Although there is no detailed guidance available in respect of furloughing directors our interpretation of the Job Retention Scheme is as follows:
Furloughing for normal employee type duties
If, as a director you were on the payroll, engaged under an existing written or verbal employment contract on 28 February 2020, and your services, in performing the duties expected of you as an employee or director are not required due to the affects of the ongoing crisis, the company may furlough you.
Can you furlough a sole director?
- In deciding whether to furlough a director in respect of their duties as a company officer, it is assumed that the director will not be furloughed in respect of their duties as an officer of the company. This is because a company cannot operate without its director and all directors have ongoing fiduciary duties to their companies.
- Most companies will need to have someone on hand, to handle on-going administration, such as post, bookkeeping, tax filings and banking. These kind of duties can be performed by a director.
- A company can go into a ‘COVID-19 hibernation’ meaning that the director would have no day to day employment type duties during that period but we are uneasy recommending that a sole director is laid off completely as they still have to undertake their statutory duties. In such cases duties as an employee would be furloughed whereas statutory duties would not be furloughed.
The job Retention Scheme is based on PAYE earnings so it will not apply to dividend payments. There is no scheme in place for the government to provide financial support to shareholders where the amount of their dividend is affected by the COVID-19 crisis.
As more information becomes available we will update you.