The IoD has called for urgent clarification on what activities directors can carry out while furloughed, following conflicting government advice.
The Government’s direction to HMRC, published yesterday, is more restrictive than HMRC guidance available online, and appears to prevent a furloughed director – where no other director is available – from undertaking basic tasks such as paying suppliers or administering the furloughing of other employees.
The IoD therefore calls for a adjustments to the CJRS to enable directors of small companies to continue working on their company while furloughed.
Roger Barker, Head of Corporate Governance at the Institute of Directors, said:
“This new guidance appears to raise a whole host of unintended consequences. It’s hard to believe the Government has thought through the implications for small companies with only one or two directors.
“If the intention is to help keep businesses afloat during the lockdown, directors must be able to continue working while furloughed, to try and get their company off life support. This would be no different from the rules for the self-employed. On an even more basic level, it’s unworkable for a company to have no-one at the wheel in any respect whatsoever.
“So far, directors of small companies have largely been caught between two stools, and they need support. They don’t fit easily into the support schemes that have established for employees and the self-employed, and it’s past time Government woke up to the problem.”
The Government’s direction to HMRC, published yesterday, states that furloughed directors may only file company accounts or carry out disclosure exercises.
In contrast, HMRC’s guidance online states that furloughed directors may ‘carry out particular duties related to fulfil their statutory duties’, provided they do no more that ‘would reasonably be judged necessary’. Given that directors’ statutory obligations include broad duties such as ‘promoting the success of the company’, HMRC’s guidance seems to provide some leeway.
However, the Government’s direction is highly restrictive, and appears to prevent simple tasks such as paying suppliers or administering the furloughing of other employees.
The IoD is therefore calling on Government to adjust the CJRS to allow directors of small companies to continue working to promote the success of their company while furloughed. This would help Government in its intended policy objective of helping businesses survive during the coronavirus outbreak.