Coronavirus Job Retention Scheme for office holders, company directors and salaried members of LLPs

Last updated 6 April 2020

Further to the announcement of the Coronavirus Job Retention Scheme by the Government, there has been updated guidance issued to confirm the questions raised about whether certain groups of individuals are eligible for the scheme.

These include:

• Office holders
• Company directors
• Salaried members of Limited Liability Partnerships (LLPs)

Such individuals may not necessarily be employees in employment law but could still be eligible for the scheme.

It should be noted that to be eligible for the scheme, unless explicitly set out below all other guidance relating to the Job Retention Scheme is applicable to these cases. In particular, the individuals must be paid via PAYE and have been on the payroll on, or before, 28 February 2020.

Office holders

Office holders can be furloughed and receive support through this scheme. The furlough, and any ongoing payment during furlough, will need to be agreed between the office holder and the party who operates PAYE on the income they receive for holding their office.

Company directors

As office holders, salaried company directors are also 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 can comply 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 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. For instance, they should not do work of any kind they would carry out in normal circumstances to generate commercial revenue or provide services to or on behalf of their company.

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

We recognise that many directors of owner managed businesses extract income from their companies via a combination of salary and dividend.  The scheme only covers the salary element and there are no support measures in place for shareholder directors in relation to their dividend income from their companies.

Salaried Members of LLPs

Members of LLPs who are designated as employees for tax purposes are eligible to be furloughed and receive support through this scheme.

To furlough a member, the terms of the LLP agreement (or any such agreement between the LLP and the member) may need to be varied by a formal decision of the LLP. For example to reflect the fact that the member will perform no work in the LLP for the period of furlough, and the effect of this on their remuneration from the LLP.

For an LLP member who is treated as being employed by the LLP, the reference salary for this scheme is the LLP member’s profit allocation paid through PAYE, excluding any amounts which are determined by the LLP member’s performance, or the overall performance of the LLP.