Coronavirus (COVID-19): Update for Directors on PAYE

7 Apr 2020

HMRC have recently updated their guidance on the Coronavirus Job Retention Scheme and have confirmed that it will apply to salaried company directors. In summary:

  • Directors currently receiving a PAYE salary can be furloughed and apply for the grant of 80% of their regular wage (capped at £2,500 per month), for three months from March 1st, or from the date furloughed if later.
  • Regular wage is to be calculated as either the average monthly earnings from the 2019-20 tax year, or the same month’s earnings from the prior year, whichever higher. If employed for less than 12 months the calculation is 80% of average monthly earnings since work commenced. Annual salaries will be accepted.
  • Dividends are excluded from the claimable amount, this is based purely on salary.
  • The director must stop working to be eligible, although statutory duties set out in the Companies Act 2006 can continue. Minimum furlough period is 3 consecutive weeks.
  • The director must have set up PAYE, been on the payroll by February 28, 2020, and enrolled for PAYE online to be eligible.
  • Wages must continue to be paid by the company to the director.
  • The decision to furlough should be considered by the board and where taken it must be formally adopted as a decision of the company and recorded in the company records. Furthermore, the company must notify the director in writing that they have been furloughed and a record of this communication must be kept for 5 years.
  • Any grants received will be classed as income for the company and be subject to corporation tax.

The on-line portal for application to the scheme is not yet live. We will post further information on the portal and more detailed guidance for directors as this becomes available. HMRC’s full guidance can be found at https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme.

Please call us should you need help to determine how this may apply to you.