Tax thread: what about owner-managers of limited companies? I have been working with colleagues @BlickRothenberg and we have put forward a proposal to HMRC

1/n

Typical example is an owner-manager who is sole director and shareholder of a company (or it may be a family company with two directors) - a personal service company or PSC for short. 2/n

I explained the issues around PSCs a few days ago, when the original self-employed package had just been announced 3/n

https://twitter.com/hselftax/status/1243243590727487488?s=21 https://twitter.com/hselftax/status/1243243590727487488

At that time I thought that, as a minimum, salary paid under PAYE should qualify. It has now been confirmed that it will (although the furloughed director can do only minimal admin duties) 4/n

We @BlickRothenberg now call on the government to do more. Owner-managed businesses are a crucial part of the economy and need more help. 5/n

Our proposal is that directors of PSCs should be able to apply for “enhanced JRS” (EJRS) so that their grant would be based on salary PLUS 2018/19 dividends. That would put them, broadly, on a par with employees and the self-employed. 6/n

Some will say directors of PSCs have paid lower tax bills in the past, due to the use of dividends (no NIC in particular)

This is true, but that was the standard way to operate in our complex, illogical tax system. Let’s pay now & fix the tax system later (I hope we will). 8/n

(Drat missed out 7/n sorry. Continued below)

Under EJRS the full amount would be taxed as salary ie subject to PAYE and NIC.

(Some have said it should be reduced by a tax charge on past dividends. We think that is possible but more complex)

9/n

The conditions for EJRS would be the same as ERS ie director must have been on payroll at 28 Feb 2020.

Qualifying dividends would be 2018/19 amount, we suggest.

Company would have to claim as for JRS; HMRC should “pay now, check later” for speed

10/n

Ideally director should be able to do more than minimal duties (as for self-employed scheme).

This is wider than PSCs and at @BlickRothenberg we think it should apply to one director of any company - to help keep the business alive

10/n

(Sorry there were two 10/n so this is 12/n)

We think our @BlickRothenberg proposal is fair and would give much-needed help to owner-managed companies.

We hope @RishiSunak is listening.

13/13 ends.