Rules for furloughed directors ‘muddled and contradictory’

The government has been accused of providing conflicting advice over what activities directors can carry out while furloughed.

Yesterday, the Treasury published new instructions that has been described by the Institute of Directors (IoD) as more restrictive than HMRC’s coronavirus job retention scheme guidance available online.

The IoD said the new edict appeared to prevent a furloughed director – where no other director is available – from carrying out basic tasks such as paying suppliers and administering the furloughing of other employees.

This would make life particularly difficult for smaller companies it said, and it has called for adjustments to the job retention scheme that would enable directors of small companies to continue working for the success of their company while furloughed.

Ministers were accused of not fully appreciating the likely outcomes of its directions. Roger Barker, head of corporate governance at the IoD, said: “This new guidance appears to raise a whole host of unintended consequences. It’s hard to believe the government has thought through the implications for small companies with only one or two directors.

It’s unworkable for a company to have no one at the wheel in any respect whatsoever” – Roger Barker, IoD

“If the intention is to help keep businesses afloat during the lockdown, directors must be able to continue working while furloughed, to try and get their company off life support. This would be no different from the rules for the self-employed. On an even more basic level, it’s unworkable for a company to have no one at the wheel in any respect whatsoever.

“So far, directors of small companies have largely been caught between two stools, and they need support. They don’t fit easily into the support schemes that have established for employees and the self-employed, and it’s past time government woke up to the problem.”

Yesterday’s direction to HMRC, the IoD said, stated that furloughed directors may only file company accounts or carry out disclosure exercises.

However, HMRC’s guidance online stated (under Company Directors) that furloughed directors may “carry out particular duties related to fulfil their statutory duties”, provided they do no more that “would reasonably be judged necessary”. Given that directors’ statutory obligations include broad duties such as “promoting the success of the company”, HMRC’s guidance, said the IoD, provided some leeway.

However, the guidance also states: “They should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provide services to or on behalf of their company.”

The new instructions, claimed the IoD were “highly restrictive”, and could prevent directors undertaking  tasks such as paying suppliers or administering the furloughing of other employees.

The IoD has asked the government to amend the job retention scheme to allow directors of small companies to continue working to promote the success of their company even while furloughed. This, it stated, “would help government in its intended policy objective of helping businesses survive during the coronavirus outbreak”.

6 Responses to Rules for furloughed directors ‘muddled and contradictory’

  1. Avatar
    Tom Matchett 16 Apr 2020 at 10:59 pm #

    I’m a director of a coach hire firm every thing off the road and zero income both my wife and myself could not do anything to promote financial gain as our fleet is grounded vehicles sorned etc

    We should be allowed our furlough situation

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    gina 17 Apr 2020 at 9:39 am #

    Yes it is madness. directors are on a basic salary anyway and on no income support, the rules are making it impossible for us to communicate with our clients, even to see how they are doing, and checking in. I am not eligible for any of the grants as my London rates are too high, and this is crippling. There is no means testing, and these rates relief and grants are even being given to all companies even ones that can remain open, while we have to remain shut. It is an impossible task sitting on my hands watching my company fall through my fingers.. and very very short sighted from the govt.

  3. Avatar
    Lee 17 Apr 2020 at 11:14 am #

    There is another situation where a small business owner has only two or three employees and one of those employees runs the payroll and manages the accounts pays the bills if that person is furloughed how is the furlough to be administered and the payroll run and suppliers paid when the business owner has no clue about the software etc as he normally pays that person to do those things… it has not been properly thought out and they have no clue how most small businesses run

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    Julie 21 Apr 2020 at 8:13 am #

    As a two person/two director company, I am interpreting the rules that employees can be furloughed then taken off furlough, then re-furloughed, with this in mind would it be feasible to furlough both of us, then un-furlough one of us to allow administrative duties (making a furlough claim, paying salaries, chasing customers, paying suppliers, VAT, cashflow etc) to be carried out for 1/2 days a month), then to furlough again?

  5. Avatar
    Craig 13 May 2020 at 6:57 pm #

    I’m a director of a business. I’m not on furlough but the other director is. Am I still ok to work normally, earning money for the business?

  6. Avatar
    sharon miller 20 May 2020 at 2:22 pm #

    Hi can a PAYE director answer general emails Questions if your not selling or purchasing whilst furloughed?
    Regards

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