Company bosses who have so far failed to qualify for government support may now face the "final straw" for their businesses, it's been claimed.
Sole directors of limited firms without employees who pay themselves from dividends have been ineligible for schemes including the UK government's job retention scheme and the self-employed support scheme.
Many had hoped they could qualify for support from the £40m hardship fund for micro-businesses launched by the Department for the Economy last month - but those who do not have employees cannot apply.
The department was asked yesterday how many applications it had received for the hardship fund, and whether any applications had resulted in a pay-out.
It was also asked if there would be any future support for company directors who pay themselves out of dividends. The department was not able to provide responses in time.
One company director, who wished to remain anonymous, said he had been working steadily for himself for around 30 years but was now facing the worst situation of his working life, despite trading through at least two recessions.
Roger Pollen, FSB NI director of external affairs, said the hardship fund had successfully plugged some gaps in previous support schemes, but some company directors had fallen through another gap as they did not have staff.
Mr Pollen said company directors “who quite legally paid themselves a mix of salary and dividends lost out in supports from Westminster only to lose out again from Stormont, not because of the merit or importance of the business, but because of the corporate structure”.
“That is deeply frustrating and, for some, could be the final straw.”
Other grants aimed at small businesses, as well as retail, tourism, hospitality and leisure firms, had been distributed according to government databases — which again excluded many operators.
Mr Pollen said: “Separately, the reliance on property-based databases to identify businesses that could be supported was a fast way of securely funnelling large amounts of public money to assist many businesses, however, it missed out a great many others that for many reasons weren’t in commercial premises, such as van-based or online businesses.”
Another company director said he believed “directors of small limited companies have been severely discriminated against during this economic crisis”.
For company directors, paying themselves a dividend can result in a reduction of their tax burden.
A director who has been working for himself for around 30 years said: “It is legitimate practice and it’s not tax avoidance, it is legal.”
But he said that for administrative reasons, it was more straightforward for the Department for the Economy and HMRC to target support at individuals operating in more straightforward structures, such as through being purely self-employed as sole traders.
The director said: “I now support myself out of savings, and that’s okay for a period of time. But I’ve now had three months of no paid work, and if you look at the timescale anticipated for furloughing, I could be looking at six months with no money.
“I have been toying with the idea of closing the business and going and becoming employed somewhere.”
He acknowledged he could qualify for a bounce-back loan, which is guaranteed by the government. But he said he was reluctant to get into debt. He said that the present state of affairs was the worst he had faced in nearly 30 years of trading.
“I’ve been in business 25 to 30 years, and I’ve never had a bad time. There was nothing like this in previous recessions.
“The last time I received any government support was when I left college and unemployment rates were so high that I went on the dole.”