We have already provided an overview of the financial support measures that are available to limited company contractors in our PSC guidance page. However here we answer some of the specific questions our limited company contractors have been asking.
I’m a director of my own Personal Service Company and my income has dried up because of the COVID-19 outbreak. Can I claim any support as a self-employed worker?
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.
I employ a couple of employees through my company. What kind of support can I get to avoid having to lay them off?
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. The maximum amounts reclaimable under the grant were reduced for September and October when the scheme was scheduled to end. In response to the ongoing pandemic the government announced an extension to the scheme until March 2021, for the period from November 2021 to January 2021 the government will cover up to 80% of the furloughed individuals salary up to £2,500 per month. The government intend to review the economic circumstances and consider if the amount of funding for February 2021 to March 2021 should be amended.
If I am ‘furloughed’ by my PSC and claiming under the Coronavirus Job Retention Scheme can I still do any work for it?
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.
I only receive a small salary from my PSC because I take most of my reward as dividends. How will my ‘furloughed’ pay be calculated?
The Coronavirus Job Retention Scheme only covers up to 80% of your PAYE salary up to a maximum of £2,500 per month. 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 to the end of October 2020. At the end of October it was announced funding is being extended until March 2021.
For the period from March to July the government committed to pay 80% of wages up to a maximum of £2,500 per month as well as any employer national insurance and pension contribution costs. This then changed each month from August onwards.
From August the government continued to pay 80% of wages up to a maximum of £2,500 per month, employers were required to cover the cost of employers national insurance and pension contributions, no contribution from the government was available for these costs from August onwards.
From September the amount claimable for wage costs reduced to 70% up to a maximum of £2,187.50 per month. Employers were be required to pay 10% of wages to make it up to 80% of pay up to £2,500 per month.
This was further reduced to 60% of wages up to a cap of £1,875 per month. Employers were required to pay 20% of wages to make up 80% of pay up to £2,500 per month.
Under the scheme extension the government will pay 80% of wages up to a maximum of £2,500 per month for the period from November 2020 to January 2021. The government intend to review the economic circumstances and consider if the amount of funding for February 2021 to March 2021 should be amended. Employers will be required to cover the cost of employers national insurance and pension contributions.
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.
You can defer any VAT payment which falls due in the period from 20 March to 30 June 2020 until 31 March 2021. You should file your VAT return as normal. Further information can be found on our PSC guidance page.
I’ve been told that I don’t need to make my self-assessment tax payments normally due on 31 July 2020. Is that right?
Yes. The tax is still payable but the Government have said that this second payment on account of your 2019/20 tax liability can be deferred until 31 January 2021.For those taxpayers who have to make payments on account this will effectively be the balance of tax they need to pay for the 2019/20 tax year. Further details of which can be found on our PSC guidance page.
Working from home is a new experience for me. Are there any expenses I can claim from my limited company for the extra cost incurred in working from home?
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.
My PSC’s Corporation Tax payment is due shortly and I don’t have the funds to pay it. Is there any help available?
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.