Ltd Co, 2 Director employees - Is running 'Payroll' considered an admissible function in furlough?

Eloceo

Scenario - Small Ltd Company, two owner directors only, both on payroll, both PAYE, both furloughed - no work.
While not explicitly specified anywhere in HMRC, my belief is that running the monthly PC computer 'payroll' system in order to pay ourselves is an admissible function of the business without it being considered 'work' - ie non-invoicable or revenue generating work.  However, my accountant has the opposite view, in that it is still considered 'working' for the company and it hasn't been explicitly excluded by HMRC.  I think it falls under 'admin' work. We obviously disagree.  I asked on the HMRC webinar yesterday, but the question went unanswered.  Any opinions please?

Jeremy535897

I think it has to be allowed, for the simple reason that if it were not, no one man band company would ever qualify (but see practical solution). Even if they outsourced the payroll, they would have to provide the payroll operator with the data.
A practical solution you could discuss with your accountant is to furlough you for 3 weeks, run payroll on the day after it ends, then furlough yourself again.The wording is not clear in the guidance:

"Company Directors

As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

This also applies to salaried individuals who are directors of their own personal service company (PSC)."

Eloceo

Thanks Jeremy, your practical solution was/is the same as that recommended by my accountant.  It just seem to add more faff to an already woolly subject. I tend to believe that HMRC can't be so anal as to insist on further complicating an already unsteady process, when it actually takes about 3 clicks of a mouse to run it, and of course there are the bank transfers to be made too etc., etc.

Eloceo

Of course, After watching Martins video this morning, I could always employ a freelancer to come and click the mouse for me.  Actually, I guess I could use my furloughed son (from his own seperate job) as a freelancer to come and do the same mouse clicking for me.  I guess there's more than one way to skin the proverbial cat.

Jeremy535897

I agree with you. It just depends how cautious you want to be.

koru

I'd say there is a good argument that running PAYE is not work "to generate commercial revenue or provides services to or on behalf of their company".  To me, they are saying that you can do what is necessary to keep the business admin ticking over, but you can't do something that earns income for the company.

rjwb

We are also a 2 director company and had a similar discussion as we are are going to furlough ourselves from 1 May. (Our employees already furloughed.) Our view was that we would do whatever was necessary to keep the business ticking over, including speaking to clients and prepping for future jobs, as long as it didn't directly generate revenue. Otherwise there will be no business to come back to when furlough ends, so we may as well wind it up now and make everyone redundant and not have to worry about their furloughing rules.

If the HMRC really have the time to object then fine, take the money back, we'll then almost certainly go into liquidation. 2 directors + 3 employees then have to apply for universal credit, so it still costs the govt/taxpayer in the end.

Eloceo

Couldn't agree more with you rjwb. However, I have seen the HMRC pitbulls come up with some strange observations in my time - they often find fault especially if its a difference of opinion between DWP and Treasury.  Lets hope they have better things to do in 3 months time.  

neilmcl

Strictly speaking you need to look at your limited company's Articles of Association which should define all the duties that you, as an office holder, are entitled to do. The first, and most important statutory duty of any company director is to act within their powers under the company's constitution. Somewhere your company must have decided and formally documented who does your payroll, if it doesn't then this is something you really should've had in place.

neilmcl

rjwb said:

We are also a 2 director company and had a similar discussion as we are are going to furlough ourselves from 1 May. (Our employees already furloughed.) Our view was that we would do whatever was necessary to keep the business ticking over, including speaking to clients and prepping for future jobs, as long as it didn't directly generate revenue. Otherwise there will be no business to come back to when furlough ends, so we may as well wind it up now and make everyone redundant and not have to worry about their furloughing rules.

If the HMRC really have the time to object then fine, take the money back, we'll then almost certainly go into liquidation. 2 directors + 3 employees then have to apply for universal credit, so it still costs the govt/taxpayer in the end.

No! This is exactly what you shouldn't be doing, putting out feelers or even posting on social media in an official capacity could well be seen as tasks or services for the company which is outside the scope of what you're allowed to do whilst furloughed. 

Andy_L

"Company directors owe duties to their company which are set out in the Companies Act 2006...Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company."

and the statuatory duties are: http://www.legislation.gov.uk/ukpga/2006/46/part/10/chapter/2

one of which is "have regard to the interests of the companies employees" I'd suggest that being paid is in their interests