COVID19 Update: 6th April 2020: The government has now published further guidance on the Coronavirus Job Retention scheme – here are the most important clarifications and latest changes to the Job Retention Scheme – furlough facts below:
- Employees can start a new job when on furlough, this was not prohibited in the earlier guidance, but the new guidance expressly allows it. The guidance does say it has to be allowed under the old employment contract, but presumably the old employer can waive that.
- An employer can reclaim 80% of contractual commission back from HMRC, as well as basic salary. This can presumably only relate to the commission from past sales as the furloughed employees cannot be completing new sales when on furlough. The cap of £2500 per month total still applies.
- The 80% does not include non-monetary benefits (for example a company car)
- Company directors can be furloughed. They can still perform their statutory duties, but not other work for the company. Dividends are not included as part of the income a company is able to reclaim.
- Employees who were made redundant on or after 28 February 2020 can be re-employed and furloughed.
- A worker whose hours or pay have been reduced but who continues to work cannot be furloughed.
- Foreign nationals can be furloughed
- An individual employing a nanny or other domestic employee can furlough them as long as they were employed and paid through PAYE on or before 28 February 2020.
- A worker can undertake training as long as that training does not provide services to, or generate revenue for, or on behalf of their organisation. The guidance specifically states that furloughed employees should be encouraged to undertake training. They can also take part in volunteer work. There are specific rules on payments that need to be made when an employee is training, if you have any queries we would suggest you contact an employment law specialist.
- Agency workers may be furloughed. This will be agreed by the agency as the deemed employer, and the worker. Although it isn’t a specific requirement, it is advisable to discuss the need to furlough with any end client involved. If the employee is engaged by an umbrella, the umbrella must discuss the furlough with the worker in the place of the agency.
- Other groups who are paid via PAYE may also be eligible for furlough, even though they are not necessarily employees under employment law. For example, an office holder or a member of a Limited Liability Partnership (LLP). The LLP agreement, or in its absence, the Limited Liability Partnership Act 2000, may detail the relationship between the LLP and the individual member, which may need to be varied to permit a member to be furloughed.
- Employers can reclaim 80% of fees from HMRC. The previous guidance said they could not.
- Employees can be furloughed multiple times, i.e. they can be furloughed, brought back to work, then re-furloughed (subject to each furlough period being at least three weeks)
- Employers must notify employees of their furlough status in writing (the previous guidance did not require it be in writing) and keep the record of that written notification for five years.
Access to the Coronavirus Job Retention Scheme grant
Any entity with a UK payroll and a UK bank account will be able to claim, including individuals, businesses, charities, recruitment agencies and public authorities.
The online service through which claims will be made is expected to be available at the end of April 2020. The claimant, not HMRC, will need to calculate the amount being claimed.
The following information will be needed:
- ePAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
- the relevant bank account number and sort code
- claimant’s contact name
- a contact phone number
After checking the claim, HMRC will pay it by BACS to a UK bank account.
The guidance states that HMRC will retain the right to audit retrospectively all aspects of the claim. Clearly since the employer will have submitted their payroll through the Real Time Information (RTI) system, HMRC will use this to make the necessary checks.
Note that the employer must pay the employee all the grant received for the employee’s gross pay. The employer cannot charge and deduct a fee from the grant.
Tax consequences of the grant
The grant paid to the employer is included within the business’ taxable profits for income tax or corporation tax purposes. It is not clear whether the grant is taxable on an employer who is not trading, such as those employing domestic staff, e.g., an individual employing a nanny. The gross salary and associated NIC and pension costs continue to be tax deductible in the usual way.
The employee is taxed on the salary paid by the employer as usual.
We have published other key points to note for businesses and self-employed during the COVID19 Crisis: please click here to view.
We are here for you during this difficult time & we will keep you updated as the Government releases new information. Our business contingency plan is in place and we will do everything we can to support our clients during this uncertain period, please do not hesitate to contact us here if you have any concerns or queries.
The information contained above is for general guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, please note that each individual has different circumstances and it is essential that you seek appropriate professional advice before you act on any of the information contained herein. HB Accountants can accept no liability for any errors or omission or for any person acting on or refraining from acting on the information provided in the above