Directors can be furloughed

The Government have confirmed this weekend that directors can be furloughed where they are not carrying out any work to generate commercial revenue. This means that 80% of the salary can be claimed back.

Full details from the government website are below:

“As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so 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 the director(s) concerned.

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

This also applies to salaried individuals who are directors of their own personal service company (PSC).”

Important: that this only relates to PAYE income, not dividends, which do often form part of a director‘s remuneration package as most are paid a tax efficient low salary and receive the balance of their income as dividends and unfortunately under the current support from the Government, dividends would not be included. So if directors could be furloughed, they would only be entitled to 80% of their salary and not their dividends.

As always, if you have any questions please get in touch.

Posted in COVID-19, COVID-19 - Job Retention Scheme & Furloughing, Employees.