Legality of Martin Lewis's advice

leitmotif

I've just had an interesting phone call with my accountant, who says he's not convinced by Martin Lewis's advice that owners of small limited companies can furlough themselves and then continue to provide their customers with the same services as self-employed. The key phrase in the government's guidance on eligibility, says my accountant, is 'when on furlough, an employee cannot undertake work for, or on behalf, of the organisation or any linked or associated organisation'. As he sees it, the 'linked or associated organisation' could reasonably be construed as referring to an individual performing the same work in the limited company's stead. Personally, I don't interpret the wording that way, but I can see his point. At the very least, neither interpretation is unassailable. Any thoughts?

gary83

When it comes to auditing the scheme HMRC are going to be using their guidance nothing else. If anybody enters an incorrect claim and HMRC challenge that how do you think the excuse; but Martin Lewis/any other journalist/a bloke down the pub told me it’d be ok would go down?

bradders1983

Pretty sure there is a disclaimer somewhere on here saying his advice is not meant to replace proper legal advice.

Hermann

HMRC administer the scheme not Martin Lewis.

Many on here don't agree with his advice on this issue whilst others do. It been discussed a few times.

Personally I agree with your accountants.

How can you claim your role is redundant when you still have work that has to be done?

One possibility that is allowed within the scheme though is to furlough for three weeks, return to work for how ever long needed to complete the work that is available, then furlough again for a min of 3 weeks.

unforeseen

Your accountants take on it is how I've always understood it.
No different to a furloughed employee not being able to take another job with a company that has a close association to their employer

Martin Lewis runs fast and loose with the information published and puts his own interpretation on it that doesn't always fit with the facts

Hermann

From Martins latest email shot....

leitmotif

Hermann said:

How can you claim your role is redundant when you still have work that has to be done?

Thanks all for the contributions. Some interesting insights. I would, however, dispute the claim that one's role has to be redundant to furlough oneself. Childcare is explicitly mentioned as a legitimate reason to furlough.

Jeremy535897

My view is that the linked or associated employer argument is too clever. The phrase "work for yourself" does not mean you employ yourself. You cannot be an employee of yourself. Where Martin's idea fails (and he had it before the Treasury Directive was published) is paragraph 2.5 of that directive:
"2.5 No CJRS claim may be made in respect of an employee if it is abusive or is otherwise contrary to the exceptional purpose of CJRS."
There are practical problems too, like using company equipment, goodwill etc.

LilElvis

I would agree with your accountants interpretation. Bear in mind that over the next few years HMRC will be rigorously interrogating these claims and, unlike their usual investigations, they will have a very specific time period to look at. Your tax return, where you are flagged as a director, combined with new self employed income could well be the red flag that brings them to your door. Your accountant probably won't mind at that stage as you'll be paying him additional fees whether HMRC ultimately agree with you or not. 

Hermann

leitmotif said:

Hermann said:

How can you claim your role is redundant when you still have work that has to be done?

Thanks all for the contributions. Some interesting insights. I would, however, dispute the claim that one's role has to be redundant to furlough oneself. Childcare is explicitly mentioned as a legitimate reason to furlough.

In the case of childcare that would be if you were unable to fulfill your role and once furloughed you could do no work for your employer, nor any linked employer on a part time basis.

jfinnie

I am neither an accountant nor a lawyer, but Martin's advice here doesn't even pass the smallest common sense analysis. 

I think many directors with tiny salaries are looking at it as a small amount of money that's all they can get, so it's fair game.  
But let's think about the ultimate implication of this view of the rules with an extreme example.
Say you have a successful painter running a Ltd company with him and a few staff, all working in the field with him also administering the business.  He felt the urge to pay himself significant salary - £3500 a month.  He furloughs his staff.  Then furloughs himself  - £2500 from Govt.  Then he goes and does himself on self employed basis £2500 worth of painting jobs.  

Can anyone really see that being a legitimate setup?  I'd love to see anyone try and argue with a straight face to HMRC that it is fair enough to do that.  If you can't make that argument then all such "go self-employed doing same work" ideas, regardless of whether the furlough cash is the mimimum or full whack, equally fail.