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IoD calls on MPs to support small company directors

17 Apr 2020

westminster

The IoD has today (Friday 17th April) written to all MPs to call for action to support directors of small companies who have been left out of current coronavirus support measures.

The directors’ organisation described the Coronavirus Job Retention Scheme as ‘not adequate’ for company directors, because it ‘fails to recognise’ how they may administer their remuneration, and ‘provides inadequate scope’ for directors to fulfill their statutory duties, potentially preventing directors from carrying out basic actions like paying suppliers.

Read the IoD's briefing on directors' duties and dividends

Read the IoD proposal to support small company directors

The IoD called for restrictions on furloughed directors’ activities to be re-examined ‘as a matter of priority’, and to ensure directors can claim 80% of their monthly income including company dividends, up to the £2,500 per month cap, subject to tax, to put them on par with support available for employees and the self-employed.

Highlighting other gaps in Government support, the business group set out measures to help small firms and start-ups. These included raising the Government backing on some loans to 100%, boosting investor reliefs, and extending coronavirus support grants to firms without premises, such as those that operate in co-working spaces.

In the letter, Jonathan Geldart, Director General of the Institute of Directors, said:

“The measures announced so far to support companies through the Coronavirus outbreak have been widely welcomed, and the Government should be commended for the scale of the response. However, giving the severity of the economic slowdown, further action is needed to reach parts of the economy which are not yet receiving support.

“While small company directors are a vital part of our economy, many are not eligible for the support currently on offer.  This cohort that contains some our most creative, innovative, and scalable companies, and their survival will be essential if we are to amplify our economic recovery.”

Full text

The measures announced so far to support companies through the Coronavirus outbreak have been widely welcomed, and the Government should be commended for the scale of the response. However, giving the severity of the economic slowdown, further action is needed to reach parts of the economy which are not yet receiving support. 

The Institute of Directors has over 25,000 company directors as members, and is tasked by Royal Charter to provide connections, professional development and representation on their behalf to government, and to foster a climate favourable to entrepreneurial activity. But while small company directors are a vital part of our economy, many are not eligible for the support currently on offer. 

Small businesses with between 0 and 9 employees account for 96% of all enterprises, one-third of jobs, and one fifth of turnover across the private sector, and there are around two million individuals running their own company. It’s a cohort that contains some our most creative, innovative, and scalable companies, and their survival will be essential if we are to amplify our economic recovery. 

Many business leaders in this group rely on a combination of wages and company dividends for their income. As their earnings depend on the business they drum up, it can vary widely, and so a fixed salary is often unsuitable. Yet, no government scheme currently covers company dividend earnings, leaving many directors with little income support. 

Other measures also fail to support this entrepreneurial group. Start-ups and high growth businesses are unable to obtain loans through the Coronavirus Business Interruption Loan Scheme (CBILS) due to high eligibility hurdles. Meanwhile, small business owners operating in co-working spaces, renting their office, or operating out of their own homes, do not qualify for grants and reliefs available to those with premises. 

With the lockdown having been extended, it is now even more crucial that we raise support to these businesses. The list below outlines the IoD’s key recommendations which the government could quickly implement to help these firms:  

  • Include company dividends earnings in income support: Directors should be able to claim of 80% of their monthly income subject to tax up to the £2,500 per month cap, including their company dividend earnings, to put them on par with support for employees and the self-employed. This is an issue of great importance to many IoD members, and we attach a fuller briefing to this email.  
  • Enable start-ups and high-growth firms to access CBILS: Raising the government guarantee to 100% for loans to small firms, accrediting a wider range of lenders, and lowering eligibility and documentation requirements will enable more firms to benefit quickly.
  • Extend grants to small firms without their own premises
  • Boost the Enterprise Investment Scheme, Seed Enterprise Investment Scheme and Venture Capital Trust investor reliefs, and create an investment fund, to support start-up and scale-up funding
  • Expedite existing claims on R&D tax credits and Innovate UK grants, and extend schemes 

While we understand that public health is the Government’s overriding concern at the moment, and they wish to prevent providing a confusing message to the public, there will come a point where the business support package will have to adapt to a loosening of restrictions. First among these will be the need for greater flexibility for furloughed workers to return on a reduced-hours basis, with companies continuing to receive some wage support from government.  

We would be grateful if you can support our efforts in ensuring these vital measures are enacted as soon as possible. Our team would be happy to discuss these recommendations further, and we have also attached an appendix providing more detail on how the government could support company dividends earnings. 

Kind regards,

Jonathan Geldart

Coronavirus Hub - IoD

Contact Press Office

Euan Holmes, Press Officer

020 7451 3280


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