The Coronavirus Job Retention Scheme was due to end on 31 October 2020 but due to the second National Lockdown, has been extended and is now expected to cover 1 November 2020 to 30 April 2021.
The scheme is largely based on the same principles as the previous “flexible furlough” scheme, which came into force from 1 July 2020. Here we summarise the key points from the updated guidance published by Government.
Which employers can qualify
- Employers that cannot maintain their workforce because their operations have been affected by coronavirus (COVID-19) can furlough employees and apply for a grant to cover a proportion of their usual monthly wages
- All employers can benefit
Which employees can qualify
- Employees who were employed on 30 October 2020, and who were included in an RTI submission submitted to HMRC between 20 March and 30 October 2020 can qualify for the grant.
- All employees can qualify, regardless of whether they have been previously furloughed or not. However, as with the last iteration, it is expected that Public funded organisations will not use the scheme.
- Unlike the furlough scheme to 31 October, there is no maximum number of employees that can be included in a claim.
- The guidance states that employees who cannot work from home but cannot go into work for health reasons (i.e. shielding) can qualify.
- There are special rules for employees returning from other leave (i.e. parental), for workers that were made redundant and re-employed after 23 September, and for employees TUPE’d during the year. We recommend seeking bespoke advice if this applies to you.
What can you claim
- Employers can claim a grant to cover 80% of an employee’s wages for hours not worked, up to a maximum of £2,500 per month for employees who you have furloughed for the entire month.
- The grant does not cover pension contributions and NIC, so employers will be liable for those.
- Employees can be on full time furlough (where they do no work for the employer), or flexible furlough (where the employee does some work for the employer, but is on furlough for the remainder of the period).
How do I calculate furlough grants & wages
There are some fairly complex rules relating to the periods that claims can cover, depending on whether an employer pays their employees monthly or weekly, and the dates which the period runs to (i.e. end of month, or during the month).
The key message is to seek advice if you are unsure how to calculate the grant, however, the principles are:
- For fixed pay employees the reference pay is based on either the last pay period up to 19 March, or the last pay period before 31 October if the individual was not paid between 6 April 2019 and 19 March 2020.
- For varied pay employees, the reference pay is based on:
- For employees who were on a payroll submitted to HMRC by 19 March 2020, this is calculated in a similar way to the previous schemes, i.e. it based on the higher of the wages in the corresponding period in 19/20 and the average in the 19/20 tax year up to the date of first furlough.
- For employees who were not employed in March 20, or were not paid prior to 20 March 2020, this is based on the average wages paid between 6 April 2020 and the date the individual was furloughed on or after 1 November 2020.
- For employees on full time furlough, the grant is based on the reference pay for the days on full time furlough out of the full pay period.
- For employees on flexible furlough, the grant is based on the usual hours for the pay period less the number of hours actually worked.
- Usual hours (for the purposes of flexible furlough) is based on:
- For fixed pay employees, the number of hours worked in the reference period ended on or before 19 March, or the reference period ended on or before 30 October 2020 if the employee was not employed in March 2020.
- For varied pay employees:
- For employees who were on a payroll submitted to HMRC by 19 March 2020, these are based on the higher of the hours worked in the corresponding period in 19/20 or the average in the 19/20 tax year up to the date of first furlough.
- For employees who were not employed in March 2020, these are based on the average hours worked between 6 April 2020 and the date the individual was furloughed on or after 1 November 2020.
- The calculations can be fairly complex and can be even more complex where employers have a mix of fixed and varied paid employees, some of who are on full and flexible furlough. The message is to seek advice before processing wages and submitting grant claims if you are unsure.
When can you claim
- Employers can usually claim for a minimum period of 7 days.
- Employers will need to file claims within 14 days of the end of a month. Previously employers had a full month to submit a claim, so this has the potential to catch employers out.
- Claims must not exceed one month, and employers will need to submit separate claims where a pay period straddles a month.
- Agents who have PAYE authority can submit claims on behalf of their clients.
- As with the previous versions of the CJRS, employers should agree in writing variations to working hours and pay where employees are placed on furlough.
- Records should be retained for 5 years.
- Most of the other aspects of the scheme still apply (i.e. furloughed workers are allowed to get another job or do volunteer work whilst on furlough).
- See our prior blogs for further info
- For claim periods from 1 December 2020, an employer cannot claim for days from 1 December 2020 during which the employee was serving a contractual or statutory notice period for the employer.
Please get in touch with your normal Shorts contact to talk any of the above through in more detail.
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As a Tax Partner, I advise clients on all aspects of UK tax, ranging from business taxes, transactions and private client matters, helping to achieve the objectives and aspirations of businesses and their owners.View my articles