'Don’t Tweet if you want your director salary paid during furloughed periods'

Tweeting could be enough to jeopardise a limited company contractor’s Coronavirus Job Retention Scheme claim, as such activity could breach the scheme’s ‘no work’ condition.

Such is the alert from a contractor accountant, who says that on top of just snookering a claim for 80% of the company director’s salary, posting online could even lead to a fraud charge.  

“Be really careful…because if you claim for it and you’re then posting on social media, HMRC could find out and that could be deemed as fraud,” said the accountant, Carrie Stokes.

'Really limited duties'

“It’s a really grey area,” she continued in a v-log.

“[Remember], statutory duties are really limited so if as a director you are still talking to customers; you are still talking to suppliers; you are still busting a gut to keep your business going; you’re still marketing your business to keep your business going and you’re still posting on social media; unfortunately you won’t be able to claim”.

The accountant was referring to HMT specifying that statutory and administrative duties can be carried out by PSC directors who furlough themselves, “so long as that is all they are doing,” Claer Barrett of the Financial Times clarified in a Q&A yesterday.

'Hoops to jump through'

Putting the issue beyond doubt, the Treasury’s Ben Kerry said in a similar webinar: “One of the key conditions of the furlough scheme is that the employee is not allowed to work for the employer.

“But if you’re the owner-manager and you do have statutory duties, then you can continue to undertake those duties while being on furlough.”

Yet limited company contractors eyeing the CJRS need to beware the “hoops to jump through” to use it compliantly, according to status advisory Qdos.

“Firstly,” it says, “you’ll need to reclassify as a ‘furloughed worker’, which isn’t black and white given contractors tend to be the only employee of their business.

“Assuming you achieve this, you can claim 80% of PAYE which, for most contractors who draw salary under the taxable threshold, will only amount to 80% of £700 p/m or so in the current tax year.”

'More value in working than £1800'

So it’s “better than nothing” according to the advisory’s CEO Seb Maley, especially as PSC contractors are ineligible for the Self-Employed Income Support Scheme (SEISS).

But accountant Stokes believes ‘nothing’ might actually be better for many PSCs, due to the condition that the pay is only awarded if no work is done during the furloughed period(s).

“The other thing for those who are busting a gut and feel that this is a bit unfair -- it is; but…the claim is [only] £1800.

“So if you make this claim, you can’t do any work for your business whatsoever…[and] the work you’re doing for your business long term [probably] has more value than £1800.”

'Unfair'

Other advisers are noting the unfairness for their PSC clients in comparison to the SEISS’s treatment of their self-employed sole trader clients, for whom there is no ban on work.

So whereas unincorporated freelancers can still trade while receiving the 80% coverage from the government (albeit based on their average trading profits of the last three years), incorporated freelancers can only get the 80% coverage – just on salary not dividends – if they cease trade.

However, hosting the FT’s Q&A, Ms Barrett pointed out that whereas the SEISS only pays out under a £50,000 cap, there is no equivalent cap imposed on PSC directors to use the CJRS.

While she too conceded that limited company directors are finding the COVID-related support unfair, Ms Stokes, in her analysis, said there was a sure-fire way that HMRC would accept them being furloughed due to coronavirus.

“If you are a company director for example…contract workers [are a case in point]… and the end-customer has cancelled all work, it would be easy to argue [to HMRC] that you are furloughed worker status,” the accountant said. “I think this is the only type of business you can claim furloughed worker status on.”

'Largely depend on the contracts'

As to whether contractors using umbrella companies have to return to the same end-customer (or recruitment agency), after the furlough period ends, Chartergates says that they do not.

“There is nothing in the [official] guidance compelling an individual to continue working for the same agency [or] client after the furlough period expires.”

In a bulletin last night, the employment law firm also said: “What happens after the furlough period in terms of continued supply and working will largely depend on the terms of the contracts in the contractual chain that govern the supply of a particular worker.

“Until we have the legislation, there are no details on HMRC enforcement action and what the grounds (if any) for a repayment will be.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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