In our last update we discussed the possibility that Contractors who are Directors of their own limited company could take advantage of the Coronavirus Job Retention Scheme. This has now been clarified by the government.
Salaried individuals who are Directors of their own personal service company are eligible for the scheme as long as they are properly furloughed and do not undertake any revenue generating function during their period of furlough. However, they can perform statutory duties, such as preparing VAT returns and annual accounts. The furloughing should be ratified by formal decision of the board and a record kept.
Under the scheme, which should open before the end of April, Government grants for up to 80% of salary of employees who would otherwise be laid off and are furloughed, up to £2,500 per employee, backdated to 1 March if appropriate. In addition the grant will cover Employer National Insurance contributions and minimum automatic enrolment employer pension contributions.
Payments received by a business under the scheme must be included as income in the business’ calculation of its taxable profits for corporation tax purposes, in accordance with normal principles.