Property company directors who top up their salaries with dividends do not qualify for government coronavirus financial support packages.
HM Revenue & Customs chief Jim Barra has confirmed dividends are excluded from calculating income under the Job Retention Scheme leaving directors only able to claim 80% of the salary they pay themselves.
The decision applies to all directors who structure their pay through dividends.
“I am aware that some owner-managers of companies pay themselves a relatively small wage and top that up with dividends,” Harra revealed to MPs quizzing him at a Treasury Committee meeting.
“However, those dividends would not qualify in the furlough scheme.
“It is only 80% of their wage that will qualify for the grant. They will also not qualify for the self-employed scheme.
“From our perspective, we have no way of identifying which dividends people receive are dividends in lieu of wages and which are simply a return on capital in their own company or an investment. We have not been able to come up with a design to be able to top this up for those people in the timeframe given.
“Of course, the government continues to listen and knows what the issue here is, but there are no plans to do anything further on it.”
Harra also confirmed the self-employed income replacement scheme would only apply to workers earning more than 50% of their income from self-employment, subject to the £50,000 cap.
HMRC will contact 3.5 million self-employed workers by mid-May, he told the MPs.
“We already have the data to calculate people’s entitlement, but we need to know the details of those who wish to claim and we will need their bank account details,” he said.