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Furlough & Directors

Directors can be furloughed

After the first couple of versions of the guidance issued by HMRC it was subsequently clarified that Directors can be furloughed and claim 80% of pay under the job retention scheme, as long as the Director is paid via the payroll – PAYE system.

No work unless statutory duties

As with all other furloughed employees, Directors must not undertake any work whilst furloughed, however a Director can fulfill a statutory obligation.

The guidance states:

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, 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.

What are statutory duties?

Companies House set out very nicely what the 7 duties are for a Director: 

It is also important to check any internal documents and procedures to ensure that you are able to continue to comply whilst furloughed.

Sole Director Company

In my view there is a higher risk for those Companies that have one Director. Unless you can really shut the Company down it may be difficult to ensure that you are genuinely doing no work.

I also think that HMRC may be more likely to look into and audit those Companies where the sole Director is furloughed. This is of course my view and I have no insider information!

I would also advise you to weigh up the benefit of getting 80% of your pay from the government verses what you could be doing for your business. If you are like most Directors and only receive wages under the tax free allowance, 80% is not going to be very much and you could do far more benefit for your business by continuing to work during this time.

How to furlough a Director?

The guidance states:

‘Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.’

It is important to put the furlough agreement in writing and to expressly state that the Director is not required to undertake any work. The Director should confirm acceptance in writing by email or post.

If you are the sole Director you still need to prepare a letter from the Company setting out the furlough agreement.

Documentation confirming the furlough must be kept for at least 5 years for HMRC purposes.

How do you calculate the wages and claim for a Director?

In the same way as other employees you can include regular payments such as:

  • regular wages you pay to the Director
  • non-discretionary overtime
  • non-discretionary fees
  • non-discretionary commission payments
  • piece rate payments

You cannot include the following when calculating wages:

  • payments made at the discretion of the employer or a client – where the employer or client was under no contractual obligation to pay, including:
    • tips
    • discretionary bonuses
    • discretionary commission payments
  • non-cash payments
  • non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay

You cannot therefore claim for dividends that are paid to Directors.

If you have any other questions please let me know: or for a free initial telephone call contact the office on 01983 897003, 023 8098 2006, 01722 653001 or 020 3470 0007.

External Resources

HMRC guidance:

Government updates:

ACAS guidance:

 Support from the RELA Team

DIY Furlough Support Package available to download for £50 plus VAT includes:

  1. Letter/notice to all staff asking for volunteers and notifying staff of proposal.
  2. Example Selection criteria form.
  3. Letter notifying staff that they are being furloughed – agreement included within.
  4. Letter notifying staff that they are being furloughed – agreement separate.
  5. Furlough agreement.
  6. FAQ’s sheet to issue to employees.
  7. Spreadsheet to record furlough details.

You can purchase the documents here: HERE

Business Support from a Solicitor: For a fixed fee of £250 plus VAT we can provide:

  1. Review of your employment contracts to check relevant applicable clauses that may assist in your decision making.
  2. Providing advice on options available at this time in respect of staff during the current situation including:
    • Furlough
    • Reducing hours
    • Redundancy
    • Lay-off
  3. Up to 1-hour of telephone calls to discuss and answer questions.
  4. Template letter depending on your choice of action.
  5. FAQ’s document for furloughed employees.
  6. Automatic updates when available of if there are changes to the scheme.

For more information or to access these offers for employers please contact us on 01983 897003 or by email:

Don’t forget getting advice from a Solicitor does not have to be complicated or costly!

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The information contained in this blog post is provided for guidance and is a snapshot of the law at the time it is written. It is provided for your information only and should not be used as a substitute for obtaining legal advice that it specific to your particular circumstances.

The guidance should not be relied upon in any decision making process. It is strongly recommended that you seek advice before taking action.

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