Coronavirus (COVID-19)

Small Limited Companies and COVID-19

Also see out main Coronavirus support page and our Coronavirus Job Retention Scheme page.

Also see – Owner/Manager Directors can Furlough – New Guidance.

The Self-employment Income Support Scheme was announced by the Chancellor on Thursday 26 March bringing relief to thousands of self-employed individuals.

However, nothing in the measures helps any of the (approximately) 891,000 sole director/shareholder businesses currently active in the UK.

Most of these business owners typically take a very low salary with the majority of their income taken in the form of dividends.  Their business structures are legal, they comply with all tax legislation (and indeed their tax burden has increased significantly in recent years) but the current COVID-19 measures do almost nothing to help them.

Why am I not self employed?

Director-shareholders run their own business, work for themselves and very often refer to themselves as self-employed.   They are to all intents and purposes self employed.

If you are operating a limited company, however, it is the company that carries on the trade that you are involved in, not you.  You are not self-employed for tax purposes – you are an employee of the company that you own.

What if I operate a Personal Service Company?

This is still a limited company and you are not deemed to be self-employed.

If I am an employee then can I furlough myself?

The Coronavirus Job Retention Scheme (CJRS) allows businesses to claim back up to 80% of the employment costs of ‘furloughed’ employees. There is a huge question mark over whether directors, particularly sole directors can be furloughed.

New Guidance – Owner/Manager Directors can Furlough.

If sole directors can furlough then it is worth considering that the support will only be 80% of their salary which is, typically, £720 per month.  Dividends are not covered.

Can I increase my salary and reduce my dividends

You can but it will not help.  The 80% calculation is based on the employees salary as of 28 February 2020 (it’s a bit more nuanced than this but you won’t be able to ‘artificially’ increase your salary).

What should I do now?

  • Immediately take action to secure whatever income you can.  If you are not earning you should apply for Universal Credit (if you are eligible) and ask about housing benefit which will help towards rent or mortgage interest payments.
  • Speak to your mortgage company about a mortgage payment holiday.  Yes this will increase the term of your mortgage but this is about cash now, not later.
  • Do not pay your VAT if it is due between now and 30 June.  You will need to pay by 31 March 2021.
  • Do not pay your Self Assessment Tax payment due on 31 July.  You will need to pay by 31 January 2021.
  • Contact your bank and credit card providers to ask for repayment holidays on any loans or balances due to them.
  • Put in place a 12 month cash flow projection for both the business and you personally to understand the size of the problem.
  • Be prepared to borrow and talk to us now.

As you will appreciate the situation is constantly evolving but to speak to our specialist team please contact ATN on 01474 326224. Alternatively, visit the website;  tweet @atnpartnership or email  info@atnpartnership.co.uk 

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