Job Support Scheme for Directors

[jimbob11]

Hi all. As a director of a company i have been receiving low wages and dividends to top my wages up. However due to COVID-19 i haven’t been getting much dividends.


Question is can I increase my wage to cover this and claim 80% from the Furlough scheme to help us me survive basically. ?


Any advice would be welcomed.


Thanks

 

[UKSBD]

An RTI submission had to have been made before 30th October, so I assume they will base it on that figure.

You can't just bump your wages up now and use a new figure

 

[jimbof]

Go to the back of the "having your cake and eating it" queue...

 

[Mr D]

Yes you can always increase your wages.

Just do not expect government to give your business extra to cover.

 

[Talay]

I had this discussion with my accountant back in March and the view was that it has always been argued that dividends are not income and thus should be taxed differently, though this benefit has been eroded somewhat over the years.

However, that always assumed there would be dividends and we expected the covid thing to be short lived.

Thus, in tax mitigation, an allowable concept, the argument should be that wages should rise to £2500 per month.

Whether HMRC actually has a stop in place to disallow wage increases I do not know but if they do not, then one would presume a director is entitled to raise their income.

 

[Mr D]

I had this discussion with my accountant back in March and the view was that it has always been argued that dividends are not income and thus should be taxed differently, though this benefit has been eroded somewhat over the years.

However, that always assumed there would be dividends and we expected the covid thing to be short lived.

Thus, in tax mitigation, an allowable concept, the argument should be that wages should rise to £2500 per month.

Whether HMRC actually has a stop in place to disallow wage increases I do not know but if they do not, then one would presume a director is entitled to raise their income.

Sure they can raise their income.
However will HMRC quibble if someone waits until lockdown to raise it then expects government money to fund the raise too?

 

[jimbof]

For the last two schemes, hasn't it been designed such that you had to have the pay in place before the announcements were made to be able to furlough and claim those amounts?

I'd expect the same to be true this time, so if the OP hadn't had the foresight to give themselves a big increase a few months ago (which they could have chosen to do) then they're probably (and quite rightly) SOL.

Deciding to do it now on the eve of Furlough III Revenge of the Step Mother is likely to get not much more than a scornful bowl of lumpy gravy from the taxman.

 

[Newchodge]

According to this https://www.gov.uk/government/news/furlough-scheme-extended-and-further-economic-support-announced

The level of the grant will mirror levels available under the CJRS in August, so the government will pay 80% of wages up to a cap of £2,500 and employers will pay employer National Insurance Contributions (NICs) and pension contributions only for the hours the employee does not work.

So, effectively, the salaries paid before 19 March will be the basis. Although that has not yet been properly confirmed. After all, employers are deciding what to pay staff this week (for weekly paid employers) and, once again, doing so without knowing exactly what they can reclaim.

 

[UK Contractor Accountant]

How to check if your employees are eligible

You can claim for employees who were on your PAYE payroll on 30‌ October 2020. You must have made a PAYE Real Time Information (RTI) submission to HMRC between 20‌ March 2020 and 30‌ October 2020, notifying a payment of earnings for that employee.

If employees were on your payroll on 23‌ September‌ 2020 (i.e. notified to HMRC on an RTI submission on or before 23 September) and were made redundant or stopped working for you afterwards, they can also qualify for the scheme if you re-employ them.

Neither you nor your employee needs to have previously used the CJRS. Further details on eligibility will be provided in the next few days.

 

[Talay]

According to this https://www.gov.uk/government/news/furlough-scheme-extended-and-further-economic-support-announced

The level of the grant will mirror levels available under the CJRS in August, so the government will pay 80% of wages up to a cap of £2,500 and employers will pay employer National Insurance Contributions (NICs) and pension contributions only for the hours the employee does not work.

So, effectively, the salaries paid before 19 March will be the basis. Although that has not yet been properly confirmed. After all, employers are deciding what to pay staff this week (for weekly paid employers) and, once again, doing so without knowing exactly what they can reclaim.

Not sure that is correct. My read is that it is using the dates in October 2020 and makes no reference to March 2020.

I believe this will include those who were employed after March but who were on the payroll in October.

 

[forevergroup]

All of us who pay to the basic threshold as PAYE and the remainder in dividends are in the same boat. The concept of manipulating our payroll to increase the former figure (and therefore the 80% therein) as a response to government support initiatives did not even cross my mind and is not something I would be comfortable doing. I'm pretty sure I know what our very-straight-laced accountant would say about that too.

According to Martin Lewis the government have clarified that there is nothing preventing business owners using Bounceback loan funds to pay themselves in a standard way (disclaimer: speak to your accountant) so while dividends may not be available there is nothing to stop you paying yourself more salary. I'm just not sure that it's appropriate to then claim furlough for the higher figure.

The other thing to watch out for of course is that you will likely have a sharp uptick in due NIC for the year.

 

[Stedurham]

wouldnt touch bounce back loan affects ability to get mortgages

 

[DavidWH]

wouldnt touch bounce back loan affects ability to get mortgages

Didn't affect mine.

 

[Stedurham]

Been lucky then, you are saying your business cant survive without a loan

 

[DavidWH]

Been lucky then, you are saying your business cant survive without a loan

Taken the loan, haven't touched a penny of it. No adverse effect when it came to the mortgage application after we'd taken it.