DSM Chartered Accountants Business News 27th March 2020 (No 2) – Government ‘Job Retention Scheme’, also known as the 80% furlough wages grant
Under the radar of the Chancellor’s major announcement at 5pm on 26th March 2020 of the new self-employed support grant, HMRC also published the new rules on the 80% furlough wages grant now called the ‘job retention scheme’ . The below link to the HMRC website has all the new rules :-
The main points are :-
1) The scheme will run for 3 months from 1st March 2020 to 31st May 2020 but the Chancellor said it will be extended if required due to coronavirus.
2) The 80% taxable grant will be paid for 80% of all of basic pay, employers NIC and employers pension costs. The grant will have to be included in the business profits in the relevant financial year end.
3) Any employees, made redundant and issued with a P45 in the period commencing 1st March 2020, can be re-employed and immediately furloughed. However the Government expects you will not immediately make them redundant again on 1st June 2020 after the scheme ends but how they may enforce this is not yet known.
4) 80% of normal wages/salary will be paid to any furloughed employees, including directors on payroll. Normal pay does not include overtime, expenses and bonuses . Also for many director/owners of the business this does not include dividends.
5) Any directors who increase their salary after 28th February 2020 will not receive any benefit for increased furlough pay.
6) Any directors who wait all year to pay an annual salary just in the month of March, then their average monthly pay will be based on their March 2019 salary payment.
7) Any new employees employed after 28th February 2020 do not qualify for furlough pay. They will have to use holiday pay and unpaid annual leave, unless they become sick and must be paid SSP. A maximum 2 weeks SSP due to coronavirus is still refunded by HMRC.
8) Only PAYE schemes registered and running with HMRC before 1st March 2020 will qualify for the scheme.
9) Any furloughed employees on variable wages will receive an average pay of the previous 11 or 12 months in tax year 2019/20, depending on when their furlough date started. Again the average excludes overtime, expenses and bonuses.
10) SMP rules must still be used for pregnant mothers but, outside of normal SMP entitlement, pregnant mothers can be furloughed under public health guidance.
11) Furloughed workers must not work on any income generation for the business, but they can be unpaid volunteers or undertake paid training, which must be paid at National Minimum wage rates https://www.gov.uk/national-minimum-wage-rates
12) No date yet given by HMRC for when the furlough pay can be claimed and reimbursed, but clearly HMRC are working faster than was originally announced on 20th March to be running by the end of April 2020.
If you have any further questions please phone 01254 823923 or email DSM on [email protected]