Q. Like many contractors, I find myself in the unenviable situation where I am considering furloughing myself in order to apply for the Coronavirus Job Retention Scheme (CJRS) to claim 80% of my PAYE earnings. I understand that once furloughed, I cannot work but I’m able to continue to perform statutory duties. Does this include the ongoing management of accounts, such as paying invoices to services my company uses? Whether it’s subscriptions, software licences or website renewals, a number of these require manual payment, but I don’t want to break the rules – any ideas on what I can and can’t do when furloughed?
A. Furloughed directors cannot carry out any work that, according to the Government advice, “generates commercial revenue or provides services to or on behalf of their company.” However, as you rightly mention, this doesn’t include all work and in contrast to furloughed staff, company directors such as yourself need to continue to perform certain tasks to “fulfil the statutory obligations they owe to their company”.
According to Companies House, there are a number of statutory duties that as a director you are obliged to carry out, including “exercising independent judgement, reasonable care, skill and due diligence.”
What the above means specifically with regards to things you can and can’t do is arguably open to interpretation – and you might even say the Government itself recognises this, which is why it states the following on the CJRS webpage: “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.”
With this in mind and focusing on your situation, it’s doubtful that paying invoices – and with it, exercising reasonable care in your role as a director – would see you break the rules. That being said, it may depend on what the payment is for specifically and whether it directly results in generating commercial revenue for your company.
There is a grey area with regards to the ‘work’ that furloughed directors can continue to carry out, which is unhelpful and can be confusing. However, the key thing to avoid is any activity that makes money for your company, such as providing a service for a client. Settling bills, organising your accounts and paying tax, for example, is unlikely to be prohibited. If you’re still unsure, consider speaking to a contractor accountant, who will be well-placed to advise you further.
This answer was provided by leading contractor accountant, QAccounting.