Give us your details and we’ll be in touch asap

Insights

All Articles

Business Services

Business Tax

Personal tax

Probate and Inheritance Tax

VAT

Coronavirus Advice  •  HMRC  •  Small Business

Updated guidance on the Coronavirus Job Retention (Furlough) Scheme

By RJP LLP on 8 April, 2020

The government has made some changes to the Coronavirus Job Retention Scheme (furlough scheme) and clarified a number of key points.

  • A grey area previously, the government will cover employer National Insurance and auto-enrolment pension contributions of all furloughed workers on top of 80% of salary payments, to a cap of £2,500. This creates a further potential saving of £300 per employee, each month, for employers.
  • Depending on their individual contractual terms, a furloughed worker may be able to take on another job whilst not working, but this must be agreed with their employer. All furloughed workers are permitted to either volunteer for the NHS or undertake training courses, without risking their pay. It remains the case that furloughed employees must not do any paid work whatsoever for the employer who has furloughed them.
  • Some workers fell ‘between the cracks’ of the support scheme, having started a new position on 1 March 2020 before the lockdown. They are being advised to approach their former employers wherever possible to try and negotiate a way to access the furlough scheme through them because the start point for the government scheme is payrolled workers on 28 February 2020.
  • Workers who were made redundant before the government interventions were announced and after 28 February, can potentially be re-employed and immediately placed on furlough to protect their incomes. This is subject to agreement by the individual employer, who must cover the costs of their wages in the short term, whilst waiting for grant payments to commence.
  • Employees who are unable to work because they have childcare responsibilities resulting from the coronavirus  (e.g. due to the closure of schools) or because they are shielding in line with public health (or need to stay at home with someone who is shielding) can be furloughed.
  • Apprentices can continue with the training element of their apprenticeships during furlough (as long as the time spent training is paid at the minimum wage). Employees who are on fixed term contracts, whose contracts can be renewed or extended during the furlough period, are also covered by the scheme.
  • Individuals who are paid through PAYE, but who may not be considered employees in the traditional sense e.g. consultants working through a limited company or LLP as salaried directors can use the furlough scheme (see previous article). They may continue to fulfil their statutory duties e.g. filing returns and have shareholder meetings, but are not permitted to do any other work in their companies whilst furloughed. This may require a formal board decision or decision by the LLP to enable furloughing to take place.
  • Employers can claim for any regular payments that they are obliged to pay employees, e.g. past overtime and compulsory commission payments. This excludes any discretionary commission or bonus payments. The cost of benefits, whether or not through salary sacrifice schemes, should not be included in the reference salary that forms the basis for furlough pay, and the government guidance states that where an employer provides benefits to furloughed employees, this should be in addition to the salary paid under the scheme.
  • Holiday pay treatment remains a grey area and we are still waiting for guidance on the exact treatment of holiday during furlough leave. It appears that holiday accrues during furlough and that the taking of holiday during furlough leave is permissible, but we do not yet know what the rate of pay that is payable during the holiday period is. For instance, is it the 80% (or capped) pay under the furlough scheme, full pay or somewhere in between? The Government has confirmed that employees who have unused holiday are entitled to carry it over for up to two years.

A number of high profile employers including Brew Dog and Timpson have come forward to comment on the value of the furlough scheme. Pret A Manger employs 8,000 people in the UK and has managed to furlough its entire workforce whilst its shops remain closed.

Up to date government guidance for employers on the Coronavirus Job Retention Scheme can be found here and guidance for employees can be found here.

 

Read more articles like this

Possible Capital Gains Tax review on the horizon

How to apply the temporary 5% VAT rate – Update for the hospitality sector

What to expect from ‘Time to Pay’

Summer Budget 2020 Update

VAT payment holiday window ends on 30 June 2020

Share this:

All Articles

Business Services

Business Tax

Personal tax

Probate and Inheritance Tax

VAT

Image

31 December 2020 - Review disposals of chargeable assets to avoid a possible CGT increase

Capital gains tax is due to be reviewed by the government and if a CGT rise is announced, the new rates may become effective from the next tax year on 6 April 2021. Take advice now if you are thinking of selling property or have other assets giving rise to a capital gains tax liability.