If you operate your business as a limited company where you’re the only director, owner, and employee, you’re probably wondering what financial support is available to help you deal with the financial impact of coronavirus COVID-19.
The government have announced a series of schemes aimed at supporting those whose income is taking a hit as a result of coronavirus COVID-19. Amongst the list of what’s available are;
- The Coronavirus Job Retention Scheme (CJRS) encourages employers to keep staff on payroll, by providing a grant which covers up to 80% of their wages.
- The Self-Employed Income Support Scheme (SEISS) which supports self-employed workers.
Are directors of limited companies eligible for the Self-Employed Income Support Scheme (SEISS)?
Sadly, the short answer here is ‘no’. The Self-Employed Income Support Scheme is only open to self-employed sole traders who work for themselves in business. Unfortunately, this doesn’t include directors, who are, technically, employees of their company.
So where does this leave Sole Directors who are struggling as a result of the virus pandemic?
Are directors of limited companies eligible for the Coronavirus Job Retention Scheme (CJRS)?
Yes, directors are eligible for the Coronavirus Job Retention Scheme as long as they take a salary through a PAYE scheme on or before 28th February 2020.
This is the big problem for lots of directors at the moment, though. To be more tax efficient, most directors of limited companies take a small salary from the company, with the majority of their income being from dividends.
This means that the salary element of their income is likely to be relatively small, which might not look too healthy at all once reduced to 80%.
Using the CJRS would also mean having to furlough yourself; in effect shutting down operations completely.
Can I pay my dividends payments as salary through PAYE instead?
This is the question that is making accountants everywhere wince, as it basically amounts to fraud.
HMRC will probably only consider what has previously gone through PAYE when they set out what the criteria will be for the calculation anyway, so making any changes now is unlikely to make any difference.
The financial support available for Sole Directors
Unfortunately, there doesn’t seem to be a single solution available to sole directors who are now struggling. Instead, the support that is available is reliant on different sources, and dependent on circumstances.
These include (but aren’t limited to)
- Deferred VAT and income tax payments
- Changes to accessibility for Universal Credit, and Employment & Support allowance
- Statutory Sick Pay relief package for SMEs, which may be useful should you fall sick with the virus
- Business rates holidays, as well as the Small Business Grant Scheme
- Coronavirus Business Interruption Loan Scheme
- HMRC Time To Pay Scheme
You’ll find more information available on our Business Support for COVID-19. The government have also launched a Business Support website dealing specifically with financial help for businesses and their employees affected by coronavirus.