Are you showing it separately in income or netting off against wages/pension/ERs NI etc?
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It's a government repayment of part of your payroll/pensions etc costs so clearly the obvious thing to do is to credit the amounts against those profit and loss headings.
Within my management report totals, there is an aggregate total for furlough 'pay' and furlough 'refund'.
My original salary lines show the gross 'proper' pay for hours actually worked.
All depends on scale, really, and what you want to show at a later date.
As we monitor direct costs as a percentage of manufactured goods we needed to take the whole furlough part out.
Other income. Not a fan of netting off, and most grant income wouldn't be netted off (many actually stipulate you shouldn't, in the terms)
I read in the HMRC guidance somewhere (can't find it now) that it had to be shown as other income
Me too, I read it somewhere that HMRC said had to be shown separately but can't remember where.
Under accounting standards income and expenditure should be shown gross. I am including as grant income and leaving the payroll costs as the gross cost to the organisation.
I wasn't in favour of netting off, however went down the line that ERs NI allowance is netted off against payroll.
Gone round in circles with it - thinking of putting notes to the accounts no matter which I think?
E'ers allowance is not a grant towards an expense. It is an exemption from paying the first £x of secondary NIC.
I will not be putting any notes in, but I will be showing it as other income.
The Employment Allowance isn't a money payment though, is it? It is a reduction in the amount due to be paid.
The official wording on the govt. guidance states "Tax Treatment of the Coronavirus Job Retention Grant - Payments you’ve received under the scheme are to offset the deductible revenue costs of your employees. You must include them as income when you calculate your taxable profits for Income Tax and Corporation Tax purposes.
Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes."
I’m netting off for our internal accounts, but will probably record as grant income for clients (unless they request netting off).
In the accounts, the so-called "netting-off" principle applies only to the balance sheet and not the P&L.
In the accounts, the so-called "netting-off" principle applies only to the balance sheet and not the P&L.
Really? So, reductio ad absurdum, it would be OK to net off all expenses against income because “it’s only the profit that matters”?
At the end of the day, no netting off is more of a general principle than an absolute rule, so there are times when it makes sense and times when it doesn’t and these apply (almost) as much to the P&L as they do the B/S.
I’m with ALISK here. I’d probably show as net for internal purposes but, for external accounts, I think it would be more correct to reflect the legal form that the business has incurred £X of wage costs and that these have been part funded to the tune of £Y by what is effectively a form of grant income.
The panel has mostly put this one to bed, but if you want the chapter and verse from a financial reporting perspective, Steve Collings set out the guidelines from FRS 102 back in May: https://www.accountingweb.co.uk/business/financial-reporting/accounting-...
His conclusion was that the grant in respect of furloughed employees must be presented as income within profit or loss. This can be done either separately as ‘Grant income’ or ‘Government grant’ or within the heading ‘Sundry income’.
For small entities on FRS 102 Section 1A and micro-entities using FRS 105 there are no specific disclosure requirements, but there is still a general requirement for the directors to ensure the financial statements give a true and fair view.
Disclosures of grants received should be considered if the directors think it is needed to present that T&F view.