Legality of Martin Lewis's advice

leitmotif

I agree that that would not appear to be in the spirit of the scheme, but the question we're discussing is whether it's permitted within the letter of the scheme.

EDIT: Let me expand on that. The scheme can be one of two things: 1) targeted support for companies in dire straits; 2) what my accountant calls 'helicopter money', i.e. like a Marshall Plan or perhaps quantitative easing, pumping money out into the economy in general in order to keep the economy as a whole afloat. Now, I should add that the following wording in the government's own advice on eligibility left my accountant in two minds about this:

'[The scheme] is designed to help employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees and protect the UK economy. However, all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus.'

The second sentence opens up the possibility of claiming on grounds other than being 'severely affected', e.g. on the grounds of reduced turnover. To such an interpretation, one could legitimately take the money if one's turnover has been adversely impacted by the crisis and continue to work on remaining workload as a self-employed individual because the money isn't intended merely to save large companies that would otherwise go under but to inject cash into the system as a whole and top up the turnover of small limited companies.

Jeremy535897

Jeremy535897 said:

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.

It's not within the letter or the spirit of CJRS.

leitmotif

Jeremy535897 said:

Jeremy535897 said:

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.

It's not within the letter or the spirit of CJRS.

Could you expand on this point about the letter of CJRS? The clause from the directive merely says 'abusive or otherwise contrary to the exceptional purpose of CJRS'. It doesn't set out what would or would not constitute abuse or what would or would not be contrary to the exceptional purpose of CJRS. Therefore it cannot by itself support or rule out the helicopter money interpretation.

Grumpy_chap

The CJRS is there to allow employers to furlough employees "If you cannot maintain your current workforce because your operations have been severely affected by coronavirus (COVID-19)" as per .gov.uk website.

If you have a large company, then maybe work is at 50% so you can furlough some staff and not others (or because social distancing cannot be maintained with everyone in the office, or because staff cannot attend because of childcare etc.)  These are all impacts to the business because of coronavirus.

If you are the only employee and director of your own company then you either have fee-paying work to still do or you do not / are not working and can furlough yourself.  The rules allow you to still do the 'admin' necessary to comply with legal obligations even if furloughed.  Other than that you cannot work for the company.

If you are working in the same type of work as you do in your company, then this is work and you cannot be furloughed while doing that work.  You may be able to manage the work flow, e.g. rather than working one day per week, take three weeks furloughed then work for the fourth week.  That seems fair and in the spirit of furlough - you are compensated to some level for the level of reduced work.

To say you would do the same type of work as you normally do for your company, but as self-employed during the furlough seems wrong.  It also has a number of technicalities, for example use of equipment, business insurance cover, whether the work is awarded to you or your company (i.e. would you have got that work other than for having your company trading history and relationships?).  A reasonable way of looking at this is to assess as though your company was large and you had furloughed a member of staff, but that member of staff then did work for one of your company's Clients directly "working as self-employed".  Would your company think that was reasonable?  Would your company be happy that the furloughed employee is using the company vehicle or other tools etc while working in competition?

That same approach also covers what the employee could reasonably do as self-employed even though furloughed from main work.  Say an employee normally earns £3k per month as, say, CAD draftsperson but is now furloughed and receiving the reduced 80% £2.5k.  So, it is tight for the employee and that employee goes out and does some gardening as self-employed to make up the shortfall.  This is probably reasonable as the furloughed employee is doing something entirely different, not in competition with the normal employer and would reasonably be expected to return to normal job full time as soon as all this is over.  Obviously, the employee is then responsible for properly recording, registering and declaring their self-employed income.

Hermann

At the end of the day there clearly an outstanding question as to whether the payroll and cjrs claim can carried out by a director on furlough.

The risk is surely too great to take for one day's 80% of min PAYE value, it's not going to cost much to be at work for one day.

There's a simple low cost solution so why not use it?

Of course if further clarification comes from HMRC then that could change.

Jeremy535897

leitmotif said:

Jeremy535897 said:

Jeremy535897 said:

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.

It's not within the letter or the spirit of CJRS.

Could you expand on this point about the letter of CJRS? The clause from the directive merely says 'abusive or otherwise contrary to the exceptional purpose of CJRS'. It doesn't set out what would or would not constitute abuse or what would or would not be contrary to the exceptional purpose of CJRS. Therefore it cannot by itself support or rule out the helicopter money interpretation.

The exceptional purpose of the CJRS is to preserve jobs that would otherwise be redundant due to the impact of coronavirus. That is in paragraph 2.1 of the directive. Fundamental to the purpose of CJRS is that it is not to pay a worker's wage when that worker is still working. They have covered working for an employer. and also linked or associated employers. The purpose is clear. Doing the same work as a self employed person temporarily, using the employer's contacts, goodwill, stock, systems, premises, equipment, customers and suppliers, as no doubt will happen, seems to me to be about as clear a case of "otherwise contrary to the exceptional purpose of CJRS" as you could get, and is probably "abusive" as well.

Grumpy_chap

@Hermann, but the OP is asking whether they can "furlough themselves and then continue to provide their customers with the same services as self-employed".  Whether a Director can run payroll and submit CJRS claim while furloughed is a different question, is it not?

I am rather inclined to agree with @Jeremy535897

leitmotif

In response to Grumpy_chap, Hermann and Jeremy535897, in that order:

Grumpy_chap

‘The CJRS is there to allow employers to furlough employees "If you cannot maintain your current workforce because your operations have been severely affected by coronavirus (COVID-19)" as per .gov.uk website.’

This is cherry-picking. I quoted a sentence from the same government advice which shows that not being able to maintain one’s current workforce is not the only valid reason for furloughing employees.

‘If you are the only employee and director of your own company then you either have fee-paying work to still do or you do not / are not working and can furlough yourself. The rules allow you to still do the 'admin' necessary to comply with legal obligations even if furloughed. Other than that you cannot work for the company.’

Correct, but being self-employed does not constitute working for the company. Entirely separate legal entities.

‘If you are working in the same type of work as you do in your company, then this is work and you cannot be furloughed while doing that work.’

With the utmost respect (I'm merely trying to play devil's advocate), everyone here seems content to assert this, and then when pressed to justify the assertion either reiterates, or quotes selectively, or quotes vague provisions that don’t specifically rule it out, or resorts to an appeal to the spirit of the scheme. We’re one step away from the ultimate capitulatory outburst: ‘well, you try arguing that to HMRC’. I’m looking for something that makes it clear that continuing to provide the same services as a self-employed individual whilst furloughed would be an abuse of the scheme, i.e. something that would explicitly rule out the aforementioned interpretation of the scheme as ‘helicopter money’.

‘You may be able to manage the work flow, e.g. rather than working one day per week, take three weeks furloughed then work for the fourth week.  That seems fair and in the spirit of furlough - you are compensated to some level for the level of reduced work.’

I dare say that would be within the letter of the scheme. Whether it’s within the spirit of the scheme, I don’t know, but it seems to be a way of having one’s cake and eating it. In any case, I’d hesitate to use the word ‘fair’, as it renders compensation for reduced work contingent upon flexibility of workflow management. But these are effectively asides, as ‘seems fair and in the spirit’ and the ‘seems wrong’ of your next paragraph are subjective impressions and not what I’m looking for, which is namely something that will explicitly rule out an interpretation of the scheme as ‘helicopter money’ and explicitly rule out the possibility of continuing to provide the same services as a self-employed individual.

‘It also has a number of technicalities, for example use of equipment, business insurance cover, whether the work is awarded to you or your company’

Agreed.

‘Would your company think that was reasonable?  Would your company be happy that the furloughed employee is using the company vehicle or other tools etc while working in competition?’

This isn't relevant to the legality question. Again, we’re into the realm of feelings.

‘Say an employee normally earns £3k per month as, say, CAD draftsperson but is now furloughed and receiving the reduced 80% £2.5k. So, it is tight for the employee and that employee goes out and does some gardening as self-employed to make up the shortfall. This is probably reasonable as the furloughed employee is doing something entirely different, not in competition with the normal employer’

‘Probably reasonable’ is just another assertion. I haven’t seen anything specific to convince me that competition is germane to the present matter.

Hermann

‘The risk is surely too great to take for one day's 80% of min PAYE value, it's not going to cost much to be at work for one day.’

That’s a fair point, Hermann.

‘Of course if further clarification comes from HMRC then that could change.’

Unless anyone here has got anything more concrete, then I think further clarification will be needed from HMRC. As things stand, they’re allowing self-employed people to claim ‘helicopter money’ and continue working, and they’re allowing directors to furlough themselves yet haven’t specifically forbidden them from providing the same services as self-employed individuals. At least not in concrete terms. The helicopter money solution for the self-employed lends credence to the interpretation of the furlough scheme as helicopter money.

Jeremy535897

‘The exceptional purpose of the CJRS is to preserve jobs that would otherwise be redundant due to the impact of coronavirus. That is in paragraph 2.1 of the directive.’

Are we referencing different directives? Clause 2.1 reads as follows: ‘The purpose of CJRS is to provide for payments to be made to employers on a claim made in respect of them incurring costs of employment in respect of furloughed employees arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus and coronavirus disease’.

Hermann

Grumpy_chap said:

@Hermann, but the OP is asking whether they can "furlough themselves and then continue to provide their customers with the same services as self-employed".  Whether a Director can run payroll and submit CJRS claim while furloughed is a different question, is it not?

I am rather inclined to agree with @Jeremy535897

Sorry, you're right, I confused this thread with another.

As I said earlier in this thread then, return to work to complete available work if it can be timed to enable 3week Min furlough.

Jeremy535897

I would agree with Hermann and do stuff in between being furloughed.

. It is true that it does not specifically say that you cannot set up a self employed trade to do the same work you would have done as a director. Arm's length contracts would have a restrictive covenant in, but there won't be one in this case. I just know that if I were arguing this case before the judge, I know which side I'd rather be on.