While the Directors Income Support Scheme (DISS) is currently a proposal and not yet in place, there is some information about what it could consist of. The idea is to offer some form of financial support specifically for limited company directors. Such taxpayers have thus far not had any tailored support during the COVID-19 pandemic, despite this having a devastating effect on business.
Here at Adaptive Accountancy, we previously reported that a business consortium was calling upon the chancellor to provide some support for those who work as self-employed directors. Now, we are sharing the lowdown on how the DISS scheme might work.
DISS has already been the subject of press attention, and the outlined policy document has already been welcomed by groups representing directors, such as the CBI, IPSE and Make UK, as well as several MPs.
A key point to clarify at the outset is that DISS is not about paying dividends. Instead, DISS will be based on trading profits. The rationale is that dividends are difficult to measure as income, and it can be tricky to differentiate from investment. Using trading profits as a measure will bring DISS in line with the existing Self-Employed Income Support Scheme (SEISS).
Company trading profits
DISS would thus be based on company trading profits, as reported via a Corporation Tax return (CT600). This is possible because a company director has particular duties laid out in law. Unlike with the self-employed, self-certification is viable. The government is protected by the fact that any director making misleading or false statements may be subject to prosecution.
A director may only claim for one directorship. This should reflect the entity providing them with the largest income – some 50% or more of the total, including that from any other sources.
The director must also be currently or previously trading, and they should intend to continue. Their business must also have been adversely affected or halted by the pandemic.
The DISS scheme objectives were set out to complement the existing SEISS scheme. It has been designed not to allow abuse or fraud by companies that are not trading, and has been designed in HMRC’s interests, using its existing systems and information to ensure that DISS is simple to set up and administer.
If the government gives DISS the go-ahead, it is expected that company trading profits might be capped at the same level as with SEISS. DISS might only apply the scheme to ‘micro-entities’ with 10 or fewer employees and a maximum turnover of £632,000. It may also only apply to around two million small companies that are currently trading, or to under one million limited companies that are non-employing.
Should DISS be approved, it could help around three million people who have previously been excluded from COVID-19 government support schemes.
As experienced accountants in South Yorkshire, at Adaptive Accountancy, we can help with your DISS claim if required. Government rules on such matters can be confusing, so get in touch if you need any guidance once the scheme is in place.