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HMRC won't furlough Annual Salary directors

Practical Issues
SentientBean
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HMRC won't furlough Annual Salary directors

#308974

Postby SentientBean » May 15th, 2020, 8:34 pm

Moderator Message:
This is probably not really a DAK topic - moved to Taxes as this seems a better home for it )chas49)

Good Evening All

I would appreciate any perspective or comments from anyone who has experienced a similar problem to that which I am facing.

I run a small Ltd company providing professional consultancy services.

The lockdown has completely evaporated all my business revenue 100% - due to the nature of the industry (necessitates lots of on-site interaction with trades).

I have paid myself for nearly two decades, as many SME directors do, largely by a mix of basic salary and dividends.

I appreciate there is nothing I can do about the dividends, they are a lost cause. However, via my accountant (who runs my company PAYE payroll), I applied to be furloughed - since there is literally nothing (other than fiduciary duties) I can do until there is a significant re-start of the economy.

I run an annual payroll for myself, paying myself a single lump-sum directors salary at the end of the financial year (March 31st) to limit account PAYE / RTI accountancy costs.

My accountant has come back to me and said HMRC have rejected the furlough application on the grounds that my payroll wasn't filed this FY before the cut-off date of March 19th. (Even though previous annual payrolls have been filed in March 2017, 2018 and 2019. And prior to that monthly director PAYE payrolls filed every month between 2002 and 2017).

This seems grossly unfair and a mere technicality to me. The accountant phoned HMRC to try and appeal to their better judgement. Appears they didn't have any.

Is this legal they can refuse to allow me to claim furlough?

They happily took my income tax and N.I payment in April, and will of course expect my Corporation Tax payment in Jan. But seems a very one-way street currently!

Does anyone have any suggestions?

Much appreciated

SB

Laughton
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Re: HMRC won't furlough Annual Salary directors

#308982

Postby Laughton » May 15th, 2020, 9:50 pm

Not really but I have a friend in a similar situation. He was told he couldn't be furloughed because he paid himself a salary every 3 months. HMRC said salaries only qualified if paid weekly, bi-weekly or monthly.

dspp
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Re: HMRC won't furlough Annual Salary directors

#309021

Postby dspp » May 16th, 2020, 8:37 am

SentientBean wrote:Good Evening All

I would appreciate any perspective or comments from anyone who has experienced a similar problem to that which I am facing.

I run a small Ltd company providing professional consultancy services.

The lockdown has completely evaporated all my business revenue 100% - due to the nature of the industry (necessitates lots of on-site interaction with trades).

I have paid myself for nearly two decades, as many SME directors do, largely by a mix of basic salary and dividends.

I appreciate there is nothing I can do about the dividends, they are a lost cause. However, via my accountant (who runs my company PAYE payroll), I applied to be furloughed - since there is literally nothing (other than fiduciary duties) I can do until there is a significant re-start of the economy.

I run an annual payroll for myself, paying myself a single lump-sum directors salary at the end of the financial year (March 31st) to limit account PAYE / RTI accountancy costs.

My accountant has come back to me and said HMRC have rejected the furlough application on the grounds that my payroll wasn't filed this FY before the cut-off date of March 19th. (Even though previous annual payrolls have been filed in March 2017, 2018 and 2019. And prior to that monthly director PAYE payrolls filed every month between 2002 and 2017).

This seems grossly unfair and a mere technicality to me. The accountant phoned HMRC to try and appeal to their better judgement. Appears they didn't have any.

Is this legal they can refuse to allow me to claim furlough?

They happily took my income tax and N.I payment in April, and will of course expect my Corporation Tax payment in Jan. But seems a very one-way street currently!

Does anyone have any suggestions?

Much appreciated

SB


I'm with the HMRC on this, who represent the UK taxpayer that are the ultimate source of these funds, and who are interpreting the law as it stands.

I run a mixed payroll and we have to align all our monthlies and weeklies in order to get them eligible. In other words the technicalities do matter, and by-the-way that creates cashflow implications for us.

If you have organised your tax affairs to minimise tax, which is your legal right of course, then it should occasionally come as no surprise that it can have consequences for you.

By the way, since it is directors remuneration, I don't know how you can be a director of a company and be in furlough. That was the view we took in deciding that our directors (who are monthly paid) could not be furloughed. I appreciate other people have taken a different view on that matter, but it was an issue we discussed internally.

regards, dspp

PinkDalek
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Re: HMRC won't furlough Annual Salary directors

#309036

Postby PinkDalek » May 16th, 2020, 9:39 am

dspp wrote:By the way, since it is directors remuneration, I don't know how you can be a director of a company and be in furlough. That was the view we took in deciding that our directors (who are monthly paid) could not be furloughed. ...


The OP is a company director with an Annual Pay Period. See eligibility under the ‘Guidance for specific customers’ section below:

https://www.gov.uk/guidance/check-if-yo ... -customers

Company directors with an annual pay period

Those paid annually are eligible to claim, as long as they meet the relevant conditions. This includes being notified to HMRC on an RTI submission on or before 19 March 2020, which relates to a payment of earnings in the 19/20 tax year. The requirement for there to be payment of earnings in the 19/20 tax year applies for any employee being claimed for under the scheme, irrespective of how frequently they are paid (e.g. weekly, fortnightly or monthly). This will be relevant for those on an annual pay period if the last payment notified to RTI was before 5 April 2019 and no further payments were notified until after 19 March 2020.


I haven’t looked at the legislation.

AF62
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Re: HMRC won't furlough Annual Salary directors

#309041

Postby AF62 » May 16th, 2020, 9:57 am

SentientBean wrote:However, via my accountant (who runs my company PAYE payroll), I applied to be furloughed - since there is literally nothing (other than fiduciary duties) I can do until there is a significant re-start of the economy.

I run an annual payroll for myself, paying myself a single lump-sum directors salary at the end of the financial year (March 31st) to limit account PAYE / RTI accountancy costs.

My accountant has come back to me and said HMRC have rejected the furlough application on the grounds that my payroll wasn't filed this FY before the cut-off date of March 19th. (Even though previous annual payrolls have been filed in March 2017, 2018 and 2019. And prior to that monthly director PAYE payrolls filed every month between 2002 and 2017).

This seems grossly unfair and a mere technicality to me. The accountant phoned HMRC to try and appeal to their better judgement. Appears they didn't have any.


Given the details were first published several weeks before the cut-off date perhaps your accountant has questions to answer as to why they didn't foresee this and alter their usual practice to meet the cut-off date, or at least alert you to the potential issues. Isn't that what you pay them for?

chas49
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Re: HMRC won't furlough Annual Salary directors

#309165

Postby chas49 » May 16th, 2020, 4:14 pm

Moderator Message:
This is probably not really a DAK topic - moved to Taxes as this seems a better home for it )chas49)

AsleepInYorkshire
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Re: HMRC won't furlough Annual Salary directors

#309167

Postby AsleepInYorkshire » May 16th, 2020, 4:20 pm

SentientBean wrote:Good Evening All

I would appreciate any perspective or comments from anyone who has experienced a similar problem to that which I am facing.

I run a small Ltd company providing professional consultancy services.

The lockdown has completely evaporated all my business revenue 100% - due to the nature of the industry (necessitates lots of on-site interaction with trades).

I have paid myself for nearly two decades, as many SME directors do, largely by a mix of basic salary and dividends.

I appreciate there is nothing I can do about the dividends, they are a lost cause. However, via my accountant (who runs my company PAYE payroll), I applied to be furloughed - since there is literally nothing (other than fiduciary duties) I can do until there is a significant re-start of the economy.

I run an annual payroll for myself, paying myself a single lump-sum directors salary at the end of the financial year (March 31st) to limit account PAYE / RTI accountancy costs.

My accountant has come back to me and said HMRC have rejected the furlough application on the grounds that my payroll wasn't filed this FY before the cut-off date of March 19th. (Even though previous annual payrolls have been filed in March 2017, 2018 and 2019. And prior to that monthly director PAYE payrolls filed every month between 2002 and 2017).

This seems grossly unfair and a mere technicality to me. The accountant phoned HMRC to try and appeal to their better judgement. Appears they didn't have any.

Is this legal they can refuse to allow me to claim furlough?

They happily took my income tax and N.I payment in April, and will of course expect my Corporation Tax payment in Jan. But seems a very one-way street currently!

Does anyone have any suggestions?

Much appreciated

SB

There's a right to appeal I think. Albeit I may be using wholly inappropriate terminology. If there's a valid reason why you didn't or couldn't submit timely then you can appeal. You have to do so [usually] within 30 days. You can ask a tribunal to allow you to submit an appeal late.

http://www.justice.gov.uk/tribunals/tax or you can phone them on 0300 123 1024.

https://www.gov.uk/guidance/tax-dispute ... lution-adr

The simple reality is most accountants fill in forms and send you a bill. Most are not capable of taking on the Inland Revenue who [and regrettably I speak from personal experience] at times fail miserably to carry out their stated tasks.

Try speaking to a "specialist" accountant.

Keep all exchanges with HMRC in writing.

AiY"t"n'U

johnhemming
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Re: HMRC won't furlough Annual Salary directors

#309177

Postby johnhemming » May 16th, 2020, 5:19 pm

The legislation probably does not have space for discretion.

PinkDalek
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Re: HMRC won't furlough Annual Salary directors

#309205

Postby PinkDalek » May 16th, 2020, 7:07 pm

johnhemming wrote:The legislation probably does not have space for discretion.


Assuming I've picked up the correct place, the direction from Her Majesty’s Treasury to Her Majesty’s Revenue and Customs dated 15 April 2020 is linked below.

The Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (Coronavirus Job Retention Scheme) Direction
https://assets.publishing.service.gov.u ... Signed.pdf

The relevant sections of the Coronavirus Act 2020 Act may be found from here http://www.legislation.gov.uk/ukpga/202 ... 71/enacted onwards.

I've studied neither but wouldn't expect discretion to be mentioned there. Surely any discretion or right of appeal etc would be within what used to be the Taxes Management Act 1970 but this isn't a Tax per se, so I'm no further forward.

johnhemming
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Re: HMRC won't furlough Annual Salary directors

#309208

Postby johnhemming » May 16th, 2020, 7:25 pm

An appeal would have to be normally on the basis that the rules were not being followed.

Reading the rules:
3.2 The employer must have a pay as you earn (“PAYE”) scheme registered on HMRC’s real time
information system for PAYE on 19 March 2020 (“a qualifying PAYE scheme”)

One presumes this qualifies on that basis. It allows regular salary in previous tax years to be taken into account. It may be worth an appeal on that basis, but it needs someone experienced in writing such appeals.

This part causes problems, however, and I think it probably is a block.

5. The costs of employment in respect of which an employer may make a claim for payment
under CJRS are costs which-
(a) relate to an employee-
(i) to whom the employer made a payment of earnings in the tax year
2019-20 which is shown in a return under Schedule A1 to the PAYE
Regulations that is made on or before a day that is a relevant CJRS
day


Therefore to get discretion it is probably worth contacting the constituency MP to write to the minister to see if they could modify the rules or apply discretion. I don't know, but generally an appeal would not involve the application of discretion.

SentientBean
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Re: HMRC won't furlough Annual Salary directors

#309364

Postby SentientBean » May 17th, 2020, 1:20 pm

Thanks to all who took the time to respond and offer suggestions.

It doesn't sound that hopeful, but I will appeal. If HMRC had chosen a date at the end of a typical financial quarter (March 31st), a mere 12 days later, I would be in receipt of much needed funds already, as I qualify on all other grounds except an arbitrarily chosen cut off date. This technical exclusion despite actually being paid within the qualifying FY and having two decades of PAYE payroll history.

Regards

SB

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Re: HMRC won't furlough Annual Salary directors

#309443

Postby AF62 » May 17th, 2020, 5:42 pm

SentientBean wrote:If HMRC had chosen a date


HMRC implements government policy doesn't set it, so the question about why a particular date was chosen would be better directed to the government and the Chancellor.


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