Support needed for left-out directors, FSB tells Small Business Minister

Company directors have fallen through the cracks of various business support measures and are in urgent need of help as a result, according to a letter from the Federation of Small Businesses (FSB) to Small Business Minister Paul Scully MP.

The correspondence flags the fact that self-employed company directors – who often pay themselves a salary topped up with company dividends – do not have access to the Self-Employment Income Support Scheme (SEISS) which allows those eligible to claim 80 per cent of earnings up to a maximum of £2,500 a month.

Limited company directors can furlough themselves through the Job Retention Scheme, but can only claim for loss of PAYE income and not dividends, despite paying both corporation tax and dividend taxation before they are taken.

However, to claim for this, directors who pay themselves annually would have had to have submitted that information HMRC by March 19 – and many were unaware this would be a requirement, leaving them cut off from all support.  

The letter, which responded to the Small Business Minister’s call for ideas on how to help the self-employed during these unprecedented times, came hours before Prime Minister Boris Johnson announced he is “looking at” options for this group of people at the Commons Liaison Committee this afternoon.

FSB proposes a range of options for supporting those currently left out, they include:

  • Providing direct income support for directors’ lost dividends
  • Creating an expanded grant scheme for businesses which have been unable to claim grants attached to physical premises, but still have high fixed costs
  • Indefinitely suspending plans for the implementation of new IR35 rules
  • Earmarking a portion of local authority hardship funds and discretionary grant schemes for directors in need
  • Considering a student loan-style approach to the repayment of bounce back loans for those in distress in future

FSB National Chairman Mike Cherry said: “The business support measures currently in place help the vast majority, but they don’t help everyone. Business owners who have contributed for years through corporation and dividend tax are now suffering purely because of the way they pay themselves. They need help, and they need it fast.

“Self-employed company directors – be they shop, hair salon or B&B owners – will be the ones we turn to help kickstart high streets once lockdown restrictions are eased. 

“And many operate in sectors, not least personal fitness, events management and the arts, that won’t be back to work next month.

“If we don’t act now, the economy will suffer a second blow further down the line, with company directors forced to shut up shop, putting further pressure on the government.

“It is essential we help them through this national emergency.”