The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020.
Update at 12th May 2020:
The government’s Coronavirus Job Retention Scheme will remain open until the end of October 2020. Furloughed workers across the UK will continue to receive 80% of their current salary, up to £2,500. From the start of August, furloughed workers will be able to return to work part-time with employers being asked to pay a percentage towards the salaries of their furloughed staff.
The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month. The scheme will continue in its current form until the end of July and the changes will allow more flexibility to come in from the start of August. More specific details and information around its implementation will be made available at the end of May 2020.
Who can benefit from the scheme?
The grant is available to put towards your company payroll costs as a result of loss of contract from either not being able to access your worksite or perform any work as a result of COVID-19. To benefit from the grant you would need to be put on “furlough”.
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.
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.
What is furlough and what are the conditions for putting either yourself as director or your employees on it?
If you are temporarily sent home because there is no work due to COVID-19, then you can be furloughed. You remain employed by your company when on furlough, but you cannot undertake work for or on behalf of the company during this period.
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.
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.
As an employer, what am I entitled to?
You will be able to apply for a non-repayable grant which covers up to 80% of your director’s fee and your employee’s wages (up to £2,500 per month for each employee), plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage.
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.
Example:
– 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.
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.
Example:
– 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.
What are the key considerations when making your grant claim?
We advise that you liaise with your Agency/end client and obtain a notification from them that your contract was effected due to the crisis and that you have no work. This then clearly establishes the eligibility criteria.
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.
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.
How do I make a claim?
The online service you’ll use to claim the grant is now available. In addition, HMRC have produced a calculator to assist you in working out your grant. If we act for you in respect of your PAYE affairs we can process your grant for you. HMRC have also provided a step by step guide to accessing your grant which you can view here.
When will the Coronavirus Job Retention Scheme be operational?
The online service you’ll use to claim to grant is now available. HMRC have produced a calculator to assist you in working out your grant and also provided a step by step guide to accessing your grant which you can view here.
What do I need to make my claim?
– Your employer PAYE reference number.
– 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.
– 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.
How do I receive the grant?
Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account. HMRC advise that this should take place within six days of applying for the grant.
Can I pay myself a director’s fee more than the grant amount?
You can choose to provide a top-up salary in addition to the grant, but we recommend continuing to pay your standard directors fee as a top up salary-this will not increase your grant as it is 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.
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.
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.
I am in my first trading period, can I make a claim under the job retention scheme?
Yes you can. In order to meet the criteria, you must have created and started a PAYE payroll scheme on or before 19th March 2020, enrolled for PAYE online and have a UK company bank account. In addition, you must have paid a director’s fee and made an RTI PAYE submission with your payroll details before this date too.
Am I allowed to undertake any work on a limited basis when on furlough?
To be eligible for the grant you must not undertake work for or on behalf of your company. This includes providing services or generating revenue.
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.
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.
Can I add a new employee and backdate their employment to 28th February 2020?
No, to be eligible for the grant, the employee must have been on our PAYE payroll on 19th March 2020. In addition, you must have made an RTI PAYE submission with their payroll details before this date too. As your payroll is run on a monthly basis, then this employee would needed to have been included in the 28th February 2020 payroll RTI run, with contracts in place and evidence of work performed in this period. Employees hired after 19th March 2020 cannot be furloughed or claimed in accordance with the scheme.
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.“
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.“
Can I uplift my directors fee and backdate this to 28th February 2020?
We would express caution here. By looking to revise your current salary, increasing it to a higher amount and backdating this to take advantage of the job retention scheme, we would point out that we don’t currently know what tax avoidance measures HMRC will implement to combat this and 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.
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.“
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.“
I am going through the cessation process – can I stop this to take advantage of the Job Retention Scheme?
If you have previously made your decision to close your company for commercial reasons, then you will be not be entitled to apply for The Job Retention Scheme. This is because the Job Retention Scheme is principally for employees who are temporarily sent home because there is no work as a result of COVID-19. If you have not worked in your business for a period of time then it is clear that the reason for not getting paid is unrelated to COVID-19.
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.
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.
Should a director have money in their limited company bank account that can be drawn down upon should they be accepted in the scheme?
The Job Retention Scheme is a reimbursement scheme. Therefore if you qualify for the scheme, you do need to pay the payroll and submit the information to HMRC as usual.
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).
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).
If a Director can, should they take additional money from the business account?
If you were to draw down additional funds in your company, then this would be in the form of salary or dividends.
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.
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.
I am inside IR35 and working in the public sector – can I take advantage of the Job Retention Scheme?
If you have lost your contract because of COVID-19 and were on your fee payers payroll on 19th March 2020, then you may qualify for funds from your agency under the job retention scheme as a furloughed worker.
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.
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.
What if I am currently on maternity leave, adoption leave, paternity leave or shared parental leave?
The normal rules for the will apply. You can claim through the scheme for enhanced (earnings related) contractual pay for employees who qualify for either:
– 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.
– 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.