Today we’re focusing on providing you with an update on Furlough;

Updated: 7 May 2020

At Partner Accountancy, we’re dedicated to staying abreast of COVID-19 UK Government financial updates, developing policies and guidelines. By informing our practice and clientele, we create practical dialogues that provide information, enabling smart choices.We’re here to help you make sense of these new developments, with support as you navigate new waters. Whether you’re an employee, director, share-holder or business owner, you can contact us to figure out what’s best for your situation – we’re here for you!

Furlough claims are being processed quickly and without issue, 95% of our clients have received the cash for their first claims

Who can claim Furlough?

Any UK organisation that had a payroll on 28 February 2020, which has enrolled for PAYE online and has a UK bank account can claim for furlough.

For an organisation to claim furlough for an employee, the employee must be at home and not doing any work. It isn’t possible to choose to furlough part of an employee salary – this is is an all or nothing scenario.

How can you manage Furlough periods?

As an organisation, you’re able to rotate furlough claims in three week blocks. This means (as an example), that you could furlough an employee for three weeks, and thereafter they’d be able to return to work for a period of time.  

Ensuring that the period of furlough claim is a minimum of three weeks (or longer), you can claim for that period.

Who can you claim for?

• Employees who’ve been on your payroll since the 28th of February 2020
• Employees with part time, zero hour contracts or flexible contracts 
• Company directors
• Salaried members of LLPs
• Foreign nationals are included

How much can you claim?

• The grant will cover up to 80% of the salary or £2,500 per month (whichever is lower), and you can choose to pay more than the 80% if able, but this is at your discretion.

You can also claim employers national insurance and automatic enrolment employer pension contributions on the furlough wage.

Claim Payment Frequency info:

HMRC will allow claims to be made every three weeks and that the payment will be made directly to the employer’s nominated bank account.

How does furlough work for a company director?

A company director who is furlough is still allowed to conduct certain duties as an office holder, care just needs to be taken to ensure that they are not conducting duties that fall under their employment contract while furlough.

Also note that for company directors, the claim is for the salary only, dividends are not included.

Can someone who is self-employed claim furlough?

For someone who has income from employment as well as self-employment, they can either claim under employment or under self-employment – they can’t claim both.  They must claim in accordance with the source accounting for the larger portion of their income.

Other points to note:

• To access the scheme, you as the employer, will need to designate relevant staff as furloughed workers. You should get agreement from the worker to do this, unless it’s already covered by a clause in their employment contract.
• It is advisable for furlough agreements to be in writing, where possible.
• HMRC will reimburse 80% of furloughed workers’ wage costs, up to a maximum of £2,500 per month.  It’s up to you whether you pay the remaining 20% or not.
• To be eligible the employee must have been on the payroll on 28 February 2020.
• Claims can be backdated to 1 March 2020
• For employees on variable pay rates you can claim the higher of (1) the same months earnings from the previous year; or (2) the average monthly earnings in 2019-20
• Grants will be prorated if your employee is only furloughed for part of a pay period.
• Any employees you place on furlough must be furloughed for a minimum period of 3 consecutive weeks. When they return to work, they must be taken off furlough. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.
• Employees on maternity pay will continue to receive their SMP payments
• Apprentices can also be furloughed as your other employees, but you are obliged to pay at least the apprenticeship minimum wage, which could mean that you make up the difference. They may continue training and you would need to pay them whilst they are training.
• Foreign nationals regardless of their category of Visa who are employees may also be furloughed.
• You cannot claim for anyone who is working but on reduced hours or for reduced pay.

OUR CLOSING NOTE

While it will certainly be reassuring to have this scope of support from the Government, many employees will now be wondering about how furlough is going to play-out in practical terms. There are many variables to consider in each unique context, certainly too, there may also be questions about how to handle the management and implication of income gaps. For some, missing 20% of their usual monthly income could be devastating, while others may be able to ‘get by’. We’re sensitive to the variability of each situation, and are here to provide tangible support in terms of planning, assessment and cost configuration.

PARTNER ACCOUNTANCY IS HERE TO HELP

The P.A. Team