The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020.
March 2021 Update :The Coronavirus Job Retention Scheme is to be extended….
The “furlough scheme” will be continued until September 2021 with all terms staying the same. (80% of income for employees out of work up to £2,500).
As of July, companies will be asked for a 10% contribution, and then rising to a 20% contribution in August and September.
HMRC have also extended the qualifying period – i.e. for periods starting on or after 1 May 2021, you can claim for employees who were employed on 2 March 2021, as long as you have made a PAYE RTI submission to HMRC between 20 March 2020 and 2 March 2021, notifying a payment of earnings for that employee. You do not need to have previously claimed for an employee before the 2 March 2021 to claim for periods starting on or after 1 May 2021.
Update – Changes to the furlough scheme from 1ST July 2020- “flexible furloughing” in the New Coronavirus Job Retention Scheme
– Been an existing furloughed director/employee, furloughed for at least three consecutive weeks between 1 March and 30 June 2020.
– A UK PAYE scheme that started on or before 19 March 2020
– Enrolled for PAYE online
– Submitted a report under the Real Time Information (RTI) reporting system for that employee on or before 19 March 2020
– A UK bank account
As a director, there is requirement to retain detailed records of you part time hours worked from July 2020- your usual hours worked and furlough hours would be disclosed on your furlough grant application.
If you are adopting flexible furlough, then you do need to issue revised furlough agreements to your employees to accommodate for any changes to their earlier furlough agreements.
Any CJRS claims which straddle 30th June must be split into two to cover the June days and the July days of the furlough period- as from 1st July 2020, the “new” CJRS is in operation.
Post July 2020, the total number of employees claiming furlough must not exceed the numbers in any claim made prior to 30th June 2020.
June: The government pays 80% of wages, capped at £2,500. It also pays employer National Insurance and pension contributions. Employers don’t have to pay anything.
July: The government pays 80% of wages, capped at £2,500. It also pays employer National Insurance and pension contributions. Employers don’t have to pay anything but ‘flexible furlough’ will be an option.
August: The government pays 80% of wages, capped at £2,500. Employers have to pay for employer National Insurance and pension contributions.
September: The government pays 70% of wages, capped at £2,187.50. Employers have to pay for employer National Insurance and pension contributions, and 10% of wages – with the 70% from the government, this makes up the 80% total, capped at £2,500.
October: The government pays 60% of wages, capped at £1,875. Employers have to pay for employer National Insurance and pension contributions, and 20% of wages – with the 60% from the government, this makes up the 80% total, capped at £2,500.
The end date for Coronavirus Job Retention Scheme is 31 October 2020.
Employers will have until 31 July 2020 to make any claims in respect of the period to 30 June 2020.
About the Coronavirus Job Retention Scheme
As a director paying a directors fee in your company and making RTI submissions via a PAYE scheme, you can receive a grant that will help to pay for your directors fee (and any other employees you may have) over the next three months. Please note, the advice is constantly changing and updates can be found here on the HMRC website.
To be eligible for the grant, your company should “write” to you and any employee’s you may have, and confirm that they have been furloughed and keep a record of this communication. Employees hired after 19th March 2020 cannot be furloughed or claimed for in accordance with this scheme.
Furloughed employees can include those currently being paid SSP (if there is a business decision that merits this). Also if you are shielding in line with public health guidance (or need to stay home with someone who is shielding), you can be furloughed.
In addition, if you are unable to work because you have caring responsibilities resulting from coronavirus (COVID-19) you will meet the furloughing criteria. For example: if you need to look after children.
For those who are paid the same amount on a weekly/monthly basis (such as a Directors Fee) your actual salary before tax, based on your last pay prior to 19th March 2020, should be used to calculate the 80%.If you are paid monthly, your claim should be based on your salary at 28thFebruary 2020, if you are paid at the end of the month.If you are furloughed mid-month, then the amount you can claim is pro-rated to reflect the furlough period only.
Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.
As your director’s fee is set at the Employer’s National Insurance threshold then there would be no grant claim as you do not pay it. As a reminder, the main reasons to process your director’s fee of £719 (2019/20) is to utilise your personal tax allowance efficiently (if you have no other employment income or pension income), benefit from corporation tax relief and ensure that you making adequate credits towards your state pension. We would recommend that you continue to do this.
– Director is furloughed on 1st March 2020 to 30th April 2020.
– He should continue to pay his directors fees as normal in March 2020 (£719) and in April 2020 (£732).
– When the portal is accessible then you would claim 80% of £719 (as its based on your February 2020 salary) against each of the director’s fees.
It’s important that you continue to pay your directors fees’ and submit your RTI submissions on time to benefit from this grant.
You should not undertake any work for the agency/end client during the furlough period. If you have work that you have not yet invoiced then we suggest that you do this immediately and your furlough period will commence after this period. The grant can be backdated to 1st March 2020 if appropriate.
You should continue to pay your director’s fee as usual.
As a director of your PSC, your confirmation of being furloughed (and any other employees) should be formally adopted as a resolution of the company, noted in the company records and communicated in writing to you and any other employees. This should include directors in receipt of directors’ fees and the amount being received at February 2020 which form the basis of the grant. This information needs to be to retained by your PSC for five years.
– The number of employees being furloughed (this may just be yourself if you are the sole director/employee in your company).
– Your Name and the names of any employees you want to furlough (including their National Insurance numbers and any payroll/works number).
– Corporation Tax Unique Taxpayer Reference or Company Registration Number.
– The claim period (start and end date).
– Amount claimed (per the minimum length of furloughing of 3 consecutive weeks).
– Your company bank account number and sort code.
– Your contact name.
– Your phone number.
You will need to calculate the amount you are claiming. This will be based on your directors fee and/or other employee last pay period prior to the 19th March 2020. If you are paid monthly, this will be February 2020. We can provide the above information to you on request.
However, if your directors fee is variable (for example if you work in the private sector and are Inside IR35) then your grant will be based on the higher of either:
– The same month’s earning from the previous year;
– Average monthly earnings from the 2019-20 tax year.
There should be no trading income in the period as you have been furloughed because of COVID-19. If you do, then your period of furlough ceases because as you will be in receipt of company income and should not apply for the grant.
However, in your position of director (as office holder), you can continue to advertise/market your company and perform general administrative duties to support your company operations.
If you wish to retrospectively add another employee, we don’t currently know what tax avoidance measures HMRC will implement to combat this and we would not encourage this as it may trigger future HMRC investigations.
Our view is that it does not appear to be within the spirit of the scheme which is designed to protect jobs that would otherwise be lost. Please note that:
“HMRC will retain the right to retrospectively audit all aspects of your claim.“
Our view is that it does not appear to be within the spirit of the scheme which is designed to protect jobs that would otherwise be lost.
As you have varied your salary, then you may be subject to the claim rules surrounding “Employees who pay varies”, namely:
If the employee has been employed for a full twelve months prior to the claim, you can claim for the higher of either:
– The same month’s earnings from the previous year
– The average monthly earnings from the 2019-20 year.
This has the effect of reducing the amount assessable for the grant.
Similarly, an uplift in salary in February 2020 could imply that this amount was a “bonus” and these are excluded for grant purposes. Please note that:
“HMRC will retain the right to retrospectively audit all aspects of your claim.“
If your PAYE scheme has not yet been closed, we would not advocate reinstating your salary to take advantage of the job retention scheme based on our comments above.
You would then claim the grant, via the online portal which is equivalent to 80% of your director’s fee based on the last pay prior to 19th March 2020. If you are paid monthly, your claim should be based on your salary at 28th February 2020, if you are paid at the end of the month.
Your payroll costs will be reimbursed by the government over your March, April and May 2020 payrolls (if you were furloughed on 1st March 2020 for the three month period).
For example, if you were to uplift your salary in April 2020, then income tax and National Insurance would be due on this amount but your rebate accessible via the Job Retention Scheme online portal would be restricted to 80% of your February salary. Dividends are taxable as normal under dividend rates and do not benefit from relief via the Job Retention Scheme.
To qualify, the public sector organisation (end client), you (your PSC) and your fee payer (agency) should confirm your furloughed status and you should formally agree that no work is being completed for the public sector organisation during your period of furlough. We advise that you put this agreement in writing.
The maximum amount that the fee pay payer would be able to apply for is 80% of the monthly contract value up to a maximum of £2,500, which they would pay into your company net of tax and insurance, as usual.
If the above circumstances apply and you are a customer of Brookson, it is important that you advise us of your furloughed status, and provide relevant payslips evidencing this. This is because you are obliged to submit the amounts you withdraw from the company (which should generally be no more than the funds received) as non-taxable income via your PAYE return.
– Maternity pay
– Adoption pay
– Paternity pay
– Shared parental pay
If you are returning from statutory leave, claims for full or part time employees returning from statutory leave after 28th February 2020 should be calculated against their salary, before tax, not the pay you received whilst on statutory leave.