Owner Kate Upcraft Consultancy Ltd
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Coronavirus Job Retention Scheme details - 30 April update

Coronavirus job retention scheme: Get the details right

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The guidance for employers on the coronavirus job retention scheme (CJRS) was updated on 20 April and 27 April with details on eligbility, and this article has been amended based on that guidance as well as the earlier updates issued throughout April, to cover all the key points about this scheme.

30th Apr 2020
Owner Kate Upcraft Consultancy Ltd
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All employers can benefit from the scheme, even owner-managed businesses. On 17 April Rishi Sunak, Chancellor of the Exchequer announced that CJRS grants would be available to pay furloughed employees until the end of June. On 29 May the Channcellor announced that a more flexible version of CJRS would apply from 1 July to 31 Ocoober 2020.

The government wants the support to be as inclusive as possible. There is no conditionality related to having sufficient funds which for example have been applied to the business interruption loans. However, the employer must have set up a PAYE scheme before 19 March 2020, enrolled for PAYE online and have a UK bank account.

Owner-managed businesses can make a claim from the CJRS, effectively they will furlough themselves, but see comments on directors below.

The following employers would therefore qualify:

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Replies (222)

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By ChrisFinn88
30th Mar 2020 16:07

Good afternoon all,

While some of this is a lifeline, particularly to our firm, I cannot help but feel this is extremely unfair on those who run small one man band Ltd Co's on a low salary, high div ratio.

We have a few clients who have switched from ST to Ltd in the last few years and it seems like they have shot themselves in the foot through no fault of their own. As with such a high % of UK residents, many are living hand to mouth.

Does anyone think there is a realistic chance of Mr Sunak introducing any further measures?

Take care all.

C

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Replying to ChrisFinn88:
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By Sanjeev Nanda
31st Mar 2020 13:19

Chris, I am inclined to wholeheartedly agree with you. This ruling is a life-raft for companies like mine. Smaller establishments, enterprises, and folks working out of their homes, will see this as a confusing call to action, one that doesn't do it for them, but somehow does it for others at the same time.
~Sanjeev Nanda

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Replying to ChrisFinn88:
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By meadowsaw227
01st Apr 2020 09:41

Whilst I agree, presumably in most cases the sole reason for the change from a sole trader to a Limited Company was purely to save tax, you can`t have it both ways ! .

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Replying to meadowsaw227:
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By tanyajackson
01st Apr 2020 10:28

I disagree with that statement. Many sole traders are forced to incorporate because their customers won't give them work otherwise. Their customers are trying to avoid the IR35 rules and up until recently making suppliers limited put that responsibility on our clients. Also dividends are already taxed through Corporation Tax and then again through personal tax, although slightly better off, not enough to leave them out of the aid packages.

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Replying to tanyajackson:
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By raju m
23rd Apr 2020 09:52

A lot of NIC savings as well!!

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Replying to tanyajackson:
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By raju m
23rd Apr 2020 09:52

A lot of NIC savings as well!!

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Replying to tanyajackson:
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By raju m
23rd Apr 2020 09:53

A lot of NIC savings as well!!

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Replying to tanyajackson:
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By raju m
23rd Apr 2020 09:53

A lot of NIC savings as well!!

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Replying to tanyajackson:
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By raju m
23rd Apr 2020 09:53

A lot of NIC savings as well!!

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Replying to tanyajackson:
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By raju m
23rd Apr 2020 09:53

A lot of NIC savings as well!!

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Replying to meadowsaw227:
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By ChrisFinn88
01st Apr 2020 11:48

Good morning Meadows,

While I do understand where you are coming from, nowadays the difference is very little in the overall tax position, assuming that all profits are drawn, as with most small single director and employee businesses. I still cannot help but feel this is a kick in the teeth to the person working in the garden office earning a modest income to support his/her family. The furlough scheme will not cut it for most.

C

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Replying to meadowsaw227:
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By InterimAccountant
01st Apr 2020 12:23

Completely agree but perhaps deemed employees should be included in the Job retention scheme.

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Replying to ChrisFinn88:
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By kevin503
17th Apr 2020 10:48

For people who went the "Low salary, high div ratio" route, it's difficult to feel too much sympathy. They made a choice that resulted in them being quids in at the time, now the situation has changed, and it turns out that avoiding tax and NI has consequences. For the record I also take dividends, but only after paying myself a proper salary through PAYE, not an artificially low one.

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By spuddle
30th Mar 2020 16:29

"Owner managed companies" and directors are specifically mentioned but is there any distinction made between directors who have a service contract / contract of employment who I think would correctly be treated as "employees" and those without any contract as I suspect is the case with most directors of small companies as otherwise they would have been subject to minimum wage regulations and should not have been on the typical minimal salary?

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By ocooper
30th Mar 2020 19:33

Thanks Kate, a really useful article.

Can you please tell me your source for the part where you say:

"Owner-managed businesses can make a claim from the CJRS, effectively they will be furloughing themselves and the understanding is that they do no income generating work for their business but can continue to run the business from a statutory perspective, for example preparing their accounts and returns".

I haven't seen anything that states that, so would be useful to see where you found it.

Thanks

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Replying to ocooper:
Northumberland flag
By MJShone
31st Mar 2020 09:02

Kate might have it from a different source but Ben Kerry from the Treasury team that designed the CJRS, speaking on a CBI webinar on Friday (or was it Thursday?) referred to directors not earning for the company but still being able to carry out "statutory duties". Some have interpreted this very widely, but I think it refers to "admin" such as filing accounts (as Kate says).

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Replying to MJShone:
Helen Froggett Thomson
By Helen Froggett-Thomson
06th Apr 2020 20:44

Hi, if you scroll down in the link below to almost half way, you will find this info:
Company Directors
As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

This also applies to salaried individuals who are directors of their own personal service company (PSC).
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus...

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Replying to Helen Froggett-Thomson:
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By markmorley
13th Apr 2020 10:25

Hi re directors the companies act requires records to be maintained. The thorny questions seems to be whether raising invoices falls in necessary duties or generating revenue (one might argue if someone else performed the service )the director is doing statutory duty if there wasn't a practical alternative to them doing so . Any ideas or any seen clarification?

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Replying to Helen Froggett-Thomson:
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By markmorley
13th Apr 2020 10:25

Hi re directors the companies act requires records to be maintained. The thorny questions seems to be whether raising invoices falls in necessary duties or generating revenue (one might argue if someone else performed the service )the director is doing statutory duty if there wasn't a practical alternative to them doing so . Any ideas or any seen clarification?

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Replying to markmorley:
Morph
By kevinringer
13th Apr 2020 10:47

I have queried this too and raised it on HMRC's Agent Forum. So far all I've not seen any guidance which specifically answers this question. HMRC have said that directors are permitted to undertake statutory duties and this is a statutory duty. I feel there is a solution to this problem. The self-employed and continue to work. I feel directors should be permitted to continue working too.

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By valakot
31st Mar 2020 00:21

Hello, does anyone know answers to this questions about CJRS:
1) If an employee is furloughed on 20th March and earns £2,000 per month can this be completely backdated to 1st March or will it be apportioned as 1st to 19th normal pay (£1225.81) and 20th to 31st 80% furlough pay (80% of £774.19)?
2) If employer choose to pay furloughed employee 80% (grant) and not to up 20% while he still must run through payroll 100% of wage (as normal) how do you later account for 20% which will be underpaid?
3) Anyone knows how you will be able to claim 80% grant when the online portal opens? Will you be able to provide information about each employee because some might have been furloughed on 20 March and some for example on 29th of March. So do you have to provide details about each employee or simply make the calculations and claim the lump sum for all employees simply stating how many employees are furloughed and the beginning date of the first furloughed employee?
This seems like it is still not clear on the gov guidance.

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Replying to valakot:
By SteveHa
31st Mar 2020 10:31

valakot wrote:
2) If employer choose to pay furloughed employee 80% (grant) and not to up 20% while he still must run through payroll 100% of wage (as normal) how do you later account for 20% which will be underpaid?

Where are you getting 100% still goes through payroll even if only 80% is being paid? That makes no sense, and I haven't seen anything to that effect.

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Replying to SteveHa:
Helen Froggett Thomson
By Helen Froggett-Thomson
06th Apr 2020 20:50

It is my understanding that the employee is expected to be paid full and usual salary until the date where they are furloughed. From which date til the end of the month, they will be paid at 80% if that is what the company are claiming for. You can only claim furlough from the time the employee was at home, not working for you.
I also believe that we will have to submit details for each employee separately for the reason you have highlighted - they will have different start dates for furlough.

'Grants will be prorated if your employee is only furloughed for part of a pay period.

Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they written to confirming their furloughed status.' Extract from https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus...

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Replying to Helen Froggett-Thomson:
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By Brian Gooch
07th Apr 2020 08:41

"they will be paid at 80% if that is what the company are claiming for." Not quite, the amount claimed does not determine the amount paid to the employee, that is determined by their employment contract and any variation you have now agreed with them, from £2,500/80% to 100%. The amount paid determines the amount the employer can claim up to £2,500/80%.

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By Siobhan1986
31st Mar 2020 08:46

Hi Kate, I have a question that I hope you can help me with.

We have zero hour contracts with all employees (it’s a pub)

When calculating average weekly pay how would this be done as it’s very seasonal if I was to use their annual pay / 52 it would not give a representative figure per week as one employee in particular earns £200 a week on a week he is working but then may not work for 6/7 weeks? Any help would be appreciated as hmrc will not answer the phones
Kind regards

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Replying to Siobhan1986:
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By rmillaree
31st Mar 2020 13:25

Hello Siobhan

Does the linked (from top of article direct to covid advise) info copied below not sort of cover your question?

Employees whose pay varies
If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:

the same month’s earning from the previous year
average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.

If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

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Replying to rmillaree:
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By Siobhan1986
01st Apr 2020 10:07

No as the employee has been employed for over 12 months therefore cannot pro data based on since employment began. I’m just confused if it should be over the 52 weeks of the year or over the actual weeks worked for the year?

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Replying to Siobhan1986:
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By Lamancha
01st Apr 2020 10:33

We are in the same situation - small Pubco - a number of variable staff averaged far less than their current regular wage either by previous year's month or by tax year average.

I'm interested by the statement;

"For an individual with variable pay ie 28 February was not an indicative week or month, their average earnings over 2019/20 or the period of employment during that year can be used."

Is there any specific guidance to confirm the "indicative" here? We have stuck strictly to the average guidance and then uplifted staff to 39 hrs with the belief we would have to make up the difference.

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Replying to Siobhan1986:
By coops456
01st Apr 2020 11:22

We totalled the hourly pay for the tax year, then divided that by the number of weeks worked. This gives their average weekly earnings. Furloughed pay is 80% of that figure.

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Replying to Siobhan1986:
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By joanne.dixon62
01st Apr 2020 13:31

I was advised that for seasonal workers and zero hour contracts pay will be calculated on an average for 2019/20

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Replying to joanne.dixon62:
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By Siobhan1986
01st Apr 2020 14:00

Thanks Joanne I understand that my question is what is the average is it divided by 52 or the number of weeks they have worked in the year? Thanks

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Replying to Siobhan1986:
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By Vicky Brough
06th Apr 2020 17:41

Hi,

I am a member of CIPP and I contacted the advisory team for the input on this as I did not believe that HMRC were clear at all.

They have come back to me and confirmed that the average would be based on the weeks worked not 52 or 53 weeks (unless they worked them). I have a client that has 2 casual employees and they have both only worked 32 weeks in 2019-20 so i have taken their earnings for 2019-20 and divided by 32 to gather my average to base the 80% furlough pay on.

I hope this clears it up a bit more.

Thanks :)

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Replying to Siobhan1986:
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By mands44
06th Apr 2020 20:00

Hi you would need to average the earnings according to actual weeks worked in the tax year not just /52. If you use sage an average earnings report will do this for you if not a spreadsheet using formulas of total earnings/weeks worked with give you the answer

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Replying to Siobhan1986:
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By sallyrichardson
07th Apr 2020 18:06

So here's the issue - we have several payrolls that work term time only. If we divide their pay by the 39 weeks they work in the year, the amount we come out with for April is a lot higher than their pay would have been as they usually have 2 weeks off. But for May the average would be about right. If this is extended and we get as far as last 2 weeks in July / Aug (lets hope we don't) they wouldn't normally be paid at all. Is it OK to come out with an "average" that's much higher than they would have received in reality?

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Replying to sallyrichardson:
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By Brian Gooch
08th Apr 2020 08:17

That was exactly my concern with using only weeks worked in the calculation, you end up with an "average" that is above the true average earnings and could be much higher. It would make more sense and seem the right answer if it was all weeks since they started work (if they started in the year), so if they only worked one week in four their monthly average would be the same, not 4+ times as much. In other words, rather than dividing by number of "weeks worked", divide by number of "weeks since started working".

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Replying to Brian Gooch:
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By s23sgn
08th Apr 2020 09:42

I'm with you Brian, I've divided by weeks since started working. Otherwise you will get a higher average to pay weekly and my concern was that HMRC will disagree with this and not pay it out. Especially with casual staff don't work every week so why would you pay them furlough pay each week.

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Replying to Brian Gooch:
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By sallyrichardson
08th Apr 2020 09:49

Thanks Brian - for backing up my feelings. I will work it out using the average for 2019-20 as all the staff involved worked all last year. I think as long as the calculations we do are reasonable compared to what the staff are usually paid it will be fine if reviewed. Thanks again

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By rmillaree
31st Mar 2020 13:22

Hellllppppppppp

This advise article directly contradicts the icaew advise in on key area. Is there a missing link?

icaew advise here
https://www.icaew.com/insights/viewpoints-on-the-news/2020/mar-2020/coro...

Here it says
Owner-managed businesses can make a claim from the CJRS, effectively they will be furloughing themselves and the understanding is that they do no income generating work for their business but can continue to run the business from a statutory perspective, for example preparing their accounts and returns.

per icaew.com

The pub closed on 20 March as instructed by the Prime Minister. and following the Chancellor’s announcement on 20 March, Pubco has furloughed its staff other than Mr & Mrs Fuller who are still living above the pub and dealing with the company administration. The contracts of employment of the other staff have been varied to permit furloughing and the three permanent staff members have agreed to accept a pay reduction to 80% of the previous level. The seasonal staff for this year have not yet been hired.
No grant support is available to support the living costs of Mr & Mrs Fuller.

Whats the difference ? maybe its me being dumb as a dumbell?

To cap it off the official government advise mentions volunteering being allowable but unless my interpretation of english is pp - it is kinda like gibberish speak to me.

"If your employee does volunteer work or training
A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation."

Translations of what the above means in plain english would be appreciated.

Practicably spekaing i am presuming we are ok to separte employment duties earning money from directoral admin duties and practicably say those directoral non earning duties are non relevant - i am happy with that being the case - it just seems ridiculous they dont simply say that in plan speak.

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Replying to rmillaree:
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By susieq
01st Apr 2020 09:49

I thought I had read somewhere that if living accommodation is provided to the employee they cannot be furloughed but can't find it now. Which would explain Mr & Mrs Fuller example being excluded.

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Replying to rmillaree:
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By Brian Gooch
01st Apr 2020 10:02

The difference is that the part of the article above only applies to companies and their directors, although that is not clear from the phrase "Owner-managed businesses" used, whereas the icaew extract is about a partnership.

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Replying to Brian Gooch:
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By susieq
01st Apr 2020 11:07

It does say "Pubco" is run as a limited company with Mr & Mrs Fuller taking a salary of £8600 each (doesn't refer to a partnership that I can see)

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Replying to susieq:
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By Brian Gooch
01st Apr 2020 12:19

Oops, you're right - I didn't read it properly.
It says they don't qualify because they are doing company administration - presumably that extends beyond statutory duties to things like running payroll, cancelling supplier orders, paying invoices, etc. However, you would have thought that one of them could handle all that, whilst the other one is furloughed, or they could reasonably be furloughed for 3 weeks and deal with everything in the 4th.

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Replying to Brian Gooch:
Helen Froggett Thomson
By Helen Froggett-Thomson
01st Apr 2020 13:30

I agree with the conclusions in this thread, but I would add that you can actually work FOR SOMEONE ELSE other than the company who is furloughing you, while you are furloughed. (and I can provide the gov.doc to back this up)
Also you can be furloughed by any number of different employers, say you had a few part time jobs, you don't have to just 'choose' one to furlough you.

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Replying to Helen Froggett-Thomson:
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By petero
01st Apr 2020 18:21

Helen, please can you provide the source re working FOR SOMEONE ELSE, as I've not seen that online.

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By Sanjeev Nanda
31st Mar 2020 13:26

While not perfect, we stand way better than 90% of the developed world, which has yet to give its fledgling entrepreneurs, any life-line of sorts. Even USA has yet to rule in favor of their small-to-medium entrepreneurs, they too stand distressed at the moment. My only gripe is that the literature is still weak in some places. Nevertheless, a pulse of optimism is slowly rising in me, after weeks of coronavirus pandemonium.
~Sanjeev Nanda

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By meadowsaw227
01st Apr 2020 09:38

Hi all,
Just a general question about the minimum wage increase from the 1st April , do we have to adjust the hourly rate to take into account the increase before calculating the amount of furlough pay ?

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Replying to meadowsaw227:
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By sallyrichardson
01st Apr 2020 09:56

It is our understanding that furloughed pay claims will be based on the historic wages. As they are furloughed and not working NLW and NMW do not apply or need to be adhered to. This was on the HMRC website. So no - you cannot adjust it to the new levels for furloughed workers, just for people that are still working.

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By mkowl
01st Apr 2020 09:48

I can't say I empathise too much with those that have utilised the low salary / rest as dividends approach. They have contributed less in tax (yes it is now marginal I appreciate) but it has been deliberate behaviour fully in the knowledge it mitigated tax and maximised net pay.

To then seek a handout because they took that advantage seems disingenuous

Had an argument on Twitter with a football commentator - where he said there was no tax advantage and he was glad I wasn't his accountant. I suggested I was a better accountant than he was commentator

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Replying to mkowl:
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By norstar
01st Apr 2020 10:07

They are not seeking "a handout because they took that advantage", they are asking for help because like millions, all of their income has suddenly ceased and they can't afford to live...

I'm absolutely fed up with this rhetoric that people who simply set up in the way the tax rules of the country encouraged them to do (unless they were stupid or incompetent) are somehow less worthy of help than those who didn't. We all need to eat.

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Replying to norstar:
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By ChrisFinn88
01st Apr 2020 16:08

Here, here Norstar. Well said.

No one could have forecasted this, and very little would ever think to plan for such a situation.

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