Q&A: Furlough for directors

Directors: Access to government funding

What is the furlough scheme for directors?

 The government has confirmed that they will cover 80% of basic wages of up to £2,500 per calendar month, not including dividends for directors of limited companies, who can no longer trade as a direct result of COVID-19.

How much are furlough payments?

The furlough payments are a taxable grant from government, that does not need to be paid back.

It will be based on PAYE income only, not dividend income.

This grant to directors is an extension of the Coronavirus Job Retention Scheme (CJRS), which was originally set up for employees.

Payments will be subject to income tax and national insurance contributions at the time payment is made.

If, for example, your PAYE income is set at the National Insurance Threshold (£9,500 per annum for tax year 2020/2021), you will receive 80% of £791.60, minus income tax and national insurance contributions. Remember, however, as the new tax year begins in April, you will enjoy the first £12,500 if income tax free, using up your personal allowance.

What happens during furlough?

You cannot trade during the period of furlough. However, you may carry our certain tasks to keep the company running but must not include activities that generate income. For example, you may work with your accountant to complete your compliance reporting or zoom your team to stay in touch and provide updates.

You may also volunteer or complete training during furlough.

What do i have to do to be furloughed as a director?

Ideally you should show you understand the terms of furlough and have this in writing.

The process of reporting to HMRC that you are furloughing yourself will be made available by the end of April via an online portal, where payments will also be administered.

How long can I furlough for?

You must furlough for at least three weeks at a time. This means that if you are currently working from home, but work does dry up if the crisis continues, you can claim for furlough payments then.

Currently, the furlough grant payments are being offered for any period of non-trading between 1st March to 31 May 2020 inclusive.

If the COVID-19 crisis continues beyond May, it is expected furlough payments will continue until businesses are able to trade again.

​If you have other questions you want to see answered here, get in touch so I can update.