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Welcomed Clarification for Directors and Furlough

Posted on 6 Apr 2020 - News

Coronavirus

Since the Government announced the Coronavirus Job Retention Scheme (CJRS), it has been unclear what the position is for Directors who are also an employee on the payroll of their Company.

It is clear that one of the conditions that must be met for an employee to be furloughed is that they must not work for the company after they have been furloughed.

This has naturally caused some debate for Directors who have both statutory and fiduciary duties they would need to continue to comply with.

The CJRS pages on the Government website did not previously refer to Directors, only the Self Employment pages alluded to Directors and how dividend remuneration would not be included.

However, on the 4th April the Government guidance on the CJRS pages of their website has now been updated in respect of a number of areas, including the position for Directors.

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

The updated guidance specifically states the following:

Company Directors

As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

This also applies to salaried individuals who are directors of their own personal service company (PSC).

This helps bring clarity as to the duties Directors can continue to undertake if they are furloughed and the procedures they need to follow. 

In addition to Directors, the guidance has also been updated in respect of a number of other areas, which should help to answer questions that businesses and employees have had since the CJRS was announced. These include:

  • Eligible individuals who are not employees
  • Office Holders
  • Salaried Members of Limited Liability Partnerships (LLPs)
  • Agency Workers (including those employed by umbrella companies)
  • Limb (b) workers
  • Benefits in Kind and Salary Sacrifice Schemes

 

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