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COVID-19: FAQs for Limited Company (PSC) contractors

We have already provided an overview of the financial support measures that are available to limited company contractors in our PSC guidance page.  However in this guide we answer some of the specific questions our limited company contractors have been asking.

Contractor FAQs

Although you run your own company, you are not classed as self-employed meaning that you aren’t entitled to the COVID-19 self-employment Income Support Scheme.  However because you are classed as an employee of your own company you should be eligible for the Coronavirus Job Retention Scheme (CJRS), details of which can be found on our PSC guidance page.

If you aren’t able to continue paying them as a result of the COVID-19 pandemic’s effect on your company’s work, you should be able to get support through the Coronavirus Job Retention Scheme (CJRS), further details can be found on our PSC guidance page. You can make them ‘furloughed employees’ and the Government will cover up to 80% of their salary up to a maximum of £2,500 per month. Employers have to pay pension and National Insurance Contributions. From July 2021 the Government will contribute 70% and employers will have to pay 10% for hours not worked. In August and September 2021 the Government will pay 605 and employers 20%

You cannot perform work for your company’s clients but you can carry out your director’s statutory duties such as preparing or reviewing accounts, filing returns etc. Further information can be found on our PSC guidance page.

The Coronavirus Job Retention Scheme only covers up to 80% of your PAYE salary up to a maximum of £2,500 per month (see the answer to an earlier question showing how this support reduces over the summer of 2021). Unfortunately, dividends are not included in the calculations. Further information can be found on our PSC guidance page.

The grant funding was initially made available from 1st March 2020. 

Yes the furlough wage payments are considered income and will be taxed in the same way as employment income would be, i.e. subject to PAYE and NIC.

Your limited company can continue to pay dividends to yourself as the shareholder from any existing profits held by the company. The payment of dividends has no impact on the ability to claim grant funding from HMRC.

A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of the employer.

An individual cannot be furloughed if they are on sick leave, during this period they can receive Statutory Sick Pay. They can be furloughed once the sick leave period ends.

The receipt of grant funding will be accounted for as income for the company, the payment of the furloughed wages will be deductible revenue cost which will leave a tax neutral position.

Yes. Your company can agree to pay you a tax-free payment of £6 per week from 6 April 2020 (£4 per week before that date). Alternatively, evidenced additional household expenses such as heating and lighting could be claimed.

There has been no announcement about deferral of Corporation Tax payments but HMRC have promised additional flexibility in their ‘Time to Pay’ approach for businesses and individuals affected by the COVID-19 virus. If you need help please contact the dedicated HMRC helpline 0800 024 1222.

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