Government ministers are putting together a grant-based rescue plan for directors.
Business leaders and tax experts have drawn up plans to help as many as 2m entrepreneurs who rely on dividends for their income and have been excluded from COVID-19 help.
The Directors Income Support Scheme, which is supported by the Federation of Small Businesses, the Association of Chartered Certified Accountants and campaign group, ForgottenLtd, would be a grant for small actively trading companies.
The scheme would operate in a similar way to the Self-Employed Income Support Scheme (SEISS). The first grant, covering three months, would be for 80 per cent of average earnings, up to £7,500. Estimates suggest that the scheme would cost between £2bn and £6bn.
The director would only be able to claim for one directorship in the entity which they have the greatest income and that income must make up over 50 per cent of any income from other sources, according to accountingWEB. The director must declare that they intend to continue to trade and are either:
- Impacted by reduced demand due to coronavirus, but are actively trading
- Temporarily unable to trade due to coronavirus, but were previously trading
Up until now, the Treasury has been reluctant to give support to those affected as it couldn’t distinguish between dividends from working and passive investments. As a result, directors weren’t able to benefit while their employees got support through the furlough scheme and self-employed workers received grants.
Craig Beaumont, of the FSB, said: “Directors have set themselves up the right way, and paid their taxes just like everyone else but have not received the income support lifeline.”
A Treasury spokesman said: “In some circumstances people may not be able to access our [support] schemes as a result of restrictions designed to mitigate the risk of fraud. We continue to engage with stakeholders on ideas that could sufficiently address these issues.”