimum salary, we are going to use our time and energy to build an even stronger business over the next three months for the long road of recovery to come.


Please do make contact with us if you have any questions.


Everybody @ MATCH Accounting.