We have also now received more detailed guidance from HMRC on how the scheme for furloughing employees will work and would like to share this with you.
As a reminder the furlough scheme is intended to be an alternative to making redundant employees for whom there is no work.
Employees who are put on furlough cannot do any work for the company during this period.
Company directors can in principle qualify for the scheme. However, HMRC are unlikely to accept that a company’s sole director will have ceased to work entirely, if you are taking calls or replying to emails during a period of closure then you are working, even if all of your staff are not. If a company has more than one director, all bar one of the directors could conceivably go on furlough (on a rotation basis if necessary).
In addition the furlough scheme applies to PAYE earnings only. Therefore it is of limited personal benefit to most company directors and owners. This is because they take the majority of their drawings in the form of dividends for reasons of tax efficiency.
The more detailed guidance go to the government website. The government will issue further guidance on the mechanics of claiming the payment in due course. It says it expects the scheme will be operational by the end of April.
Key points which are worth noting are:
- Furlough leave must be taken in blocks of at least 3 weeks.
- Employees must not work during furlough (though they can continue to work for another employer). If they work for you for even a minimal amount of time during their furlough period they won’t then be eligible under the scheme. However, they are able to undertake training and do volunteer work. Any training must be paid at normal rate.
- The guidance indicates that employers can claim employer’s NIC and statutory minimum auto-enrolment pension contributions in addition to the 80% of wage costs (capped at £2,500 per month per employee)
- There is no requirement for employers to top up the pay of furloughed employees to their normal wage or salary.
- Commissions and bonuses will not count as wages for the purposes of the scheme. For those employees whose pay varies, you claim the higher of their month’s earnings from March 2019 or their average earnings this tax year.
- If 80% takes an employee below National Living/Minimum Wage (NMW) based on their normal hours this is acceptable and the government does not expect the wage to be topped up. This is because the employee is not working and the NMW only applies when the employee is working.
- Employees are only eligible if they were on your payroll on 28 February this year. Anyone on payroll on 28 February who has since been made redundant can be re-hired and placed on furlough leave.
- Employees on sick pay or self-isolating cannot be furloughed, but can be furloughed afterwards. Employees who are ‘shielding’ i.e., over 70, pregnant, or under 70 with a serious underlying condition, can be placed on furlough.
We held a webinar this morning and will have the recording available for distribution early next week. Please email Nina if you would like a copy.
We will be studying the scheme rules and guidance in detail in the coming days and weeks so that we are able to answer your queries and process the claims once the government portal is up and running. The government currently expects this to be in late April.
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