Owner Kate Upcraft Consultancy Ltd
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Coronavirus job retention scheme: Get the details right

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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Coronavirus Job Retention Scheme details - 30 April update

Who can claim?

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. This extension is widely understood to be put in place to avoid businesses having to start redundancy processes to take effect from the end of May.

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:

  • Businesses
  • Charities and not-for-profit organisations
  • Individuals employing domestic staff (4 April update)
  • Public sector organisations (see below re: public funding)

Which employees?

To reclaim a CJRS grant from HMRC, the employer has to designate employees as furloughed (essentially a period of paid leave when they cannot work) other terms and conditions of employment continue unless these have been varied too, (see How to Furlough below).

Whilst furloughed staff can’t do any work for the employer that furloughed them, they can undertake training, work for other unconnected employers (see Direction para 6.2), work on a self-employed basis (see Directors below) or as a volunteer.

The guidance refers to employees (and occasionally workers). HMRC confirmed on 4 April that the following individuals are covered:

  • Employees on any type of employment contract including zero-hours, flexible, part-time or fixed term
  • Apprentices (make sure you follow the guidance on continuing apprentice training and NMW)
  • Agency workers (including those employed by umbrella companies)
  • Office holders (including company directors) - but only on their PAYE income 
  • Salaried members of Limited Liability Partnerships (LLPs).
  • Limb (b) workers - ie those on PAYE not those who are self-employed
  • Nannies and other domestic staff.

HMRC confirmed on 9 April 2020 the following employees are covered:

  • Unpaid leave - CJRS grant only covers employees who were on unpaid leave on, or after, 28 February 2020 and furlough can only begin when that period was due to expire eg return from sabbatical. Unpaid leave that begin after 19 March 20 cannot be covered under the CJRs
  • Maternity and paternity leave - those on statutory leave can return from that leave and be furloughed.
  • Sick leave - Furloughed employees who become sick can be moved on to SSP, and sick employees can be furloughed, but the CJRS only covers salary (SSP will not be paid by employer as SSP has ended)
  • Shielding - employees who are caring for someone or shielding can be furloughed.
  • Working for another employer - these employees can be furloughed as long as they are doing no work for the employer who is furloughing them.
  • TUPE transfers - where the transfer was made from 19 March onwards it does not affect the ability to furlough and make a claim. 
  • PAYE restructures – where employees are moved to a new PAYE scheme within the business to consolidate two or more schemes after 19 March 20
  • Deemed employees- those subject to the off-payroll rules in the public sector. These individuals can be furloughed and the CJRS can be claimed as long as there is no public money going to the individual from the project them were working on. Note this is a complete change from the previous position  for deemed employees as it was understood.

The following individuals will not be covered:

  • Workers engaged under a contract for services, ie sole traders being paid gross via an invoice. These individuals will have to claim under the self-employed support scheme. 

A business may need to furlough all employees if it has effectively closed down, as in hospitality or non-food retail. However, it can choose to furlough a group of employees, whilst key workers continue to work, or to rotate groups between furloughing and working.

Directors

The HMRC CJRS Direction confirms that company directors can be furloughed as long as they do no work for the business which employs them or for any "person" connected to that business. "Person" in this context includes individuals, charities and other companies. A director/ shareholder who controls a company remains connected with the company while he controls it, so any work he performs as a self-employed individual is treated as indirect work for the company (CJRS Direction para 13.4).  

Paragraph 6.6 the CJRS Direction clarifies that directors may fulfil a duties or other obligations arising by or under an Act of Parliament relating to the filing of company accounts, or provision of other information relating to the administration of the director’s company. Those tasks are not counted as work for the company for CJRS purposes. HMRC guidance has indicated that the director must do no income generating work for their business.

Public sector bodies

The government expects that most public sector bodies will still have the majority of employees working in frontline services.

The 4 April HMRC guidance says: "Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs."

This has generated an area of major confusion as there are numerous employers who receive some sort of public funding even though they are not strictly in the public sector, such as nurseries receiving early years’ funding and universities. The public funding may be only a small proportion of their overall income and the rest of their income has been severely impacted as a result of COVID-19, so some clarity is needed as to whether any public funding causes the employer to be unable to furlough. Let’s hope we can rely on the phrase: where organisations are not primarily funded by the government’ (my italics).

When were they employed?

On 15 April HMRC changed the cut-off date for eligible employees from a start date of 28 February or earlier to 19 March 2020. However, all employees included in the CJRS claim must also have been reported to HMRC in an RTI submission by midnight on 19 March 2020, and must have received some pay in 2019/20.  

HMRC categorically confirmed on 28 April that employees and directors who had reported thier only 2019/20 earnings under RTI after 19 March 2020 cannot be included in the CJRS. This affects all employees, not just directors on annual schemes who tend to pay themselves at the end of March.

Where employees were added to a March payroll retrospectively because they missed the February payroll cut-off date, they may have still missed the 19 March cut-off date if the March FPS was not sent until after 19 March.

It is useful to see in the updated HMRC guidance on 4 April (and expanded on 15 April) that people could be re-employed by their old employer if they had resigned since 28 February and had now had their new job offer withdrawn. However, this is the employer's choice and not an employee's right.

Employers need to be aware of the pitfalls of re-employing former employees. For example is this a new contract with a different salary and benefits package or are they being reinstated on the previous terms? It could make a huge difference to the pay they are receiving and what the employer can legitimately reclaim. Also will this additional period of service give the employee two years of employment and therefore entitlement to redundancy pay in the future or protection from unfair dismissal? If the employer decides not to reinstate everyone who was made redundant in March could there be an issue of discrimination?

The CJRS is effective from 1 March so changes to March payrolls can be made retrospectively to change employees’ status to ‘furloughed’ and reinstate those who had already been made redundant due to COVID-19. However, the PAYE scheme must have been in existence on 19 March 2020 (as per 15 April guidance).
 

How to furlough

The CJRS doesn’t override employment law. The employer must mutually agree with an employee, ideally in writing as it’s a contract change, that the employer is designating them as furloughed (there is no work for them due to COVID-19) and what the employer is planning to pay them whilst furloughed.

Decisions to furlough and the amount to be paid are a contract change. HMRC confirmed on 4 April that this decision must be put in writing to the employee and the employer must retain a record of this communication for five years. However, the employee does nto have to respond to this communication in writing. 

In order to take advantage of the scheme employees should be paid at least 80% of their pay based on their pay in the last pay period before 19 March 2020, tax year 2019/20, or the same pay period last year, whichever is the higher.

Some businesses may choose to continue to pay full salary even though they can only reclaim 80% up to the cap. Other employers may only be able to pay 80% of regular salary or even less than that, until the CJRS grant arrives – but they must retrospectively pay the employee to meet the 80% value or will be in breach of the scheme.

An employee can be furloughed for a minimum of three weeks at a time and the government have extended the scheme to 30 June 2020. The individual could remain furloughed even if the CJRS is not extended, but then the employer would not have any grant funding to cover their wages. HMRC confirmed on 20 April that a furlough period can be extended for a shorter period thant three weeks as long as the initial period of furlough was at least 21 days.

Salary sacrifice

There have been lots of questions about salary sacrifice, particularly in respect to pensions where employees are concerned because of the reduction in their net pay and employers because of the increase in their pension contribution exposure. The HMRC guidance updated on 4 April now says that future contract changes (and that is crucial as a salary sacrifice contract change should be in place before the payday in which it takes effect – so not retrospectively) are acceptable even if the sacrifice hasn’t been in place for 12 months as this can be classed as a lifestyle event.

But this will not affect the  CJRS claim which is based on the last pay day before 19 March. The Pensions Regulator provided new guidance on salary sacrifice on 17 April. It is vital that employers do not further reduce furlough pay to meet a sacrifice agreement or they will be in breach of the scheme.

How much will be paid?

The grant from the CJRS will be the lower of £2,500 per month per employee or 80% of gross regular wages plus employer NIC on the grant figure plus 3% employer pension contributions on the grant figure using the qualifying earnings threshold (see example). On 9 April HMRC confirmed that employers must not claim for the 3% pension contributions if the employee is not in the pension scheme. 

The apprenticeship levy can’t be claimed as part of the CJRS grant.

The 9 April update clarified that any employers' NI covered by the employment allowance cannot be included in the CJRS claim.

When calculating claim values for directors of owner-managed companies you can only consider the salary that has been subject to PAYE, not any dividends paid to those directors.

HMRC has made a calculator available help you work out how much to claim, which on 22 April was updated to deal with employees with varible pay.

Running the payroll

It is important to distinguish between the CJRS grant funding and normal payroll operations which continue, other than that employees won’t necessarily be receiving their former contractual wages. On 23 April HMRC published guidance on reporting payments from the CJRS under RTI.

To decide how much to pay, employers will need to calculate how much the CJRS grant will cover. The £2,500 cap refers to regular wages as in their last pay period before 19 March (per 15 April guidance), excluding bonuses, fees, "compulsory" commission and tips paid from a tronc. The HMRC guidance update on 4 April confirmed that overtime is to be included, but not discretionary bonuses (including tips not from a tronc) and commission payments, nor non-cash payments.

For an individual with variable pay, such that the last pay period before 19 March was not an indicative week or month, their average earnings over 2019/20 or the period of employment during that year can be used. The HMRC calculator has now been updated to cope wiht employees who have variable pay.

The figure that is agreed with the employee to be paid in the period of furlough will treated as normal earnings, subject to all statutory and voluntary deductions, reported under RTI with the remittances paid over to HMRC by the normal deadline.

What is paid through the payroll will not necessarily equal what can be reclaimed from HMRC.

The claim

A standalone portal was introduced by 20 April 2020 to allow the CJRS grants to be claimed. HMRC has published a step by step guide for employers on how to make a claim. For more information on how to claim, see this AccountingWEB article

Repeated claims for CJRS will be required for the same employer if the furlough period is extended. As long as the next claim follows on sequentially by date from the claim before, the CJRS claims can be submitted more than three weeks apart.

On 15 April HMRC confirmed that the employer will have to provide the NI number and name for each employee included in the claim, but the payroll number is optional. However, some employees don’t have a NINO, in which case you should contact the HMRC  COVID-19 Helpline on 0800 024 1222 who can process their claim over the phone.

A major concern is that there may be a requirement to have a PAYE online account in order to make a claim. Thousands of businesses, particularly SMEs that outsource their payroll operation to a tax agent don’t have a PAYE online account. Those businesses will have furloughed employees in March on the understanding, from the initial HMRC guidance, that as long as they had a UK bank account and an operational PAYE scheme that was sufficient to be able to make a reclaim in due course. ICAEW have provided a step by step guide to agent authorisation as it stands at 20 March 2020.

As one amount of CJRS grant will be claimed for a group of employees you need to consider how this will be reconciled once it is paid into the company’s bank account (it needs to be a UK account).

HMRC will reserve the right to investigate claims and cross-reference them to RTI data.

 

Replies (222)

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Replying to norstar:
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By DawnBYF12
01st Apr 2020 18:52

I agree with you. We have a micro business -myself and my husband and our profits are quite modest after paying corporation tax and having the dividend amount of our "salary" taxed. For the hours we have to put in to achieve this we are on less much less than minimum wage. We paid in to NI fully for over 35 years before being forced into working for ourselves due to redundancy. Like everyone else on here we have a mortgage and bills to pay as well as suppliers & other expenses so that we do still have a business when this is all over. Unfortunately so far it would appear that we are on our own.

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Replying to mkowl:
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By AdShawBPR
01st Apr 2020 10:21

If the government provides us with a set of stupid, complex and illogical rules which means if you do something one way the tax will be X but do it another way and the tax will be Y, then why on earth wouldn't any sane person choose the route with less tax? Many of these people will have been forced down this route by the employer and will be saving little or no tax. My personal view is that if you are going to give a sole trader a grant based on the earnings from his/her work, it would seem to me to be fair to do the same for a director of a small business - and I can't see whyn it shouldn't be based on salary + dividends. The chancellor alluded to it the other day but if this is the wake up call government needs to stop dicking around with crazy rules like IR35 and others and can produce a set of coherent, straight forward tax rules then that at least would be a good thing to have come out of all this.

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Replying to AdShawBPR:
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By [email protected]
01st Apr 2020 11:45

I agree with you regarding how stupid the tax laws are. However, one major saving with dividends has been that of NI payable. There is a clue in the wording National Insurance.
Personally, whilst I have always taken dividends in the past I have paid myself up to the higher rate band in the normal way. To me it was about fairness to the rest of society and contributing my 'fair' share of NI.
Of course, we could have a wholly different conversation as to whether NI is in fact just another tax, particularly as these days there is no upper limit.
Again I must agree with you absolutely that the whole regime needs a total rethink.

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Replying to mkowl:
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By Jimess
01st Apr 2020 10:48

Such companies tend to pay more in corporation tax due to the disallowance of dividends for tax purposes. When you factor everything together for a company with profits at the limit suggested for the small business grants for sole traders and partnerships - there is not a lot of difference in the overall tax liability, it is just where it is paid. A lot of small businesses are run via companies for lots of different reasons, some to do with maintaining family ownership. They are as badly affected as sole traders and partnerships during the shutdown but seemingly are entitled to little or no help during this coronavirus pandemic.

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Replying to mkowl:
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By Peter Bromiley
01st Apr 2020 11:09

Yes you're right. Let them starve. That will teach them to form a company and comply with the country's tax laws.

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Replying to Peter Bromiley:
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By mkowl
01st Apr 2020 11:39

They will probably be entitled to 80% of the £8,620 /12

And are probably paying their wife who has probably been furloughed from day 1 of the company - so times 2

And perhaps they should have retained some profit in their companies to cover a rainy day fund rather than withdraw every penny each month

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Replying to mkowl:
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By Jimess
01st Apr 2020 12:36

Again - a sole trader or partners in a partnership could employ wives/family members and claim furlough relief. The difference being that they (depending on circumstances) may also be able to access the small business grant based on their profits, which a small business trading through a limited company cannot.

As for saving for a rainy day - that applies to everyone in business - not just companies, and rainy day funds only stretch so far.

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Replying to mkowl:
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By AdShawBPR
01st Apr 2020 13:32

Quite a few 'probablies' in there. I can only speak of my own client portfolio but the proportion of my clients working through limited companies who pay their wives is 6.7%. And of that 6.7%, half do valuable work for the company, be it bookkeeping, general admin, directors' duties, revenue generation, etc. That leaves 3.4% paying their wives to do director duties only.

It would be more tax advantageous to them if they did leave their money in the company but most do take out what they can because they don't earn enough to be able to leave it in the company. My experience with my self-employed sole traders is that they tend to be less careful with their money as they don't have to abide by the rules governing a limited company.

There seems to be a perception that everyone working through a limited company is on the take. Probably! There will be some who are on the take, just as there will be sole traders taking cash, fiddling expenses etc. There is no reason to treat this section of the business community any differently from others.

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Replying to mkowl:
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By djames
04th May 2020 11:36

I would suggest that you would be a terrible accountant and wouldn't last 5 minutes in the job if you didn't act in the best interests of your client.

This jealous attitude that because some people have arranged their affairs, or being forced to arrange their affairs, in a way that meant they were paying a little less tax than the employed, then they should not be entitled to help from the Government (who in previous years had actively encouraged businesses to set up in this manner) is getting a bit tiresome.

As an accountant I empathise with all clients, no matter what their employment status and how their affairs are arranged, as long as they are acting with the legal framework. If the government wasn't happy with the way people organise their business it would be a relatively simple matter to change it. The fact is they haven't and they even 'employ' such people in their own departments, so you've got to think that they are happy with the situation. That being the case then they should recognise that this sector has been short changed by the recent schemes.

Unfortunately, the 'I'm alright Jack and I don't give two hoots about someone who was paying a bit less tax than me' attitude isn't really going to get us through this. Hopefully you won't need the services of one of these 'tax dodgers' in the near future - a barber, a gas-fitter, an electrician, a builder, a washer-repair man, or even an accountant. If you do then make sure you keep your prejudices to yourself!

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By Marcpat
01st Apr 2020 09:56

Good morning.
Question, if we furlough a group of employees from the 23rd March (having paid them weekly for work done up to that point), am I right in thinking that they won't get the full 3 months support, but only on wages paid from the 23rd?
The same could be argued for directors as outlined above who would have been generating income throughout March.

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Replying to Marcpat:
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By sallyrichardson
01st Apr 2020 10:01

It is our understanding that you can only claim from the date each staff member was furloughed. It can only be backdated to 1st March if they were furloughed from 1st March i.e. they weren't working. For our practice we are setting up a spreadsheet for each payroll to calculate each staff member's furlough pay based on their salary / variable pay the same month last year / variable pay averaged over 12 months. You will then need to report the total furloughed claim for the payroll to the HMRC every 3 weeks. They will have the right to look at your detailed calculations by employee if they wish to.

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By Cathy Milligan
01st Apr 2020 09:59

Hello all,
Does anyone know if running the payroll and bits of bookkeeping counts as "work". If I furlough my self, I can't do the wages. If I do run the wages, i am working and thus getting just 1/2 hour pay for the month.
Any ideas?
Thanks.

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By gaustin
01st Apr 2020 09:59

Can anyone advise on the position in respect of Tronc payments to employees.

It is quite common for staff in restaurants on an hourly paid basis to be paid a minimum wage + a split of service charge receipts. So for example if an employee has historically earned £400 per week in basic wages + £200 per week Tronc (share of service charge receipts), and the employer is going to pay 80% of regular wages whilst employees are furloughed - is the 80% applied to £400 or £600.

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Replying to Cathy Milligan:
By coops456
01st Apr 2020 11:26

@CathyMilligan
If you are a director, then that would fall under statutory work and is permitted whilst furloughed.

If you are an employee, then you cannot perform any work for the employer whilst furloughed.

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Replying to Cathy Milligan:
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By M Bell
01st Apr 2020 11:59

My guess is that that would be ok because it's not generating income for the business?

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Replying to Cathy Milligan:
Helen Froggett Thomson
By Helen Froggett-Thomson
01st Apr 2020 13:37

Hi, this is a couple of solutions I've been thinking about. You could employ someone else to do that admin for you, if it's only half an hour a week? and therefore keep yourself furloughed legally. It could be someone who is furloughed from a different company, someone who does payroll? Perhaps accountants could buddy up and do this for each other? OR you could furlough yourself for three weeks a month and be back to normal for a week doing the admin and emails and whatever, and then re-furlough yourself. It's designed to be a three week at a time process and I wonder if this is why?

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By OrmeGoat
01st Apr 2020 13:03

"Owner-managed businesses can make a claim from the CJRS .......on the understanding 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."

So what happens when they pay their employees? I accept it isn't "income generating work" but neither is it "statutory work".

Please copy Rishi Sunak into any replies.

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By KenKLM
01st Apr 2020 10:04

“Statutory” duties should be clarified . Picking up emails to your business or keeping in touch with customers and suppliers so that when the business can re-open it is in a decent position should not penalise a claim when the self employed are being told they can carry on working and still be entitled to claim if impacted . It should read “can perform administrative duties to protect the business but the business is not performing its normal income generating work” . Then small business directors know where they stand . The fact it will be restricted to salary is what it is - we save the NI so can’t complain in my view but agree it does seem discrimination compared to what self employed have been given. We are having to tell directors to do absolutely nothing which is ridiculous .

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By thump3s
01st Apr 2020 10:08

I have a number of concerns over the wording of some of the Gov guidance which I suspect will cause major issues once this blows over once the legal vultures come circling.

Staff will have a contract of employment, implied or written, which covers their remuneration. It seems to be a given that if staff are furloughed that they will be paid 80% (unless the employer is covering the additional 20%). This is clearly an alteration of their contractual terms and needs to be expressly agreed? in the absence of this agreement I really worry that businesses are going to face a legal claim for the 'underpayment' at some stage (particularly if redundancy / dismissals happen subsequent to this)

In my opinion there needs to be a clear distinction over what the staff and what the Government pays the business under the scheme?

It doesn't help when you've got the money lending expert lobbying for businesses to re-employ staff that have left and to furlough them. Excepting some sort of feeling of social responsibility I don't see why they would take the risks involved especially whilst they are struggling to adapt and survive right now.

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Replying to thump3s:
By coops456
01st Apr 2020 11:39

It's true, furloughing has no meaning in UK employment law. There could be fallout from this but I hope social responsibility will prevail all round.

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Replying to coops456:
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By Brian Gooch
01st Apr 2020 12:58

That (fallout) probably depends primarily on whether employers agree it with employees or simply impose it on them, which would likely be a breach of contract - certainly if they don't continue to pay them 100%

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By whiteways
01st Apr 2020 10:17

"Whilst furloughed staff can’t do any work for the employer that furloughed them, they can undertake training, work for other employers, work on a self-employed basis or as a volunteer."

So are we saying the the Director of a one man band limited company can furlough himself under the company's PAYE scheme, but continue to work on a self employed basis?

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By ANDREW RUSSELL
01st Apr 2020 10:40

Can someone clarify the position re ers NIC on the furloughed pay.The claim for the 80% rebate includes the related ers NIC on the pay.Can this still be claimed even if the total ers NIC for the business is covered by an EA claim through RTI?

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Replying to ANDREW RUSSELL:
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By sallyrichardson
02nd Apr 2020 11:47

Employers can claim their ER costs. If they don't have a cost as they get Employer's Allowance then no, we don't believe they can claim the ER NI, just the gross pay and any pension contrbutions.

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Replying to sallyrichardson:
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By Death
08th Apr 2020 10:27

Just catching up on reading so apologies if this has subsequently been addressed but can't employers just not claim the Employment Allowance through their payroll software until later in the tax year?

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Replying to Death:
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By SXGuy
08th Apr 2020 10:47

Of course. But why would they? Just don't include the employer ni in the furlough calculation. If there's none to pay there's none to recover.

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Replying to SXGuy:
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By Death
08th Apr 2020 10:56

I'm thinking for those employers that end up paying Ers NIC later in the year after the allowance has been used up in the early months - so why not hold on to the allowance until later down the line?

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By GillD
01st Apr 2020 11:14

We have a couple of clients where there are employees are paid under the tax and NI thresholds so there is no requirement for a PAYE scheme. Employees are still issued with payslips and the deduction for wages claimed through the accounts. Is there any mechanism for reclaiming the 80% in this situation?

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Replying to GillD:
Kitten
By Hazel Accounts
08th Apr 2020 11:28

Unfortunately not, it specifically says they have to have been on a PAYE scheme at end Feb 2020

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By Taxbod
01st Apr 2020 11:28

Thanks Kate. I am the only person advising on this and have been flying by the seat of my pants. Thanks goodness my interpretations have been correct thusfar and thank goodness I have told my clients to pay a reasonable salary. The April date is a useful addition to the knowledge base.

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By matthew pennifold
01st Apr 2020 12:07

I cannot see any reference in the article to claiming only for the amounts paid out in respect of the time when staff are furloughed.

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By Sarahk87
01st Apr 2020 12:51

Hello all,

I am seeking any clarification whatsoever regarding the 28th February 2020 cutoff.

I have a client who had 3 workers employed on 24th February, but as stated in the article above, missed the cut off for the February payroll and were processed and paid in March. I had initially interpreted the guidance as Kate has stated in the article, i.e. that they will be eligible for Furlough as they started work before 28th, hopefully we all agree this is the sensible interpretation.

However, both me and the client have telephoned the HMRC Coronovirus helpline and been advised separately that they would not be eligible for Furlough funding as no FPS was filed in February with their starter details. The starter FPS submission was filed the 26th March, the day before they were first paid. It is my understanding that there is no requirement to file an FPS with starter details before the new employee is actually paid.

Hopefully, the helpline advisers have misinterpreted the finer points of the situation, perhaps not understanding from the description that the employees were physically present in work on 24th February. But it worries me that both me and the client have been advised the same thing separately. The owner of the business is making these three employees redundant today as he does not wish to take the risk that my interpretation is in correct!

Kate, I would welcome any reference for your statement above re the 28th February deadline and workers missing the February payroll cut off. Indeed any clarification anyone is able to offer woulf be gratefully received.

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Replying to Sarahk87:
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By Cathy Milligan
01st Apr 2020 12:55

I thought I had read somewhere that if there was a job offer and / or a signed contract and supporting emails etc of the intention to employ eyc, then we could claim for an employee who started on 1 March. Has anyone else seen this?

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Replying to Sarahk87:
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By WJP
08th Apr 2020 15:37

I have a new client who registered for PAYE in late March and received his employer reference numbers on the 6th April. Their first payroll should have been reported in January however registration was overlooked.

Submissions were made via RTI on the 6th April for January, February and March.

As per the article:

Only employees with a start date of 28 February or earlier are eligible, even if they were added to a March payroll retrospectively because they missed the February payroll cut-off date.

Whether a person is employed on the 28 February or not is a matter of fact which will be confirmed by the record for them on the National Insurance and PAYE service (NPS). Many employees will have been set up and paid for the first time in March but have a start date at the end of February which is on, or before, the 28 February. It is simply a matter of the practicalities of payroll cut-off whether they were paid in February or March. You will have the evidence in the form of starter details and contract letters that indicates that the employee was in employment on the appropriate date regardless of when the FPS was sent.

I am reluctant at this point to advise the client they can go ahead with making payments at the end of April to his employees who have been Furloughed.

I will be waiting for more guidance before advising him.

Is anyone in a similar experience and received any guidance from the HMRC?

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Replying to WJP:
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By Brian Gooch
08th Apr 2020 17:06

"I am reluctant at this point to advise the client they can go ahead with making payments at the end of April to his employees who have been Furloughed."

Presumably you mean you are reluctant to advise them whether they would be able to claim for those employees - whether or not the client should pay the employees is a matter of their contractual entitlement under employment law, independent of whether they can claim for those costs.

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By cfield
07th Apr 2020 09:47

How exactly do owner/directors furlough themselves? Must they write themselves letters? Will HMRC be checking this? I think not somehow, but best to be on the safe side I guess, so get writing.

As for the work criteria, there is no way they can police this. Statutory duties include acting in the best interests of the company so admin work like payroll to keep the company going is presumably OK, but fee-generating work may include emails and phone calls. Where do they draw the line? I can't see them being too hot on this unless a company is clearly continuing in business.

A director could also just carry on his business as a sole trader for the furloughed period, or claim to be, as no need to register any more if already on Self Assessment.

As for the block on dividends, no surprise there, but for the people thinking it's a bit rich to dodge tax/NI and then expect dividends to be treated as earnings for this purpose, don't forget that if they take a much higher salary, they will pay total NI of 25.8%. That's a major deterrent. Also, of course, many contractors have no alternative but to work through a company.

The real losers here are the IR35 victims, who are once again being shafted. No pension, no holiday pay, no employment rights, and now no Government help either, despite paying "the right amount of tax". Not exactly a "level playing field" is it?

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Replying to cfield:
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By whiteways
01st Apr 2020 13:20

"A director could also just carry on his business as a sole trader for the furloughed period, or claim to be, as no need to register any more if already on Self Assessment."

According to the OP, furloughed workers can work for another Company or self employed, so presumably you're correct, although I did request confirmation on this thread and there was no response (as yet).

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Helen Froggett Thomson
By Helen Froggett-Thomson
01st Apr 2020 13:20

Hi, thanks for this summary Kate. You've not mentioned this but I am sure you've heard about it, that the government (and specifically Martin Lewis as a spokesperson) are urging people to use their previous employer to re hire them into the system, if they were in between jobs or had started a new job after 28th February. So they can be furloughed.

Essentially using businesses as an extension of the Social Security system as the PAYE system is quite robust and the only effective simple mechanism for calculating the grants.

If this is fact, (time will tell on that) do you know how far back employers can go to re-hire, as in how long ago can they have left their previous employer? If they left, say in January, how would that work? if they left in Feb, but have not been paid, can they be furloughed for March (which is the impression I am getting)? How would that work? Look forward to hearing your thoughts on this. Thank you

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By unclejoe
01st Apr 2020 13:29

So as owner and director of a small struggling business if I am to take advantage of schemes to put food on the table for myself and my family, I am only allowed to undertake activity that is required by statute. The business has zero sales now. If I manage things from home there is just a possibility that I may have some sort of business left at the end of this. But I am not allowed, for example, to contact my customers (not statutory) or do anything that might just keep the business alive. Keeping employees furloughed is going to cost something, and to do so I will have to keep the business alive on life support (and I am not sure iif that is a statutory activity). So it seems to me I have a choice: terminate the company life support (and sack the employees) and get some government help to live, or keep the company alive and probably starve or become homeless myself myself. Or am I missing something. And I don't have much time to make the choice! Oh, and as an aside, the government have made it impossible for the landlord to evict me for the time being, but back rent will have to be paid, so we might get 6 months reprive on homelessness if we have not died of starvation before then.

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Replying to unclejoe:
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By sallyrichardson
02nd Apr 2020 11:39

From the HMRC guidance:

"To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions."

We are telling Co Dirs that as long as they are not providing services or generating income i.e. actively working or pursuing sales, then that's fine. Letting customers know what is going on and updating paperwork is in our opinion within the rules. The term "statutory duties" does not appear in the actual HMRC guidance anywhere.
Keeping workers furloughed shouldn't cost you any direct costs - you should be paying them the exact amount you can reclaim from the government, including ER NI and pension contributions. Your only costs may be if you pay someone to run the payroll.
This is just our opinion based on the HMRC wording. :-) Others may view it differently.

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Replying to sallyrichardson:
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By Brian Gooch
02nd Apr 2020 12:49

"you should be paying them the exact amount you can reclaim from the government" assuming of course that they have agreed to a temporary reduction in pay as part of their agreement to be furloughed.

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Replying to Brian Gooch:
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By sallyrichardson
03rd Apr 2020 12:53

We have instructed all of our clients to get agreement in writing for anyone they wish to furlough - Brightpay have a standard letter to use:

https://www.brightpay.co.uk/blog/2020/03/coronavirus-job-retention-schem...

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Replying to sallyrichardson:
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By whiteways
03rd Apr 2020 13:17

This is a dead link.

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Replying to whiteways:
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By sallyrichardson
04th Apr 2020 13:46

Sorry - it works fine for me. I have added the template to our website so you can download it:

http://www.clearcutaccounts.co.uk/uncategorized/coronavirus-job-retentio...

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By ohgoodgodno
01st Apr 2020 17:48

Can you confirm if employees have to furloughed for a minimum of 3 weeks as per the article - we thought that staff could be called back to work at any point when needed

is the 3 weeks not actually just the claim frequency?

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Replying to ohgoodgodno:
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By Brian Gooch
02nd Apr 2020 08:39

3 weeks is the minimum claim period BECAUSE it is the minimum period for which staff can be furloughed in order to qualify for the grant. It says it somewhere in the detailed guidance I think, published ~26 March

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By Dave Jaques
01st Apr 2020 18:10

I'm getting questions from businesses who can't afford to pay furloughed staff until the grants come through. Government guidance seems to imply that staff should be paid first and the grant claimed afterwards, but businesses which are shut down may not have the cash to do that. Loans under the business interruption loan scheme won't come through in time to resolve this. I'm suggesting they put the payments through RTI at the proper time then actually pay staff when they get the first grant. Is there any alternative?

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Replying to Dave Jaques:
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By thump3s
02nd Apr 2020 09:23

I think they have got a legal obligation to pay their staff at the normal time. That doesn't change because COVID-19 has hit us all out of left field.

The fact that the Government are effectively giving the business a grant to compensate it for some/all of staff costs is another matter entirely.

It's akin to saying to staff in normal times I can't pay you until a customer has paid me.......admittedly these are not normal times but the legal position is the same.

They are down to either borrowing or if not an option to get the employees to agree that they will be paid once funding is sought - this really should be done in writing to avoid issues down the line.

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Replying to thump3s:
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By rememberscarborough
02nd Apr 2020 10:39

Solid legal advice but if the money physically isn't there no beating the legal drum will alter the fact that it is not possible to pay them until the funds are there.

We've seen people hoarding toilet rolls etc in case they run out and many companies are doing this with cash so suppliers just aren't being paid. Many companies might survive until the grants/loans come through but a huge number will have gone to the wall before that.

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Replying to Dave Jaques:
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By sallyrichardson
02nd Apr 2020 11:30

Most of our clients with payroll have PAYE money, VAT money (which doesn't have to be paid now until next year) or Corporation tax money put aside. We are suggesting they use this money to pay the staff, then contact the HMRC Time To Pay helpline to arrange longer time to pay the taxes. In the circumstances I think the HMRC are being very flexible.
We're lucky in that most of our clients do as we suggest and do put this to one side.

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