We have been asked a lot of questions about where directors stand during the coronavirus crisis. The government has released some information, but not all of it is completely clear. We have taken legal advice and consulted key government officials in an effort to clarify the issues. 

You can also read our coronavirus FAQs which include information about other financial help that may be available for your business. This includes taking out a coronavirus business interruption loan. Find out more about loans on the government website. 

The following Q&As explain our current understanding of the situation in relation to directors. Please check back often as things can change from day to day. These FAQs cover: 

Can directors be furloughed? 

You can be furloughed and receive 80% of your wages (as of 28 February 2020) only if you are paid via PAYE.  (Many salon owners are directors of limited companies and pay themselves only a small amount as PAYE as it’s more tax-efficient to pay the rest as dividends.)

Read our job retention scheme FAQs. 

What about directors who are not paid via PAYE? 

Dividend payments are not covered by the job retention scheme. This is because income from dividends is a return on investment in the company rather than wages and so is not eligible for support under this scheme. 

What about members of partnerships? 

If you are a member of a partnership you can apply for the government’s self-employment income support scheme. Our understanding is that those individuals who receive financial support via this scheme can still carry on working. 

Can directors work while on furlough? 

Generally speaking, those on furlough are not allowed to carry out activities that will make money for or provide services to the business. This general rule also applies to directors who have furloughed themselves. 

We have been informed by the Department for Business, Energy & Industrial Strategy that the following are examples of activities which directors are not allowed to carry out while on furlough: 

  • Correspondence with clients including social media.
  • Going through and organising your general financial paperwork.
  • Stocktaking.
  • Deleting old records to ensure GDPR compliance.

Also: make sure you don’t carry out activities which could generate revenue or future revenue, for example:

  • Sale of retail products.
  • Sale of gift vouchers.
  • Booking in future appointments.

We are seeking further clarification about exactly which types of work will be allowed and we will provide an update when we have more information. 

Can directors carry out their statutory obligations while on furlough? 

Yes. Our understanding is that it is up to the director to decide what a ‘statutory obligation’ is, but the following would probably be included in this category: 

  • Maintaining statutory records, for example, updating any changes of directors or shareholders.
  • Any work relating to submissions required by Companies House, such as confirmation statements, annual accounts or changes to directors.
  • Any work relating to submissions required by HMRC such as payroll, VAT
  • or corporation tax.
  • Liaising with staff during their furlough period.
  • Financial transactions, such as paying bills.
  • Ensuring your salon/barbershop premises are safe and secure while they are closed. Find tips on this. 

Because the guidance is vague, it is best practice to keep a written record of which activities you are carrying out while furloughed and why you have classed them as a ‘statutory obligation’. This will mean you have documentation ready if you are ever challenged about this. 

Is training allowed while on furlough? 

Online training is allowed while on furlough. However, the current minimum wage must be paid for the time spent doing this as it is classified as ‘work’. Find out more. 

Is there an alternative to furlough for directors? 

Directors do not have to be furloughed. You can continue with all your usual business activities if you have not furloughed yourself. 

You will need to consider if the work limitations placed on furloughed directors may risk the longer-term survival and profitability of your business. Alternatives such as a coronavirus business interruption loan may be a better option. 

See all the financial help being provided for businesses. 

Not furloughed? Find out how to hit the ground running when you re-open.

You will still need to follow the government’s rules about staying at home and social distancing. 

What is the NHBF doing to help directors? 

The NHBF is continuing to press the government for greater clarification and more support for directors. 

  • Members can call our membership team, Monday-Friday, 9-5, on 01234 831965. Please be patient due to the extremely high level of calls we are currently getting. You can also email enquiries@nhbf.co.uk.
  • For legal advice, Members can login to get our 24/7 legal helpline number. Again, please be patient. The legal team is also dealing with a huge number of calls.

Author: NHBF | Posted 16 Apr 2020