Entitlement to CJRS Entitlement to CJRS
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  1. #1

    Nervous Newbie


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    Default Entitlement to CJRS

    My contract work ceased on 17th April after project was cancelled due to Coronavirus. As a result I am considering taking a perm job and so I had a discussion with my accountant at start of April about my tax options as I have reserves in the company and wanted advice as to whether I could continue to draw dividends or should consider closing my company and taking Entrepreneur's Relief. Decision won't be taken until I secure a perm job, but likely to just make company dormant as accountant advised if I close company down and take ER, I won't be able to start contracting again for 2 complete tax years.

    Accountant also advised that if I take a perm job paying higher rate salary in 2020/21 then the salary I currently draw from my company will all be taxable, and he suggested setting my salary for 2020/21 to nil, on the premise that if I did resume contracting I could reinstate salary and make back payments for payments not taken.

    My salary in 2019/20 was £8628 pa (£719 pm) and was due to be £8784 pa (£732 pm) in 2020/21.

    When I had first discussion with my accountant it hadn't been confirmed if ltd co directors would be able to furlough themselves or not. Once it had been I spoke to my accountant again and said I would like to furlough myself from 17th April, when contract work ended. They responded that as I had set my salary to nil for 2020/21 I would not be able to claim CJRS. I thought that the CJRS salary would be based on my 2019/20 salary, which was paid in full and processed through RTI up to end of March. Accountant said HMRC would claw back any CJRS payments once they got wind via RTI that salary had been set to nil. I discussed this with them in mid April and asked could I reverse the decision to set salary to nil and they said as it's been documented that I wanted salary to be set to nil it would be regarded as an abuse of the system.

    Interested to hear other people's thoughts as to whether I could claim CJRS (esp as the deadline for first phase applications now been set to 10/6), and whether my accountant's advice was valid, particularly as my reasons for setting salary to nil were not related to CJRS?

    Thanks

  2. #2

    Should post faster


    Join Date
    Feb 2020
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    Quote Originally Posted by RamJam View Post
    My contract work ceased on 17th April after project was cancelled due to Coronavirus. As a result I am considering taking a perm job and so I had a discussion with my accountant at start of April about my tax options as I have reserves in the company and wanted advice as to whether I could continue to draw dividends or should consider closing my company and taking Entrepreneur's Relief. Decision won't be taken until I secure a perm job, but likely to just make company dormant as accountant advised if I close company down and take ER, I won't be able to start contracting again for 2 complete tax years.

    Accountant also advised that if I take a perm job paying higher rate salary in 2020/21 then the salary I currently draw from my company will all be taxable, and he suggested setting my salary for 2020/21 to nil, on the premise that if I did resume contracting I could reinstate salary and make back payments for payments not taken.

    My salary in 2019/20 was £8628 pa (£719 pm) and was due to be £8784 pa (£732 pm) in 2020/21.

    When I had first discussion with my accountant it hadn't been confirmed if ltd co directors would be able to furlough themselves or not. Once it had been I spoke to my accountant again and said I would like to furlough myself from 17th April, when contract work ended. They responded that as I had set my salary to nil for 2020/21 I would not be able to claim CJRS. I thought that the CJRS salary would be based on my 2019/20 salary, which was paid in full and processed through RTI up to end of March. Accountant said HMRC would claw back any CJRS payments once they got wind via RTI that salary had been set to nil. I discussed this with them in mid April and asked could I reverse the decision to set salary to nil and they said as it's been documented that I wanted salary to be set to nil it would be regarded as an abuse of the system.

    Interested to hear other people's thoughts as to whether I could claim CJRS (esp as the deadline for first phase applications now been set to 10/6), and whether my accountant's advice was valid, particularly as my reasons for setting salary to nil were not related to CJRS?

    Thanks
    Sounds to me like your AC was wrong..I dont understand the "set your salary to nil for 20/21" bit, surely your salary will be an ever changing amount ?, yes your tax code is calculated on an estimated amount based on assumed salary and/or dividends but you can logon n change this and HMRC will re-calculate and send you a new code.

    The CJRS amount is based on the higher of either the same month in 2019 or the 19-20 tax year divided by 12. I assume like me it will end up approx £575

    The deadlines are you must of been on a PAYE payroll before March 19th 2020 (I assume you were) and the CJRS must be applied for before June 10th (I think)

    Have you used the CJRS amount calculator ?, just fill it in truthfully and its should end with £575 or so, there are no questions about "setting salary to nil", then put in a claim

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