01 May 2020
MIchael Black, Director at Cleaver Fulton and Rankin, provided advice to tourism businesses across Mid Ulster by answering questions and clarifying issues posed by many businesses.
Below are the most frequently asked questions and answers.
1. Can you outline and clarify the position of furloughed staff who have taken a second job?
If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually. Employees can be furloughed in one job and receive a furloughed payment but continue working for another employer and receive their normal wages.
2. Can you give us an update on advice for those who are self-employed?
The Self Employment Income Support Scheme (“SEISS”) has been introduced by the Government to help self employed workers or members of a partnership who have lost income due to coronavirus. The SEISS permits a claim for a taxable grant worth 80% of trading profits up to a maximum of £2,500 per month for the next 3 months. The initial 3 month period may be extended by Government. You can apply if you are self employed or a member of a partnership and you:
• have submitted your Income Tax Self Assessment tax return for the tax year 2018-2019
• traded in the tax year 2019-20
• are trading when you apply, or would be except for COVID-19
• intend to continue to trade in the tax year 2020-21
• have lost trading/partnership trading profits due to COVID-19
Your self-employed trading profits must also be less than £50,000 and more than half of your income from self-employment.
This is determined by at least one of the following conditions being true:
• having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
• having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period
If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return. If you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, you must do this by 23 April 2020.
HMRC will use data on 2018-19 returns already submitted to identify those eligible and will risk assess any late returns filed before the 23 April 2020 deadline in the usual way.
The SEISS grant will be paid directly into eligible workers bank accounts in one instalment and so HMRC will make contact with anyone that is eligible to avail of the SEISS. Unlike the Job Retention Scheme workers can continue to work and still avail of the SEISS grant.
Apparently, HMRC will contact eligible individuals by mid-May regarding the Self-Employed Income Support Scheme with payments by early June at latest.
For those that don't qualify for the above grant the only other option is applying for Universal Credit but there is a number of eligibility criteria to satisfy in order for a claim to be successful.
3. The employee retention scheme portal, how does it work in practice?
The portal went live today at 5.30am. HMRC has produced guidance on how to use it to make an application for reimbursement of wage costs. There is a calculator you can use on the portal to help work out how much you can receive as a reimbursement. When making the application, all the information must be submitted at once because there is no option to save and return to the form later and amendments cannot be made to the form after submission, so it’s important that the application is submitted fully and accurately at the first attempt. HMRC will not provide any e-mail confirmation for submission and the employer should print the submission record and make a note of the reference number. Please make your calculations carefully in advance- calculations are required in relation to holiday pay, maternity pay, sick pay, pensions and salary sacrifice as these can give rise to anomalies.
The Scheme was set up to run for 3 months initially, backdated to 1 March 2020 (so will cover employees that were already on unpaid leave after 28 February as they can be deemed as furloughed from then).
On 17th April the Chancellor announced that the Scheme will be extended by one month until the end of June. This may be extended further.
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim. Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account. You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll. You must pay the employee all the grant you receive for their gross pay; no fees can be charged from the money that is granted. You can choose to top up the employee’s salary, but you do not have to.
Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles. Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes. It is expected that the Scheme will be up and running by the end of April 2020.
To claim you will need:
• your ePAYE reference number;
• the number of employees being furloughed;
• national insurance numbers for the furloughed employees;
• names of the furloughed employees;
• payroll/employee numbers for the furloughed employees (optional);
• your Self-Assessment Unique Taxpayer Reference or Corporation Taxpayer Reference or Company Registration Number;
• the claim period (start and end date);
• amount claimed (per the minimum length of furloughing of 3 weeks);
• your UK bank account number and sort code;
• your contact name; and
• your phone number.
If you have fewer than 100 members of staff you will have to enter in the details for each furloughed employee. If you have 100 or more members of staff you will be asked to upload a file with the details. HMRC cannot provide employees with details of claims you make on their behalf and it is your responsibility to keep them updated.
For businesses that need immediate assistance with cash flow then you may be eligible for a Coronavirus Business Interruption Loan. The Loan is being delivered by the British Business Bank and is designed to assist small and medium sized businesses access bank lending and overdrafts. Loans of up to £5 million in value are available.
4. Furlough and redundancy, after 6 weeks of being furloughed can you claim statutory redundancy.
It's not possible for an employee to claim redundancy, ie it's a decision within the control of the employer. Unlike a temporary lay off scenario, there is no automatic right to be able to seek a redundancy payment. If an employer decides to close permanently then its required to comply with the redundancy provisions for staff. This would include notice pay and a redundancy payment. In many instances the employer may not be able to pay this and staff and employers will require Government assistance. If redundancies become necessary to reduce staff, then good practice should be followed to avoid unfair dismissal claims (ie unfair selection for redundancy claims). It is important to follow the statutory procedures and good practice.
Employers should consult with employee representatives where appropriate, particularly if involving 20 or more redundancies, to communicate with staff, send the appropriate letters, offer meetings (ie over the telephone/skype etc.) and then give notice.
5. Legalities of people working voluntarily while being furlough, what are the do's and don’ts for employers, e.g. furloughed staff required to complete payroll and how does this work in practice?
When furloughed, an employee cannot undertake work for or on behalf of the organisation (or any ‘linked’ organisation). This includes providing services or generating revenue. However, they are able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer. You can agree to find furloughed employees new work or volunteering opportunities whilst on furlough if this is in line with public health guidance. Company directors that are PAYE employees can also be furloughed if eligible but, as with other employees, they cannot work. However, unlike other employees, they can do small amounts of work where this is necessary to comply with their statutory duties. It is not entirely clear what this covers but it seems likely that it would be minimal pieces of work such as filing documents to Companies House. Volunteering to do payroll is unlikely to breach the Scheme.
6. Holiday pay entitlement and the legalities surrounding that, can you outline this?
The latest Government guidance for employees states that workers continue to accrue annual leave while on furlough, and that they are entitled to take leave during this time. It goes on to state that holiday pay should be ‘your usual holiday pay in accordance with the Working Time Regulations 1998’, and that ‘employers will be obliged to pay the additional amounts over the grant’. This suggests that where furlough pay is 80% of normal wages, the employer will be required to make this up to 100% of normal (i.e. pre-furlough) wages for any period of annual leave. The guidance goes on to note that employers have the flexibility to restrict when leave can be taken if there is a business need. This includes furloughed employees as well although it's difficult to see what business need could be argued to reject leave requests from furloughed staff. If an employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up their usual holiday pay, or give the employee a day of holiday in lieu. HMRC is keeping the policy on holiday pay during furlough under review.
7. My business is registered as a limited company and I am an employee of it. I have furloughed all my employees including myself. I am continuing to do wages, post on social media etc. Does this cause a problem for me claiming my 80% back through the furlough scheme?
I assume you are a director of the limited company and so, on this basis, you can be furloughed and also carry out administrative duties to assist paying staff etc. I would be careful about social media posts as there is a risk that the HMRC could argue that this may amount to revenue generating work – its not clear how HMRC will categorise posting on social media and until that becomes clear I would suggest you hold off from posting on social media.
8. If my in house Book keeper is doing the payroll the company generating no cash due to that does that mean they are in breach of the furlough.
As payroll is a necessary administrative function I cant see that HMRC would regard this scenario as a breach of the furlough scheme.
9. What are the repercussions of breach of furlough?
An employer may not be able to receive reimbursement of wage costs in respect of employees who have not been properly furloughed or who are identified as working while on furlough. Its very important to obtain written confirmation from staff that they agree to be on furlough and agree not to do any work for their employer during the period of furlough.
10. Auditing of furloughed businesses, is this happening or could it?
Yes, auditing is possible and HMRC has the right to audit employers in respect of the job retention scheme. Employers should ensure their payroll systems and personnel files are kept up to date and in good order in case HMRC carries out an audit. Its important to retain details of all furlough claims to include the amount claimed for each employee, the claim reference number and also to prove to staff that you have made a claim (informing them that they don’t need to contact HMRC directly).