Coronavirus Job Retention Scheme extends to limited company directors

Limited company contractors have been squeezed in to the Coronavirus Job Retention Scheme, although in a much less financially-supportive way than they will have hoped.

In an update by HM Treasury, the CJRS was briefly mentioned as a scheme that is going to cover furloughed staff who pay themselves a salary and dividend through their own company.

In line with previous guidance by experts who were trying to fathom its details, the scheme will only apply to such limited company directors who run PAYE, HMT said last night.

But the scheme’s showpiece of the state paying up to £2,500 a month (to cover 80% of the wages of workers directly or indirectly hit by COVID-19), won’t pay out for PSCs.  

“Contractors won’t be able to benefit from [today’s announced grants for the self-employed], but will be able to use the CJRS,” Patrick Gribben of Intouch Accounting began last night.

“But the HMT wording implies the assistance offered to contractors will be much less valuable, as most of them will have paid themselves a nominal director’s fee under PAYE.”

The accountant added: “In 2020-21 for example, that will be about £791 a month, so the assistance available to them then is just £632, some way short of the £2,500 upper limit.”

Joanne Harris, technical commercial manager at SJD Accountancy said: “Given that the majority of these workers paid themselves [in the 2019-20 tax year] a monthly salary of around £719, it’s clear that PSC workers have simply been left behind -- and are now facing the harsh reality of just £575 a month in financial support from the government.”

Referring to the figures on an annual basis, status expert Rebecca Seeley Harris said: “[PSC] directors are now confirmed as being covered by CJRS but, it will only apply to their salary which is about £8,000 a year -- so not much help, and it won’t apply to their dividends.”