Legality of Martin Lewis's advice

craig88b

It seems to me that a normal employee could be furloughed by their current employer, Tesco for eg, and then get another job at Sainsburys and receive both payouts. This appears to be fully legal, depending on their actual work contract which has nothing to do with HMRC. 

Taking it a step further, a limited company's 1 employee /director who is now furloughed could also get another job as a permanent employee at Sainsburys for eg. And thus be paid by both companies, one through the furlough scheme.

It would possibly make sense that they(ltd employee/director) could furlough themselves and then do the same/similar trade through self-employment but this obviously becomes a much greyer area and riskier for audits down the line. Especially if they are still dealing with the same clients as they were in their ltd companies. 

jfinnie

One problem I think with that argument is the relationship with the director, the company and who the employee is going to be working for (themselves).  The person they are going to work for is related to the company by means of being in control of it.
By your argument, you would also be able to set up a new LtdCo and re-employ yourself in that business.  But you definitely, definitely can't do that as the direction is very clear - the new LtdCo is related to the old LtdCo by means of the person of control.  Just like the new construct of Self Employed individual is also related to the old LtdCo.  It seems like the same difference.
I believe you could arguably go employed for one of your previous clients from the business.  The guidance talks about if you are getting another job while on furlough you need to have the new starter paperwork completed.

I have seen in several places talk that if you got a job while furloughed, it should be for hours of working which are outside of the hours you'd normally work.  SO if you were usually working 9-5 the expectation would be employment would be outside those hours.  However everywhere I've seen this has been news reports, and I've not seen it actually in any of the guidance.  Perhaps that relates to you having to maintain the terms of an employment contract, and so if your contract states specific hours you couldn't clearly take another job doing the same hours in normal circumstance.

craig88b

I agree with you that it's probably pushing the limits and most likely a potential act of fraud to do the self-employed scheme, especially with the same clients. The most beneficial would be to get a perm role and have that salary coming in along with the furlough. As long as your Ltd company doesn't have any restrictive furlough covenants  

jfinnie

I don't think really there is any doubt here or even much of a question of pushing the limits.  The example given of setting up another Ltd co is basically the same principle as saying you've become self employed for that period and the separate Ltd Co is very definitely against the guidance.  The only reason self employed gets slightly murky is because of the question of who is employing who (there is some peculiarity in that if you're sole trader you're arguably not an employed by yourself).  But with sole trader, working for yourself and self-employed used interchangeably really it is a case of "who are you kidding"... 
I think if you could get a proper job with one of your clients that would probably be "OK".  I'd love to know where the references to usual working hours came from though as that could equally be a spanner in the works.

Jeremy535897

jfinnie said:

I don't think really there is any doubt here or even much of a question of pushing the limits.  The example given of setting up another Ltd co is basically the same principle as saying you've become self employed for that period and the separate Ltd Co is very definitely against the guidance.  The only reason self employed gets slightly murky is because of the question of who is employing who (there is some peculiarity in that if you're sole trader you're arguably not an employed by yourself).  But with sole trader, working for yourself and self-employed used interchangeably really it is a case of "who are you kidding"... 
I think if you could get a proper job with one of your clients that would probably be "OK".  I'd love to know where the references to usual working hours came from though as that could equally be a spanner in the works.

From an assumption that your contract of employment requires you to be available for the hours you normally work, and cannot be negotiated?

craig88b

Jeremy535897 said:

jfinnie said:

I don't think really there is any doubt here or even much of a question of pushing the limits.  The example given of setting up another Ltd co is basically the same principle as saying you've become self employed for that period and the separate Ltd Co is very definitely against the guidance.  The only reason self employed gets slightly murky is because of the question of who is employing who (there is some peculiarity in that if you're sole trader you're arguably not an employed by yourself).  But with sole trader, working for yourself and self-employed used interchangeably really it is a case of "who are you kidding"... 
I think if you could get a proper job with one of your clients that would probably be "OK".  I'd love to know where the references to usual working hours came from though as that could equally be a spanner in the works.

From an assumption that your contract of employment requires you to be available for the hours you normally work, and cannot be negotiated?

Not sure your normal working hours mean anything now. When furloughed you are being paid to not work so for the company to expect you to be "available" between 9-5 is not reasonable. You could essentially go on holiday to a different country, assuming you could travel there, and your company has no right to prevent this.

leitmotif

craig88b

‘By your argument, you would also be able to set up a new LtdCo and re-employ yourself in that business. But you definitely, definitely can't do that as the direction is very clear’

Definitely?

jfinnie

‘I agree with you that it's probably pushing the limits’

Probably?

‘I don't think really there is any doubt here or even much of a question of pushing the limits’

Think?

 

See my comment on page 2 of this thread about people being content to merely assert that it’s against the rules. I’m looking for something concrete 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 will explicitly rule out my proposed interpretation of the scheme as ‘helicopter money’. Nothing raised so far in this thread has been sufficient to rule out that interpretation. I would accept that being seconded to a different division within the same company or to a different entity within the same group of companies would be 'definitely, definitely' against the rules, as these are clearly 'linked or associated organisations', but nobody here has managed to demonstrate (rather than assert) that a director of a limited company performing the same work in the capacity of self-employed individual would constitute a linked or associated organisation. One's subjective interpretation of what constitutes a linked or associated organisation is no substitute for clear and concrete definition in the guidance itself.

craig88b

leitmotif said:

craig88b

‘By your argument, you would also be able to set up a new LtdCo and re-employ yourself in that business. But you definitely, definitely can't do that as the direction is very clear’

Definitely?

jfinnie

‘I agree with you that it's probably pushing the limits’

Probably?

‘I don't think really there is any doubt here or even much of a question of pushing the limits’

Think?

 

See my comment on page 2 of this thread about people being content to merely assert that it’s against the rules. I’m looking for something concrete 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 will explicitly rule out my proposed interpretation of the scheme as ‘helicopter money’. Nothing raised so far in this thread has been sufficient to rule out that interpretation. I would accept that being seconded to a different division within the same company or to a different entity within the same group of companies would be 'definitely, definitely' against the rules, as these are clearly 'linked or associated organisations', but nobody here has managed to demonstrate (rather than assert) that a director of a limited company performing the same work in the capacity of self-employed individual would constitute a linked or associated organisation. One's subjective interpretation of what constitutes a linked or associated organisation is no substitute for clear and concrete definition in the guidance itself.

You definitely have a point. Everyone seems to be saying that if you were contracting as an accountant through your Ltd company and then furloughed yourself and started cleaning people's gardens through self-employment that this would be fine. But this then goes against the possible "link" of yourself and the ltd company which people have argued is connected, although there is no confirmation guidance on this.

I do personally think it would be a risk to suddenly continue providing the same services to the same clients, but now outside of your Ltd company, and HMRC may very well audit this in the future and say it was fraud. 

leitmotif

craig88b said:

leitmotif said:

craig88b

‘By your argument, you would also be able to set up a new LtdCo and re-employ yourself in that business. But you definitely, definitely can't do that as the direction is very clear’

Definitely?

jfinnie

‘I agree with you that it's probably pushing the limits’

Probably?

‘I don't think really there is any doubt here or even much of a question of pushing the limits’

Think?

 

See my comment on page 2 of this thread about people being content to merely assert that it’s against the rules. I’m looking for something concrete 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 will explicitly rule out my proposed interpretation of the scheme as ‘helicopter money’. Nothing raised so far in this thread has been sufficient to rule out that interpretation. I would accept that being seconded to a different division within the same company or to a different entity within the same group of companies would be 'definitely, definitely' against the rules, as these are clearly 'linked or associated organisations', but nobody here has managed to demonstrate (rather than assert) that a director of a limited company performing the same work in the capacity of self-employed individual would constitute a linked or associated organisation. One's subjective interpretation of what constitutes a linked or associated organisation is no substitute for clear and concrete definition in the guidance itself.

You definitely have a point. Everyone seems to be saying that if you were contracting as an accountant through your Ltd company and then furloughed yourself and started cleaning people's gardens through self-employment that this would be fine. But this then goes against the possible "link" of yourself and the ltd company which people have argued is connected, although there is no confirmation guidance on this.

I do personally think it would be a risk to suddenly continue providing the same services to the same clients, but now outside of your Ltd company, and HMRC may very well audit this in the future and say it was fraud. 

Exactly. I'm not disputing the reasonableness of some of the interpretations presented in this thread, but rather the assumption that those interpretations are fully supported by something concrete and unequivocal in the text of the scheme itself.

I agree with the risk issue (though the risk of being audited and prosecuted doesn't automatically mean that the aforementioned 'something concrete and unequivocal' exists in the text). Personally, I'm likely to err on the side of caution here. After all, most of my earnings come in the form of dividends. 80% of my salary would amount to less than £30/working day. Although HMRC's standard practice is to keep things as ambiguous as possible so as to keep their options open and use the threat of prosecution as a deterrent, and although it's in my nature to target the weaknesses of strategic ambiguity, I can't see myself taking the risk for less than £30 a day. If it were 80% of dividend, that would be a different story entirely.

Jeremy535897

Paragraph 2.5 of the directive is trying to be equivalent to a GAAR in tax. The whole point of a GAAR is to cover avoidance you haven't covered specifically.