Directors and the Job Retention Scheme 

But how does this work for directors?

The Government confirmed company directors can be eligible for the scheme, but only under certain circumstances. 

Under the initial scheme, directors were not able to carry out any act that provides a service to or generates revenue for the company. However, from 1st July 2020 directors and other employees were allowed to work a proportion of their usual hours, and the employer could claim for the hours not worked by the employee. This was known as flexible furloughing.

In theory it is possible for directors to be flexibly furloughed, however it is difficult for directors to evidence the unworked hours for the claim. This is because most directors are not contracted or paid for a standard number of hours, and instead work on a more irregular basis. HMRC have not given clear guidance on this point.

Coronavirus Job Retention Scheme – Frequently Asked Questions

Do I need to document the decision to furlough a director?

The Government has stated that where a director’s furlough is decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to any director furloughed.

What can I claim as a director? Simply the basic salary or can I include dividends?

Directors often take a very low or no salary from the business but will instead choose to receive dividends to top up their income. Dividends are not subject to PAYE and therefore cannot be included as part of the JRS calculation. Only your salary is relevant to the scheme.

Is it possible to vary/increase the amounts claimed by introducing an employment contract?

If the director was already on the payroll on 19th March 2020 and paid a fixed amount, then the calculation of the subsidy is based on the employee’s actual salary before tax, as of 28th February 2020. We would not expect amendments to the 28th February payroll to be acceptable.

If the director joined the payroll between 20th March and 30th October 2020, then the grant is based on the last pay period ending on or before 30th October.

New rules will apply to claims from 1st May 2021, and HMRC are yet to announce how claims will be calculated for these periods.

How we can help

There are several ways in which we may be able to help. It’s always important to get good advice and that’s particularly true in turbulent times. If you need help please talk to us on 01257 277 999 or use our online enquiry form. We can offer initial consultations, advice and support over the phone or by video call.

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For our latest COVID-19 news and guidance for your business, visit our dedicated Coronavirus Hub.
We will be updating it regularly as we continue to monitor and digest all the latest information

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Date published 1 Apr 2020 | Last updated 24 Mar 2021

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.