An update on furloughing of directors of dental limited companies
Initial thoughts in relation to company directors being furloughed were that this would not be possible – in order for an employer to claim the government grant for a furloughed employee, the employee must not carry out ANY work for the company.
However, in a conference call with the CBI on Friday 27 March, a representative of the Treasury said that if directors are furloughed, they can still carry out their statutory duties as directors. This is clearly a very positive message and may allow some directors to be furloughed however care will be required to limit their work to statutory duties.
When deciding if director furloughs are appropriate for dental limited companies – please bear in mind the following:
1. Dentist directors – even though the practice might be completely closed down, are any of the directors to be furloughed performing any work at all other than “Statutory duties” (which represent only attending to the Statutory affairs of the company such as correspondence with the Registrar of Companies)? If for example the company has an NHS contract, and the dentist director is asked to assist the NHS under the revised NHS terms, then this is not Statutory work.
2. Spouses of dentist directors who are also directors – if a spouse is furloughed then please consider how you might answer an enquiry from HMRC asking what duties the spouse normally performs (i.e. in non-crisis times). In order for a company to be able to claim tax relief on salaries paid to an employee (including a director) the salary paid must be commercially reasonable in relation to the work performed by the employee.
3. HMRC – we are also aware that HMRC intend to retrospectively audit these arrangements, so it is essential that the finer points of working practices are considered before entering into furlough and making a grant claim.
4. Legal – we advise anyone considering furloughing directors to take legal advice, as in addition to taxation, employment law must be considered.
To discuss in more detail, please email firstname.lastname@example.org or call 07860 246718.