Dividends Excluded From Coronavirus Support Calculations


The Self-Employed Income Support Scheme is not available for directors, who will need to seek financial support in other ways during the coronavirus outbreak.

When the Government first announced measures to help self-employed workers last week, the information included a telling paragraph. It read:

“Those who pay themselves a salary and dividends through their own company are not covered by the scheme [the self-employed scheme] but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.”

Clearly, this confirms that claims under the Coronavirus Job Retention Scheme will be based on previously submitted payroll returns that include directors’ salaries (but not dividends).

Your Income As A Director

Directors that have taken the lion’s share of their income in the form of dividends – and benefitted from significant National Insurance contributions reductions for a number of years – will therefore be restricted in the amount of relief they can claim.

Potentially, they will only be able to recoup up to 80 per cent of their monthly salary – capped at £2,500 a month.

You’ll Need To Furlough Yourself

To make a claim, directors will need to furlough themselves. This is the new shorthand for laying yourself off.

To qualify, you will also have to play no further active role in the business. For most this is a non-starter as directors, at the very least, have a legal responsibility to monitor and file ongoing returns to HMRC and Companies House, keep accounts up to date and manage numerous ongoing matters for their business.

 What Are The Choices For Directors?

If your company is unable to trade – perhaps one of the leisure, entertainment or other “closed down” service industries – you may be able to organise mothballing activity in such a way that you can assert you are furloughed and collect 80 per cent of your reported salary as a grant, up to the £2,500 limit.

If this does not meet your basic cash requirements there are other personal claims you can consider: Universal Credit or other relevant benefits.

If you want to consider ongoing trading, possibly at a reduced level, planning will be key.

Directors will need to take care that they do not borrow money to support temporary losses if this results in insolvency. Insolvency in this respect means running out of retained profits and issued share capital.

We’re Here To Help

Whatever your decision on these choices, please contact us, as planning and monitoring of your company finances will be paramount.

The longer this disruption continues, the greater the strain and risk for small businesses will become.

Speak to a member of the Bracey’s team today.