Press Release of the Day – 1st April

Directors being left behind by the Government

It should apply a ‘level playing field’ approach now to businesses of all types and sizes when it comes to allocating financial supporting measures.

Whilst considerable support has been available for the employed workforce and some of the self-employed during the COVID-19 pandemic, owner-directors have fallen between the cracks and the Government needs to address this urgently, say leading tax and advisory firm, Blick Rothenberg.

Richard Churchill, a partner at the firm, said: “The Institute of Directors estimate that there are over two million limited companies in the UK employing between 0-9 employees, and such companies include some of the UK’s most enterprising and creative firms. Protecting these owner-director microbusinesses now is essential if we want to ensure our economic recovery once this crisis is over.

“There is not yet enough support for these businesses. In the first instance, we welcome more clarity around enabling directors to apply for furlough through the Job Retention Scheme (JRS), while continuing their statutory duties. That said, the monetary support through the JRS is likely to be minimal because owner-directors usually pay themselves a small salary (typically up to the National Insurance Contribution (NIC) threshold) and then receive the majority of their income through dividends.”

Richard added: “We urge the Government to expand the income support available for owner-directors, putting them on par with the grants available for employees and the self-employed. This could come in the form of a grant; the lower of £2,500 per month or 80% of their 2018/19 salary plus company dividends (pro-rated to a monthly amount). The payment can be administered in the same way as JRS, via payroll and subject to tax and NIC.”

In line with the support for the self-employed, owner-directors should also be permitted to continue to work beyond their statutory duties, in order to protect the business as far as possible during this time.

He added: “For this proposal to work, the owner-director would need to make a manual claim to HMRC, clearly evidencing the declared dividends from their statutory accounts. The Government would likely need to restrict the scheme to active trading businesses, where the owner-director is working full-time in their own personal company and registered on the payroll as at 28 February, which would align to the JRS.”

Richard said: “The Government reacted quickly and admirably to support the employed workforce and subsequently introduced a restricted version for self-employed individuals. However, the owner-director has been left sidelined and this inequality needs to be addressed.

The Chancellor, Rishi Sunak, has intimated that he does not favour self-employed professionals and trades people operating their businesses through a limited company, because of perceived tax inequality. But while the Government may look to review different types of earnings and how they are taxed once the crisis is over, they should apply a ‘level playing field’ approach now to businesses of all types and sizes when it comes to allocating financial supporting measures.

– Ends –

Join our mailing list to receive Tomorrow’s Business every Monday to Thursday and learn which companies and business news topics will be making the headlines over the coming week.

  • We will use the personal details you share with us to provide you with the information you’ve requested, this will include the use of Cookies to enable us to share offers of other products or services we provide and which we feel may be of interest to you. We will not share this information with any third parties. Please read our Privacy Policy to see how we protect and manage your personal data.

  • Hidden
  • Hidden
  • Hidden
  • Hidden
  • Hidden