Company Directors & Shareholders. Many small companies are run by just one or two directors and have no other employees. What government financial support is available to directors/shareholders during the coronavirus crisis?
- A director or company officer is an employee for PAYE purposes.
- A director cannot claim the COVID-19 Grant for the self-employed by virtue of holding the office of a director.
- Directors can be furloughed under the COVID-19 Coronavirus Job Retention Scheme (CJRS).
- There are potential issues for small companies to consider.
- The government has temporarily suspended the wrongful trading in insolvency rules in order to allow companies to have a breathing space during the virus crisis.
If the director’s company is adversely affected by COVID-19, the director has the following options, depending on the circumstances:
- The government has announced that it will temporarily suspend the wrongful trading rules, backdated to 1 March 2020.
Joint and several liability of directors for deliberate claims under CJRS where company not eligible
Finance Act 2020 includes provision to make a company officer jointly and severally liable for Income Tax assessments raised on CJRS payments where:
- that officer deliberately made a CJRS claim where the company was not eligible and the company is insolvent, or
- HMRC can show there is a serious risk that the company will not be able to pay the Income Tax assessment.
Furloughing for normally employee type duties:
A director who was on the payroll and engaged under an existing written or verbal employment contract on or before 19 March 2020 ( prior to 15/04/2020 this date was 28 February 2020) may be furloughed if they meet the conditions of the scheme.
HMRC guidance says that where a company board decides to furlough a director, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director being furloughed.
Can you furlough a sole director?
A sole director company will probably not wish to furlough a director in respect of their statutory duties. This is because a company cannot operate without its director and all directors have ongoing fiduciary duties to their companies.
A sole director company may furlough the director in respect of their employment duties
Most companies will need to have someone on hand, to handle on-going administration such as post, bookkeeping, tax filings and banking. These kinds of duties can be performed by a director in his statutory capacity.
A company can go into a ‘COVID-19 hibernation’ meaning that the director would have no day-to-day employment type duties during that period. From 1 July flexible furloughing means that part-time work can be undertaken with claims being adjusted accordingly
If you have two directors then one could be totally furloughed leaving the other in charge of statutory obligations