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business unaffected by corona claiming furlough

quite simply we have companies actually thriving or doing well under covid wanting to furlough

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Hi Everyone, 

I'm sure everyone is sick of hearing the word furlough, I know I am, but I have what I suspect is a common issue.  We have a client (financial advisers) reporting increasing year on year turnover and profits for y/e July 2020 saying they have been severely impacted by coronavirus and wanting to furlough themselves and their wives.  Their wives do limited admin work and so receive a minimum wage.  They've all been annually paid, so miffed they missed out on furlough round 1.  now they want to claim under furlough round 2 on the basis that because their new business pipeline has reduced they have been severely affected.  they have no business premises and turnover will more than likely increase next year.  This seems like a pretty spurious claim (or maybe I'm misinterpreting the guidance) but anyone else coming across issues like this? ^Thanks as always and good luck with the silly season,

 

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By Paul Crowley
26th Nov 2020 14:30

Are they working?

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Replying to Paul Crowley:
By scrasey
26th Nov 2020 15:15

directors are saying that they don't have as much work. profit increase of 15% yr on yr. the reality is i doubt they work at all anyway. simply a tax wheeze, put the wives on the payroll to make the most of their tax allowances.

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By Wanderer
26th Nov 2020 14:32

Your issue isn't whether they can furlough these employees it's whether they can claim under the CJRS.
Firstly ignore the 'guidance'.
Secondly consider the law.

Quote:
2.1 The purpose of CJRS is to provide for payments to be made to employers on a claim made in respect of them incurring costs of employment in respect of employees who are within the scope of CJRS arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus and coronavirus disease.
Quote:
2.6 No CJRS claim may be made in respect of an employee if it is abusive or is otherwise contrary to the exceptional purpose of CJRS.
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Replying to Wanderer:
By scrasey
26th Nov 2020 15:22

sorry, didn't word it very well. yes of course they can furlough them but issue is whether they can claim the grant. the issue is 2.1 how do we determine whether they are within the scope of cjrs arising from the health social and economic emergency? 2.6 makes clear this is exceptional but there's little interpretation of this and there's a perception amongst the majority of my clients at least that this is just free bunce that they can in some way by saying they've furloughed their partner. Justified where it's clear there has been adverse impact on their business, difficult to show an adverse impact due to coronavirus where profits continue to grow in double digits, no business premises etc.

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Replying to scrasey:
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By Paul Crowley
26th Nov 2020 15:31

I agree
Gravy train
Amazing that so many businesses have a wife on full furlough, clearly not a job that needs protecting, as company clearly trading.
Wife done nothing for 9 months. Not really a job.

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Replying to Paul Crowley:
By coops456
01st Dec 2020 16:42

Totally agree. I'm sick of CJRS being seen as free money by greedy [email protected]. Too many of our clients have the other half on payroll solely to use their personal tax allowance AND claim the Employment Allowance. That's bad enough, but to then furlough them for a year?

It's just taking the p!ss.

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Replying to Wanderer:
By SteveHa
26th Nov 2020 16:11

It's a bit odd that the architect of that legislation worded it that way, since flu and the common cold are also coronavirus, and so the reach of CJRS is extended way beyond its intended purposes according to the letter of the law.

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By Matrix
26th Nov 2020 15:33

How do you treat the wives’ salaries for corporation tax purposes?

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Replying to Matrix:
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By Paul Crowley
26th Nov 2020 15:56

It would be interesting to see HMRC take a rigid stance
both on income spreading and CJRS

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Replying to Paul Crowley:
My photo
By Matrix
26th Nov 2020 15:59

It would be interesting to see accountants take the stance that the salary is not a proper salary for the purposes of CJRS when they have been allowing the business to obtain a tax deduction for same.

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Replying to Matrix:
By Duggimon
26th Nov 2020 16:15

Exactly, I would assume OP has been processing the payroll (else why come to them for CJRS) and also doing the accounts.

If you have processed the salary through the payroll and claimed a deduction from the taxable profits of the company for it, then you agree they are legitimately working.

If they are not now working then the only grounds on which you might reasonably allege they can't claim under the CJRS is if you think the reason they're not now working is because of something other than the Covid-19 situation.

Arguing that they're not working now because they've never worked is shooting yourself in the foot with both barrels, as are your rambling about bunces and wheezes.

If the wives never worked, you already messed up long before now, if they did work but now don't then I think you need to find some other justification than that already provided for denying the claim.

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Replying to Duggimon:
By scrasey
26th Nov 2020 16:43

I'm not saying it's not a proper salary. I'm saying that it's quite reasonable to ask during the first client meeting if the partners do any work for them. Most but not all small business have a "other half" that does some work in the business, often paid by the owner but not put through a payroll until the accountant mentions it So I was asking the question if any others have clients where they suspect the partner is not all that active in the business where the directors are furloughing them. My argument here with a few businesses I have is that with increasing turnover, it seems very difficult to argue that they have been adversely affected by corona virus, which appears to be of the conditions of claiming the furlough grant.

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Replying to Duggimon:
By scrasey
26th Nov 2020 16:45

oh come on. it's a well used practice to put wives on the payroll. quite legitimately because they do some work for the employer (I never said they do none, I said I suspect, which is an entirely different thing), though not usually formalised by written contract and often money changes hands for those services, so why shouldn't the wives be on the payroll? What I'm saying is that usually happens with the encouragement of the accountant when they realise that the tax free allowance of the wife is not being used. In that respect it is a tax wheeze as far as the client is concerned but quite legitimate. What i'm saying is, clients view that as they see it as a clever tax wheeze they are pushing it to now say their wives are on furlough when they haven't really been affected by corona virus at all, in some cases profiting from it.

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Replying to Matrix:
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By Hugo Fair
26th Nov 2020 16:23

Wholeheartedly agree (from a personal perspective) - but you may just have invented a whole new sphere of interest for HMRC ... "inverted IR35".
Instead of HMRC being the arbiter of whether a supply of services was in reality employment, they could now take on the right to decide whether an employment actually delivers any valid services.

Apologies if I've been inhaling too much CJRS documentation, it does something to me!

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Replying to Matrix:
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By Paul Crowley
26th Nov 2020 18:33

If wife was answering phone and making coffee fine.
If wife is still answering phone and making coffee then no CJRS

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Replying to Paul Crowley:
blue sheep
By Nigel Henshaw
26th Nov 2020 18:57

Paul Crowley wrote:

If wife was answering phone and making coffee fine.
If wife is still answering phone and making coffee then no CJRS


These days I think you will find that Husbands make coffee too
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Replying to NH:
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By Paul Crowley
27th Nov 2020 09:46

Thanks for that really constructive and insightful addition the thread.
Not one of the spreading style remunerations that I might have concerns with fall into that category
The few women where I would have thought that spreading might have happened, have not done so. One has spread downwards to adult children but planned properly with shares on incorporation and they all work full time so is not an issue.

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Jennifer Adams
By Jennifer Adams
26th Nov 2020 16:21

Last time round I rang every one of my lot and gave them a chat 'how are you doing - any work on the horizon' etc . Its amazing how many fell into the trap. 'You're doing OK so you wont want the grant'.

Personally in your case I'd say you dont think it is a good idea.

I know for a fact that HMRC will be looking into getting some of this money back (for my sins I know someone at HMRC ) - the VAT return will be easy ones to spot first. Second will come all those who have opened companies and then miraculously closed them down a few months later.

I always say... cover your back and always always put something in writing that you dont agree or wont claim or whatever.

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Replying to Jennifer Adams:
By scrasey
26th Nov 2020 17:01

Exactly right, I don't think it's a good idea. The law is very vague on this, but it does say exceptional in 2.6 I suppose. Called HMRC who were even more vague than the published guidance. However, it does seem pretty clear that this is help targeted at impacted employers in order to prevent redundancies. But I can't find anything definitive one way or the other to settle the argument. very frustrating.

thanks for the advice, glad someone else is taking a similar approach, not adversely affected no grant seems pretty sensible to me.

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Replying to scrasey:
By Duggimon
27th Nov 2020 09:43

The test for CJRS has nothing to do with how the business is affected though.

If there's reduced work, or a reduction to the particular role of the employee, as a result of Covid-19 and this leads to the employee being furloughed, the CJRS grant is available.

My point earlier was that if you think the above is not true then yes, you should make that point to your clients, but the point you make can't be that their spouses do sod all anyway and their turnover has increased, because the first puts you in hot water and the second is irrelevant.

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Replying to Jennifer Adams:
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By Calculatorboy
26th Nov 2020 21:12

oh come on, hmrc will only be looking at the big scammers which even the daily mail identified ..don't freak out lowly aweb firms who are paranoid enough as it is ...

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blue sheep
By Nigel Henshaw
26th Nov 2020 17:08

Yes I suspect there are many in this situation, along with businesses that were going to cease anyway with or without Covid.

I had one client say to me that yes he has been severely affected because he has not been able to expand the business as planned (profits are therefore the same as last year). How on earth do you argue with that?

We have asked any client wishing to claim to reply to an email that says they have read and understood the points mentioned by Wanderer, I have also been asking clients that want to furlough a partner "what did they do before that they cannot do now due to Covid". we are not there to interrogate them or catch them out but a) we need to cover our backs and b) protect the client from an enquiry

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By ireallyshouldknowthisbut
26th Nov 2020 17:54

The way I put it to my clients in my circular about claims is if the spouse's salary is really just for their director's duties, it is likely if the business that has been affected by Covid, my presumption is those duties have increased and not decreased in this period.

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Replying to ireallyshouldknowthisbut:
blue sheep
By Nigel Henshaw
26th Nov 2020 18:12

ireallyshouldknowthisbut wrote:

The way I put it to my clients in my circular about claims is if the spouse's salary is really just for their director's duties, it is likely if the business that has been affected by Covid, my presumption is those duties have increased and not decreased in this period.


You've lost me on that one! Furloughed Directors were still able to carry out statutory duties
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Replying to NH:
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By Paul Crowley
26th Nov 2020 18:36

But only those if fully furloughed.

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Replying to NH:
By ireallyshouldknowthisbut
26th Nov 2020 18:50

@NH, I put it on the phone to a couple of clients, they don't do anything anyway, how can the be doing a negative amount now?

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By garforth
26th Nov 2020 21:18

The only employee (director) of a property management company has left us as another firm of accountants are happy to back his claim for CRJS. Tenancy agreements are still being signed and rent collected. Business as usual but new accountants are happy to make the claim. I am expecting to lose another client to same accountants as I have told the second client that they could be prosecuted for fraud as director proposes claiming CRJS for his wife although nothing has changed in business. It is very worrying seeing accountants supporting blatant fraud.

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Replying to garforth:
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By the_drookit_dug
26th Nov 2020 22:42

Abusive - yes. Fraud? Not so sure. The guidance is vague, so who are we to judge whatever reasoning clients cobble together?

I personally consider the financial impact test in the postponed JSS guidance to be a good starting point.

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By Arcadia
27th Nov 2020 11:22

A business experiencing increased income as a result of Covid could legitimately need support arising from an increased requirement for working capital (stock/debtors/need to pay new suppliers up front).

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By SBS33
27th Nov 2020 11:34

My (now ex-) client had his wife on payroll as per the usual scenario. She did in fact do a fair amount of work on a side-line of the business (managing a furnished holiday let). When the CJRS grants became available he told me to furlough his wife and said she would not be doing any work.

In October I discovered that she had indeed been doing a fair amount of work since August and told him the CJRS grants paid since then would need to be repaid to HMRC. Consequently he sent me an email (which I suspect she wrote) in which he said she hadn't been working -- he had been using her email address and name in correspondence etc in order to provide 'continuity'.

I am still sceptical, but at least if HMRC ring me about the claims, I have that email to cover myself.

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By Arcadia
27th Nov 2020 11:55

A lot of businesses have a certain amount of spare capacity, whether it the sole director's wife, or in a larger business staff who are ready to respond for example but not always working 100%. If the business works out it can furlough some people in order to protect themselves against a possible downturn, then that is surely fair. There has to be an element of predicting what could happen, and it is therefore key to record the reasoning.

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