Furlough Worker Explained

Furlough Worker Explained

HMRC meaning

If you and your employer both agree, your employer might be able to keep you on the payroll if they’re unable to operate or have no work for you to do because of coronavirus (COVID-19). This is known as being ‘on furlough’.

Once you are on furlough you will not be able to work for your employer, but you can undertake training or volunteer subject to public health guidance, as long as you’re not:

Your employer can still make you redundant while you’re on furlough or afterwards.

Who is eligible?

Every employee who is employed on 28 February 2020.

Employer will make final decision.

What happens during Furlough period?

  • No work
  • No emails
  • No fee earning activity
  • No work for any other employers
  • Allowed to get training
  • Scheme is open for only 3 months

HMRC role

Government will retain the right to retrospectively audit all aspects of the scheme with scope to claw back fraudulent or erroneous claims.

Director and Furlough worker status

Issues for directors who are shareholder of own company:

1. Furlough simply mean “Lay-off”, no more work. A director is still active to deal with HMRC, bank, accountant etc. who will look after the affairs of the company.  Business is closed but the company is still live.  Director remains legally responsible for all affairs of the company.

2. Not many Directors have a written Employment Contract with their own company.Contract can be verbal but how did it come into effect and when?

3. Director is also a Shareholder

In 2000 there was a case where the court issued the ruling that a sole shareholder could not be an employee of his own limited company for the purposes of a redundancy payment from the National Insurance Fund. However, HMRC provides further explanation. 


4. If a director leaves the company, who will re-appoint him/her?

The Companies Act 2006 (S154) requires at least 1 director.  If the single director resigns then the company has no director and it breaches the compliance of the Companies Act

5. If you appoint a new director temporarily, who does he/she report to?

Can someone take over as a director and manage and maintain the company the way you do?

In short this is a mind field and required a proper legal advice from a lawyer.  There are many differing views but you need an authentic and professional advice.

We can help 

Sterling Finance is open for business to support businesses during this tough time.  Our experienced and knowledgeable team is ready to help you.  Here is our contact details

Sterling Finance UK Limited

Website             www.sterlingfinance.net

Email                 info@sterlingfinance.net

Tel                      0161 339 4989

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