A couple of weeks ago the government announced that they would subsidise employees' wages if, rather than laying them off in the crisis, employers kept them on anyway. If they do that, and the employer expects the government subsidy, the employee is to all intents and purposes not allowed to work at all. That process is known as "furloughing". It's been a big deal. Between 2007 and the Friday before last, the word "furlough" came up in precisely two of Greg's emails in 13 years. Since the Friday before last, it appears in 189 separate conversations.
The scheme is aimed at employees, not business owners. But some directors of limited companies have found that their work has completely dried up, and so understandably have asked if they can furlough themselves so that their company gets some contribution towards their own (usually around £700) salary.
The idea of a company director furloughing themselves is basically a logical nonsense. Even if absolutely every bit of fee-earning work has dried up, and there's no point looking for more, a company director still has legal obligations around the stewardship of the company - there's an obvious Catch 22, where as soon as a director suggests to us that they've furloughed themselves, the fact that they're talking to us means they're still engaged in company business! And even if fee-earning work has disappeared, many directors will be working hard to try and find new revenue for the company to fill the gap.
However - it's now clear HMRC are in practice going to be content with claims from companies against part of a director's small salary where the company's income-generating work has totally dried up. They probably realise that limited company owners - especially ones with company income under £50,000 who would have been given some support had they been a sole trader - have fallen through a crack in the system, and they're saying they'll accept claims from companies relating to small director salaries if absolutely all fee-earning work has disappeared. On that basis, the subsidy the company could expect for a month of inactivity would be about £575, at present for up to three months (assuming a total absence of fee-earning work over a three month period).
Anyway, there's no action to take now. The claims process for getting the subsidy for furloughed workers doesn't exist yet, and HMRC are hoping to have it in late April. So for now, directors with no fee-earning work to do will have to be patient - and in the meantime try and find some other source of company income, which hopefully will be greater than that relatively small subsidy. Of course, as soon as the reclaim portal exists we'll be letting clients know!
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