What can furloughed directors do?

[DavidWH]

We're at the point now where it makes sense to furlough myself, alongside my dad, and fellow director who is currently furloughed.

I understand we cannot work, which is fine theres little work to do.

I'll still be paying suppliers, and chasing overdue accounts, clearly in the best interest of the company to do so.

Our accountant has suggested we can still 'work' provided the tasks we do, do not result in an invoice or income. So no design or production.

I assume we could still estimate any enquiries, keep replying to emails and calls, and generally keep the business running with zero income.

Or is it a case of sit on our hands, and do nothing. Of course we're planning for our return in the background.

 

[Mark T Jones]

AS your accountant says - the official line is you can't do 'income generating activity'

And as you say, that's pretty broad. Signing orders or actually 'doing work' are out - I'm guessing putting out estimates is pushing the boundaries

Most things can come under the banner of marketing, I can't see how that's an issue as long as you aren't saying 'buy now'.

Who's deciding, who's checking - we're all making it up as we go!

Curiously, you are allowed to earn elsewhere - I've signed up with a driving agency who have done the research and can demonstrate that this is allowed.

 

[Newchodge]

You cannot do any of those things if you are furloughed. Work is described as generating income for or providing a service to the employer. The only things a furloughed director can do are statutory duties - companies house returns, and so on. Anything to do with the business activity of the company is out. Please ask your accountant how his advice gels with:

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 is from the latest guidance https://www.gov.uk/guidance/claim-f...IYIA5I0HrF5NBOps8FS4y6vMM8xOYZ5oOatVw#history

You are required to keep records (for example the written agreement with the employee about furlough) for 5 years. HMRC will have 5 years to look at claims and there will be heavy penalties for those who have claimed fraudulently.

 

[DavidWH]

Paying suppliers, and chasing overdue accounts isn't generating 'income', the income and purchase has already been generated.

Directors have a responsibility to the company, and the companies best interest.

It is in the best interest of the company, to furlough both directors, we're not generating sufficient income to cover the salaries. It is also in the companies best interest to recover monies owed, and ensure our suppliers are paid.

I think it's a valid argument. I'm not selling, generating invoices, or processing orders?

 

[Newchodge]

Paying suppliers, and chasing overdue accounts isn't generating 'income', the income and purchase has already been generated.

Directors have a responsibility to the company, and the companies best interest.

It is in the best interest of the company, to furlough both directors, we're not generating sufficient income to cover the salaries. It is also in the companies best interest to recover monies owed, and ensure our suppliers are paid.

I think it's a valid argument. I'm not selling, generating invoices, or processing orders?

But you are providing a service to the company.

How is chasing overdue accounts not 'generating an income'? If you don't chase and the invoice is therefore not paid there is less income.

It is NOT in the best interests of the company to furlough both directors because, if you do, you cannot act in the best interests of the company in doing the duties you have described. It is in your personal best interest to be furloughed as you will then receive a small income generated by the government, but why do you think it is in the interests of the company? The scheme is not there to support businesses. It's purpose is to support employees.

 

[Mark T Jones]

Personally, I'd repeat 'who's checking?'

If you want to be safe, pay someone else to do collections.

 

[DavidWH]

I'll furlough myself, the other director and employ someone on a temp, part time contract to make the payments. Job done.

It is in the best interest, as the company isn't generating sufficient income to cover the salaries. We've zero work due to COVID, the grant from the local authority hasn't arrived yet.

Chasing debts... the income was generate prior to COVID-19, it's not like it's a new order.

Our current position is we're better to furlough all staff, and just shut up shop.

 

[DavidWH]

Interestingly there's much conflicting information, and advice, with no definitive advice from government. The companies act 2006 makes it pretty clear what the responsibilities are:

A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—

(a)the likely consequences of any decision in the long term,

(b)the interests of the company's employees,

(c)the need to foster the company's business relationships with suppliers, customers and others,

(d)the impact of the company's operations on the community and the environment,

(e)the desirability of the company maintaining a reputation for high standards of business conduct, and

(f)the need to act fairly as between members of the company.

http://www.legislation.gov.uk/ukpga/2006/46/part/10/chapter/2/crossheading/the-general-duties

 

[Newchodge]

If you base it on that the director can do anything whatsoever, including generating income, but that is in contravention of the rules on furlough. Which take precedence when claiming reimbursement under the rules on furlough.

 

[DavidWH]

@Newchodge I'm not disagreeing with you, but there is no definitive yes/no, and it's open to interpretation.

I would argue that if you're chasing monies owed, is in the best interest of the company, and the revenue would have been generate prior to Furlough.

From what advice we've got, we're going to limit what we as directors do. There's no point in quoting a job, but we can record their details and contact them once we're back at it.

That's not generating income, but fostering the relationship, and they're free to go elsewhere.

Be different if we were furloughed, and still trading, doing work, and generating invoices for work and services provided. I'm sure there are many who will, we're VAT registered and wouldn't take einstein to work out if we'd been trading or not.

 

[Alison Moore]

You can't provide estimates and quotes - as that's working surely? The whole point of the government steeping in is to help businesses that have had to close, retain their staff. If there's work to do - even just quoting, then you've still got a business and can't furlough yourself. I thought the whole point was that Directors could just do their duties under a directorship - i.e. mandatory board meetings, filing mandatory paperwork - that sort of thing.

 

[DavidWH]

@Alison Moore that's it there's definitive yes/no.

We don't have any enquiries to quote, the few jobs I have done the past few weeks, has equated to half a days work a week, and not enough to justify the salary.

We'd be better off, sticking an auto responder on saying we're in shut down.

It's all a bit vague as to what is, and isn't permitted.

 

[Gordon - Commercial Finance]

@Newchodge I've been asked to write a piece for an industry magazine. I’m doing it as a favour, for free and to help and of course it’s financial based so it’s almost in a professional capacity, but not for the benefit of my company. Do you think I can do this while furloughed?

 

[Newchodge]

@Newchodge I've been asked to write a piece for an industry magazine. I’m doing it as a favour, for free and to help and of course it’s financial based so it’s almost in a professional capacity, but not for the benefit of my company. Do you think I can do this while furloughed?

Will you name your company and expect to get custom from it?

 

[Stedurham]

Sorry I’m a bit miffed so we get furlonged and get about £550 a month. Do what you need to for your family, no idea how they expect me to live on £550 a month absolute joke.

 

[Gordon - Commercial Finance]

Will you name your company and expect to get custom from it?

Will name company probably but no I don’t expect to get custom whatsoever.

 

[Newchodge]

Will name company probably but no I don’t expect to get custom whatsoever.

Then it doesn't fall within the restrictions

 

[STDFR33]

Sorry I’m a bit miffed so we get furlonged and get about £550 a month. Do what you need to for your family, no idea how they expect me to live on £550 a month absolute joke.

Had you set a salary that was fair for the work you do, you would have received a more reasonable sum.

However, I suspect you set your salary at a level to avoid tax (perfectly legal) and are now left with only claiming a paltry sum. Unfair? I’m not sure is. You can’t really expect to take money out of a system that you’ve tried to avoid as much as possible.

 

[Business News]

You need to keep furlough records for three years or each worker furloughed and they are not supposed to work at all for their employer during the furlough period. I have closed my company from Monday and done forward wages to cover that period with scheduled payments. That way I can prove that no work was done over the initial furlough period. It might be harder if that is extended as fresh payroll would need to be run and payments scheduled.

We know that McDonalds with 135,000 workers furloughed will never be scrutinised but those small to medium businesses with 20 to 250 employees will be prime for a show us what you did again inspection. I'd expect most of those inspected would have pushed the envelope a little too far to avoid HMRC fines.

 

[Porky]

My accountant says that his clients are interpreting the guidelines in different ways. Let’s face it, It’s not really that clear is it regarding what’s a revenue raising task and what isn’t, then there’s the argument for what if staff answer emails or do stuff off their own initiative? When you haven’t instructed them?

I just think that HMG either want business to survive and pay future taxes when the market recovers or help screw the coffin lid down now by drowning us all in red tape and rules and putting us out of business.

If the business is in lock down and no staff at your premises a work force working from home is just not effective so sod it, Frankly I think it’s a case of just trying to survive at the moment, if the revenue want to go to the trouble of beating you up later because someone’s done something on Furlough when they shouldn’t, deal with it then, because your going to go out of business now anyway if you don’t try and do something.

 

[obscure]

Paying suppliers, and chasing overdue accounts isn't generating 'income', the income and purchase has already been generated.

You seem to be fixating on the "income generating" point while ignoring the "OR provides services to or on behalf of their company."

Unfortunately "the best interest of the company" is not best served by what amounts to benefit fraud. Your suggestion of hiring someone part time is much better.

 

[Newchodge]

You seem to be fixating on the "income generating" point while ignoring the "OR provides services to or on behalf of their company."

Unfortunately "the best interest of the company" is not best served by what amounts to benefit fraud. Your suggestion of hiring someone part time is much better.

Except, of course, supervising, managing and paying that member of staff is also precluded!

 

[Newchodge]

I am very surprised that no-one has picked up on the point that many of the self employed can get 80% of their income while continuing to work as normal (if they have any work). I haven't seen anyone suggest that should also apply to company directors.

 

[DavidWH]

A straight forward employee can just stop working. Directors have different responsibilities.

Sought advice from various people yesterday with mixed advice, face it any comeback saying "I got told online it was fine" wont cut it.
I'll trust the advice of the advisors who have PI insurance in this instance... there is no definite answer from gov.

@Newchodge Martin Lewis made a valid point, that we could trade as a sole trader whilst furloughed, not using any company assets... perfectly legally.

How about this... you have to furlough for a min 3 weeks. Furlough for 3 weeks, on the 22nd day make the payments required, then furlough again for a further 21 days.

 

[Newchodge]

You need to keep furlough records for three years or each worker furloughed and they are not supposed to work at all for their employer during the furlough period. I have closed my company from Monday and done forward wages to cover that period with scheduled payments. That way I can prove that no work was done over the initial furlough period. It might be harder if that is extended as fresh payroll would need to be run and payments scheduled.

We know that McDonalds with 135,000 workers furloughed will never be scrutinised but those small to medium businesses with 20 to 250 employees will be prime for a show us what you did again inspection. I'd expect most of those inspected would have pushed the envelope a little too far to avoid HMRC fines.

I think you need to keep them for 5 years. You certainly need to keep the written agreement with the employee for 5 years. This, presumably, is to avoid employers claiming the 80% while requiring employees to work.

 

[Newchodge]

A straight forward employee can just stop working. Directors have different responsibilities.

Sought advice from various people yesterday with mixed advice, face it any comeback saying "I got told online it was fine" wont cut it.
I'll trust the advice of the advisors who have PI insurance in this instance... there is no definite answer from gov.

@Newchodge Martin Lewis made a valid point, that we could trade as a sole trader whilst furloughed, not using any company assets... perfectly legally.

How about this... you have to furlough for a min 3 weeks. Furlough for 3 weeks, on the 22nd day make the payments required, then furlough again for a further 21 days.

Absolutely, you can furlough for 3 weeks, work 1 (or however many) day(s) then furlough for 3 weeks.

I am just listening to what HMRC had to say to the select committee yesterday and they have stated there will be a hotline to report abuses, aimed at employees being made to work while furloughed.

 

[DavidWH]

@Newchodge I think we'll do that, it's far more beneficial and covers our backside.

Please don't think I am arguing with you... I'm sure you know there are varying opinions on this, and everyone will believe there's is correct.

What's your thoughts on operating self employed outside of the Ltd co?

Where do agree is that self employed can claim a grant, but still work??

 

[Newchodge]

Please don't think I am arguing with you... I'm sure you know there are varying opinions on this, and everyone will believe there's is correct.

That's perfectly all right. If you are interested there was a difference of opinion between me and an accountant on the thread Furlough, latest guidance, around post 59. Many accountants had been saying directors cannot be furloughed FULL STOP. I differed with an accountant in that thread and there was quite a discussion about duties etc.

The guidance for self employed is here
https://www.gov.uk/guidance/claim-a...ovid-19-self-employment-income-support-scheme

I hadn't read it before and was quoting what I had heard from others about being able to continue to trade, but it is not explicit in the guidance. The closest I can see is in this bit

You can apply if you’re a self-employed individual or a member of a partnership and you:

• have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
• traded in the tax year 2019-20
• are trading when you apply, or would be except for COVID-19
• intend to continue to trade in the tax year 2020-21
• have lost trading/partnership trading profits due to COVID-19

 

[Newchodge]

Sorry, David, I mkissed the bit about working as self employed. I see no reason why you cannot but it might get terribly messy. You can't access copany emails as a self employed person, you can estimate, but only in your sole trader name, you an'd produce anything as you, presumably, don't have any equipment. It may be mpre trouble than it is worth.

 

[DavidWH]

Jolly, good I value your opinion on here, and quite like seeing you lay down the law.

There needs to be some solid advice around this, as it's been made public knowledge directors can furlough, all the contradictory advice could land some, unwittingly, in hot water.

I'm sure HMRC will at some point be checking over these claims, and the small business is the easy target, those with a handful of employees all on furlough, it wouldn't be difficult to identify those breaching the rules.

We have printers etc, but we genuinely wouldn't use them, we would send it to a local company who are still trading through this, and we'd have invoices etc to evidence that.

We actually run a squeaky clean business, and our accountant does everything by the book, as a result we're in a much better position than some others.

 

[thetiger2015]

I'm sure HMRC will at some point be checking over these claims, and the small business is the easy target, those with a handful of employees all on furlough, it wouldn't be difficult to identify those breaching the rules.
.

They definitely will be, once this has calmed down a little. They'll be wanting to get some money back.

I read the rules as you cannot do anything at all, other than legal duties of a Director e.g. submitting any legal documents/VAT returns - you cannot trade. Emails should be autoresponders saying you'll re-open in the future. No invoices go out, no work gets done.

This gets a little messy when you consider that almost every business has transactions going out of the bank account automatically, each month.

 

[DavidWH]

That's how I read it, there's a difference IMHO between trading, generating an income, and meeting your obligations to pay suppliers. In these unique circumstances, it would be of benefit to our suppliers, and HMRC if we continued to make payments to suppliers.

 

[Stedurham]

Had you set a salary that was fair for the work you do, you would have received a more reasonable sum.

However, I suspect you set your salary at a level to avoid tax (perfectly legal) and are now left with only claiming a paltry sum. Unfair? I’m not sure is. You can’t really expect to take money out of a system that you’ve tried to avoid as much as possible.

I pay more in vat corporation tax etc than most earn yet I’m left with a paltry sum, which after thinking over last few days im just going to close down after the 10k runs out and will have to make People redundant and close
Also when all this debt needs repaying will they also treat us in the same way, we got very little so pay very little back I doubt that. We will be hot the hardest

 

[STDFR33]

I pay more in vat corporation tax etc than most earn yet I’m left with a paltry sum, which after thinking over last few days im just going to close down after the 10k runs out and will have to make People redundant and close
Also when all this debt needs repaying will they also treat us in the same way, we got very little so pay very little back I doubt that. We will be hot the hardest

You don’t pay VAT. You are merely an unpaid tax collector.

You don’t pay corporation tax either, your company does.

 

[Stedurham]

I actually pay it monthly without me the business will close and no vat or corporation tax wIll be paid by me or business. which after how government has made an arse of cv and helping people I’m happy to close. 10k keeps me open for 6 weeks maybe 8 after that it closes

 

[James Kaye]

My accountant says that his clients are interpreting the guidelines in different ways. Let’s face it, It’s not really that clear is it regarding what’s a revenue raising task and what isn’t, then there’s the argument for what if staff answer emails or do stuff off their own initiative? When you haven’t instructed them?

I just think that HMG either want business to survive and pay future taxes when the market recovers or help screw the coffin lid down now by drowning us all in red tape and rules and putting us out of business.

If the business is in lock down and no staff at your premises a work force working from home is just not effective so sod it, Frankly I think it’s a case of just trying to survive at the moment, if the revenue want to go to the trouble of beating you up later because someone’s done something on Furlough when they shouldn’t, deal with it then, because your going to go out of business now anyway if you don’t try and do something.

I think you're entirely fair and correct in your outlook. Most of us are just fighting for survival and its the law of the jungle. I am also in the same position and wondering what the furlough boundaries are.

I suppose it is a simple risk assessment. Much like random VAT inspections, will HMRC come after people with Spanish Inquisition-style inspections years done the line to see if they were working? Also, how will they ascertain what has been done in terms of work? Will they go through my emails and the emails of staff to check there was no traffic during the furlough period? How can they expect me, as a company director not to at least be looking at emails and still attending to occasional urgent items if we are not shutting up shop? Staff still need directing even if we are not working on accounts directly. It's a tough one. I don't want to defraud the system in any way and risk penalties down the line, but I also don't want the business which we've sweated over in the last six years to go up in a puff of smoke.

 

[DavidWH]

@James Kaye we recently had a VAT inspection.

HMRC rolled out MTD, yet when their inspector rocked up, couldn't touch your system, even if it's a back up on an isolated system.

I'm sure they'll have their ways, box 6 on VAT returns will probably be pretty clear. RTI for payroll they know who works where, and who's furloughed. Assuming all their systems can talk to each other.

 

[Newchodge]

Staff still need directing even if we are not working on accounts directly

Are you considering furlough for the director(s) while the staff are not on furlough? That's unusual!

 

[Dahu371]

RTI for payroll they know who works where, and who's furloughed.

Are furloughed employees noted as such on RTI returns?

 

[Newchodge]

Doesn't look like it.