The Institute of Directors is calling for help for companies and entrepreneurs currently "falling through the cracks" of government support during the coronavirus crisis.
In a new survey of over 700 business leaders conducted by the Institute of Directors (IoD), seven out of ten directors said the Covid-19 outbreak posed a high or severe threat to their organisation, up from two in ten in a similar poll a month ago.
The findings show that over 70% of directors have already seen demand for their products or services decrease, including 42% who had seen a significant decrease. Four in ten firms have contacted their bank about an emergency loan, while 42% have contacted HMRC to defer tax payments.
Based on the extreme disruption expected over coming months, the IoD is calling for support in three areas:
Extending support to company owner directors: Directors of the smallest companies, including consultants and freelancers, often take their income as dividends. The IoD says that those that provide a clear paper trail should be able to make a furlough claim of 80% of their monthly income subject to tax, up to a £2,500 per month cap, to put them on par with support available for employees and the self-employed. Meanwhile, the duties directors can carry out while furloughed should be clarified.
Encouraging co-operation from lenders: Banks must be "flexible and accommodating" to get cash to companies as quickly as possible through the Coronavirus Business Interruption Loan Scheme. All lenders should follow the example of the banks who have dropped requirements for personal guarantees.
Support for firms without premises: Grants available through local authorities for firms that already pay little or no business rates on their premises should be extended to some of the smallest companies and start-ups that do not have premises (including those in co-working spaces).
Edwin Morgan, director of policy at the IoD, said: "The government deserves credit for acting quickly and producing a substantial package of measures to support the economy … in a situation as frantic and fast-moving as this, inevitably some gaps have opened up, but these need to be acted upon to prevent people and businesses falling through the cracks.
"The chancellor has said that tax treatment of different forms of payment will need to be looked at when the dust has settled after this crisis, and there is certainly a case for reform. This is a discussion for the future, however, and company owner-directors need support now."
The position of company directors that pay themselves as a PAYE employee has been examined by the Institute of Chartered Accountants in England and Wales (ICAEW). It has said that company directors that receive salaries through PAYE can be furloughed and apply for a grant of 80% of their salary during the coronavirus pandemic.
It said: "After examining HMRC guidance, ICAEW believes that individuals who are directors of their own family companies and who are themselves paid via PAYE should be eligible for the coronavirus job retention scheme.
"We are awaiting full details of how the scheme will operate from HMRC, including for directors paid via PAYE but not receiving a consistent, regular monthly salary. We understand the intention of the scheme is to include those on irregular earnings, but full details on how the amount of the grant will be calculated for these individuals have yet to be released."
As with other businesses, the ICAEW says such directors would need to have been on the payroll on 28 February 2020 and they cannot work while they are on furlough leave. It added: "We do not yet know the extent to which minor directorial duties would be disregarded, or whether the requirement that a furloughed employee should do 'no work' would prohibit this."
Last week, the government provided additional details on the Coronavirus Job Retention Scheme, confirming that the government will cover employer National Insurance and minimum auto-enrolment pension contributions of furloughed workers - on top of 80% of their salary.
It said that those that are furloughed can volunteer for the NHS without risking their pay. The government also confirmed that those made redundant after 28 February can be reemployed and placed on furlough.
Written by Rachel Miller.