If a sole director, furloughed because there is nothing happening in their line of work, spends a small amount of time trying to gain work, would this disqualify them from receiving furlough, and would costs incurred be allowed? The question has been asked of me and its left me pondering.
HMRC guidance is as follows
"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 be judged reasonably necessary for the purposes, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
This also applies to salaried individuals who are directors of their own personal service company (PSC)"
On face value this would prevent someone jumping into their car to go see a contractor about new work, but under the Companies Act the Director has a duty to promote the success of the company for the shareholders benefit, and to my mind this would fit in with that responsibility.
So I'm voting yes, allowable, but wondered what others thought.
-- Edited by Leger on Friday 9th of October 2020 02:39:55 PM
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
I was always under the impression from what I heard and read when furlough first started that Directors were only allowed to complete their statutory duties as in filing confirmation statements and signing off accounts and anything else could put the claim in jeopardy.
BUT
I do not see how one Director Companies can survive if after this amount of time they do nothing to promote their business and try to obtain work, I do not believe that in these unprecedented times that someone should be penalised for trying to obtain work that would ultimately mean that they could leave the furlough scheme and that their business could survive.
So I think Yes but just my opinion!
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
There isn't a statute. The closest we have is the CJRS Direction 33 Final signed by Rishi on 15th April 2020
The salient point is 6.6 Work undertaken by a director of a company to fulfil a duty or other obligation arising by or under an Act of Parliament relating to the filing of company accounts or provision of other information relating to the administration of the directors company must be disregarded for the purposes of paragraph 6.1(a)
Now here s what the Companies Act 2006 says in section 172
Duty to promote the success of the company
(1)A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to
(a)the likely consequences of any decision in the long term,
(b)the interests of the company's employees,
(c)the need to foster the company's business relationships with suppliers, customers and others,
(d)the impact of the company's operations on the community and the environment,
(e)the desirability of the company maintaining a reputation for high standards of business conduct, and
(f)the need to act fairly as between members of the company.
(2)Where or to the extent that the purposes of the company consist of or include purposes other than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the company for the benefit of its members were to achieving those purposes.
(3)The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company.
