Potential revision for directors pay – Covid-19 Update

Under the Coronavirus Job Retention Scheme directors who pay themselves salaries and dividends through their own company will receive minimal support from this support initiative. A proportion of these directors salaries might be covered under the CJRS if they are operating PAYE schemes. However often the salary levels involved are minimal as the majority of their income is via dividends, for which there is currently no support.

Further discussions have been made and it was raised at the Treasury Select Committee this week, when they were urged to relax the rules and raise support for directors. There was encouragement to relax the salary/dividend rules with potential clawback after the crisis is over, but at present there are no changes to the rules.

The Chairmen also noted that he would support changes to future tax arrangements where the advantages of taking dividends compared to PAYE income were reduced, therefore we can anticipate changes in the future on this front.

In our opinion, while we all as small businesses need to focus on surviving this lockdown and protecting our families, our employees, our customers and our business, we must also understand that we will be the target for raising taxes in the future to pay for this crisis. Clearly HMRC is winning the argument that business owners are all tax dodgers and there is no doubt that they will be aggressively targeting businesses in the future.