The Coronavirus Job Retention Scheme
Government grants relating to Coronavirus (COVID-19)
It is important to note that all grants received from the government to provide support in respect of COVID-19 are taxable. For companies, the funds received will be added to income in the annual accounts. For the self employed the grant will be added to your profits and reported in your tax return.
Company directors are not self employed, they are employees of the company. A director may be self employed if they have another business which they operate as a sole trader or partnership, provided that that is their primary source of income.
Claim for wage costs through the Coronavirus Job Retention Scheme (COVID-19)
Guidance for employers
- the Government expect the scheme to be up and running by the end of April 2020.
- Employers can use a portal to claim 80% of furloughed employees (employees on leave of absence) usual monthly wage costs up to £2,500 per month plus Employer NIC and minimum automatic enrolment employer pension contributions on that wage.
- Employers can choose to top up gross wage costs to 100% but do not have to.
- the Government portal is not yet up and running, it is expected to go live sometime in April 2020
- a temporary scheme for at least three months from 1 March 2020
- open to all UK employers that had a PAYE scheme in place on 28 February 2020
- Individuals on National Living Wage or National Minimum Wage are only entitled to the minimum wage for the hours they work. So if they are furloughed and do not work, and 80% of their normal earnings would take them below the minimum wage based on their normal working hours, they still only receive 80% as they are not working. However, they are entitled to be paid NMW for any time spent training.
- to be eligible, the employee must have been on the payroll on 28 February 2020. If they were hired later, they are not eligible. Anybody who was on the payroll on 28 February and has since been made redundant can be rehired and put on the scheme
- furlough leave must be taken in minimum blocks of three weeks to be eligible for funding
- there is nothing in the guidance which prohibits rotating furlough leave amongst employees, provided each employee is furloughed for a period of at least three weeks
- the employee must not be working at all. If they work for even an hour (presumably during their entire three week furlough period), they are not eligible. However, they are able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer.
- If an employee is working on reduced hours they will not be eligible.
- employees on sick pay or self-isolating cannot be furloughed, but can be furloughed afterwards. Employees who are shielding can be placed on furlough.
- employees on maternity (or similar) leave can continue to draw SMP (or similar) payments. The guidance does not prohibit women on maternity leave agreeing to return to work early and then being furloughed, or electing to change to shared parental leave and then being furloughed.
- employers can only claim once every three weeks, i.e they cannot get weekly reimbursement. Claims can be backdated to when an employee was furloughed with a backstop of 1 March 2020.
What you can claim
- employers need to make a claim for wage costs through this scheme.
- for salaried employees the employees actual salary as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should be excluded.
- for employees whose pay varies, if employed for over 12 months the higher of the same months earnings of previous year or average earnings for 2019-20 tax year. If employed for less than a year use their average earnings.
- employers should discuss with their staff and make changes to the employment contract by agreement
- to claim you will need, PAYE reference number, number of employees being furloughed, claim period, amount claimed, employers bank account details, contact name and your phone number
- the employer will need to calculate the amount you are claiming. HMRC have the right to audit this retrospectively
- the scheme is temporary and is operated through your payroll. Your payroll should continue to be processed in good faith at the revised pay level.
- the employer is responsible for calculating the amount claimed which HMRC can audit
- any steps taken should be in keeping with the contracts of employment and of course subject to employment law in the usual way