Q&A: Owner Managed Businesses Help Due to COVID19

For owner managers of limited companies, covid-19 is a minefield as government emergency financial support seems to miss the mark.

Approximately two million people in the UK run their businesses through a limited company, typically as the sole director and sole employee of the company, the so-called owner managed businesses. 

This is a constantly changing situation, so it is important to bear in mind that that these questions and answers are based on information published by the government on or before 7 April 2020. As we have seen in the few weeks since the package was first announced last month, it is subject to constant change due to the extent of the  pandemic.

I am an owner manager. Am I entitled to a grant under the Self-employment Income Support Scheme (SEISS)?

No.

While a self employed person is entitled to receive a cash grant of up to £7,500 under the SEISS, this does not apply to owner managed businesses.

Although limited companies business owners may think of themselves as being self employed, they do not qualify as self employed for the Scheme and therefore cannot benefit under the SEISS.

In normal times, there are many benefits of a limited company structure, most notably for tax and profit extraction reasons, but during this current health emergency, specific financial support has not been announced.

So what financial help can I get as a limited company director?

Small business owners have the facility to claim a cash grant to support 80% of staff wages under the Coronavirus Job Retention Scheme (JRS).

As a company director, there is the opportunity to furlough yourself under this scheme. Although dividend income is not considered when calculating a director’s wage, the government has confirmed it is possible to receive an equivalent 80% of their payroll wage.

You can read more here on the Job Retention Scheme.

 Once I’m on furlough, can I do any work for the company?

No, but... 

You can carry out those duties required to fulfil the statutory obligations that you – as a director - owe to the company.

But that is all you can do; you should not undertake any work in order to generate sales income for the company.

 My company provides services to the public sector and is paid through the payroll (ie, IR35 rules apply), an umbrella company or personal services company (PSC). Do I qualify for furlough?

Yes.

If you are continuing to provide services to the government - NHS or public sector bodies, etc - then the company will paid as normal unless the particular client is unable to continue to operate due to covid-19.

If this happens, say due to government closures, the public sector client can put you on furlough, making a payment equal to 80% of your pay rate up to £2,500. This is also known as ‘contingent worker’ rules. 

Is any other support available to me or my company?

A wide range of measures have been announced as part of the government's emergency covid-19 response.

These include business grants if you operate from a business premises. Read more here.

You can also take advantage of tax holidays. HMRC are advising all businesses, irrelevant of size and including the self employed, that they should look to defer tax payments to them and we are seeing an average of 3 months tax holidays being offered, with an option to extend if self-isolation continues beyond May.

You can read more here.

You can find an overview of all the financial assistance offered by the government via our COVID-19 Business Hub.