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Coronavirus support – has the Personal Service Company been left behind?

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Coronavirus support – has the Personal Service Company been left behind?

Rishi Sunak has just delivered another package of measures. This time, setting out the Government’s support for the self-employed through the Self-Employed Income Support Scheme (“SEISS”).

We must be pretty much there now in terms of the support being offered. There might be a few tweaks but it is difficult to see any further major movements.

It is therefore interesting to look at some of those who will miss out.

It perhaps won’t come as a big surprise to those operating such structures that a notable gap in support appears to be the Personal Service Company (“PSC”).

As I touched upon today in an interview with PropertyTV, it seems to me that a PSC falls between the cracks in the support offered.

If one takes the Coronavirus Job Retention Scheme (“CJRS”) then there are no special rules for PSCs.

However, the first problem will be that the PSC, like most owner-managed businesses, will have a remuneration strategy based around paying a low level of salary (usually around the personal allowance) and the majority of the balance as a dividend.

Only the smaller PAYE element can qualify under CJRS.

However, there must also be serious questions over whether a sole director / shareholder of a Company can be ‘furloughed’ at all.

This is because the process of being furloughed is the employment equivalent of being placed on the sub’s bench…

This is because the process of being furloughed is the employment equivalent of being placed on the sub’s bench. One cannot no longer participate. No more work can be done.

However, the sole director will still, surely, be looking to advance the interests of the company and looking for new projects. How can this be done from the sub’s bench?

Further, what about statutory duties? Even where a sole director / shareholder has mothballed themselves, what about their statutory duties? Presumably these still need to be discharged.

IR35 will not come to the rescue as this only deems an individual affected by the measures to be an employee for certain tax purposes. As CJRS is based on employment law any such adjustment will seemingly have no effect.

Perhaps we will see further guidance which clarifies these issues? However, I would not hold my breath for any positives here.

Clearly, there is no respite under the new SEISS scheme. This applies to those that are self-employed and have trading income.

Finally, Mr Sunak also seemingly ‘soft’ announced an equalisation of NICs for all workers – regardless of the form in which they provide their services.

 

If you have any queries about this article, personal service companies or IR35 then please do not hesitate to get in touch.

Please see our ‘hub’ on Coronavirus support for further information on the Government’s package of measures

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