DISS architect to set Treasury straight on dividends
The architect of a scheme to offer financial aid to limited companies amid covid-19 is writing to HM Treasury, after new grounds it gave for not adopting it emerged as factually incorrect.
Rebecca Seeley Harris says her written “rebuttal” is vital because the whole point of her Directors’ Income Support Scheme is that it’s not based on dividends, whereas HMT thinks it is.
“It’s clear that DISS is intrinsically reliant on self-certification by owner-managers of companies,” a Treasury letter to DISS supporters wrongly asserts.
The HMT letter adds: “HMRC are unable to verify dividends for a director’s remuneration amounts or to whom they are paid.
“Under current reporting mechanisms, it is not possible for HMRC to distinguish between dividends paid in lieu of employment income and those paid as returns on investment”.
Citing the letter on a Gaps in Support APPG call, Caroline Lucas MP said: “And [HMT] go onto say, ‘This reliance on self-certification is to open up to unacceptable levels of fraud.’”
'Treasury deliberately choosing to misunderstand'
But in fact, DISS not does not require any self-certification (other than for the director to vouch covid has affected the company), because HMRC already has the PSC’s financial data.
And the scheme does not draw on dividends at all, preferring monthly trading profits instead, from which grants at 80% of those profits for three months are calculated, up to a £7,500 cap.
“To be generous [to HMT], maybe they are misunderstanding,” said Ms Lucas. “But to be perhaps rather more realistic, maybe they are deliberately choosing to misunderstand.”
'There's no need to self-certify'
On the call, Ms Seeley Harris confirmed that either way, HMT appears not to be getting DISS.
“We’re basing it on the CT600, the corporation tax return, and it’s based on trading profits. These are figures that HMRC already has, so there’s no real need for self-certification.”
“The eligible individuals would be…the executive working director or the government could choose the ‘person of significant control.’
“Again, [both are] all very well-documented and this is information the government already has. So there’s no need to self-certify…because it’s already in their system.”
'Husband-and-wife teams would be eligible too'
However, it’s not just government which isn’t grasping the finer details of DISS.
“The grant is open to companies that have more than one director,” the ReLegal Consulting boss added. “The Sun, the Daily Mail, the Telegraph [all reported that] it was for sole directors.
“It’s not [just] for sole directors. And that was done quite deliberately, because there are a lot of companies where you have maybe a husband-and-wife team who are joint-directors, both working in the company. So they both deserve the support.”
Having drawn up the scheme from scratch, with help from Forgotten Ltd, the ACCA and the FSB, Ms Seeley Harris last night said she was “incensed” that the Treasury is rejecting it on a false premise.
A former adviser to the Office of Tax Simplification, she braved much the same on the call to the MPs: “I’m very aware of the letter that Caroline [Lucas] read, and what the Treasury has said.
“And I have to contain myself to not say the words I really want to say -- because it is completely incorrect [from HMT]. And I have no idea why the Treasury is coming back with those lines. Dividends are completely irrelevant to…[DISS]. That’s the whole purpose.”
At the end of the APPG virtual meeting, all MPs including former Lib Dem leader Tim Farron MP, Tory MP Esther McVey and the DUP’s Sammy Wilson, voted for DISS -- unanimously.
“We got unanimous cross-party approval,” said Ms Seeley Harris. “That is such good news and pretty rare to get so many MPs, including from Northern Ireland not only attending but, coming together to support this policy.”
As to the prospect of chancellor Rishi Sunak adopting DISS at Budget 2021 on March 3rd, supporters hope he will do so and with retrospective effect.
But towards the end of the APPG call, Craig Beaumont of the Federation of Small Businesses said that despite submitting the DISS proposal to Number 11 on December 9th; and an inference from HMT of “early January” for its reply, officials have now gone “quite quiet.”