The Coronavirus Job Retention Scheme, or Furlough scheme, has been set up to allow UK employers to access support to help with paying employees’ salaries that would been laid off during Covid-19.
Employers are able to flexibly furlough employees for any amount of time and any shift pattern, while still being able to claim a grant for their normal hours not worked but being responsible for paying their wages while in work. When claiming the Coronavirus Job Retention Scheme grant for furloughed hours, employers will need to report and claim for a minimum period of a week.
August – The government will pay 80% of wages up to a cap of £2,500. Employers will pay ER NICs and pension contributions – for the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.
September – The government will pay 70% of wages up to a cap of £2,187.50. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 14% of the gross employment costs the employer would have incurred had the employee not been furloughed.
October – The government will pay 60% of wages up to a cap of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.
When the scheme closes on October 31, you must decide, depending on your circumstances, as to whether employees can return to their normal hours. If not, it may be necessary to consider reducing their hours, or a termination of employment (redundancy). Normal redundancy rules apply to furloughed employees.
Click here for more information and to apply.
PLEASE READ INFORMATION BELOW ABOUT ELIGIBILITY AND THE INFORMATION YOU NEED TO HAVE TO HAND BEFORE APPLYING.
Before you make a claim you need to ensure that you and your furloughed employee are entitled to use the scheme and have worked out how much you can claim.
Employees you can claim for
From 1 July, only employees that you have successfully claimed a previous grant for will be eligible for further grants under the scheme. This means they must have previously been furloughed for at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June. The last day an employee could have started furlough for the first time was 10 June 2020.
The number of employees you can claim for in any claim period starting from 1 July 2020 cannot exceed the maximum number of employees you claimed for under any claim ending by 30 June 2020.
Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed.
To be eligible for the grant, when on furlough, an employee cannot undertake work for, or on behalf, of the organisation. This includes providing services or generating revenue. Employers are free to consider allocating any critical business tasks to staff that are not furloughed. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. A record of this communication must be kept for five years.
Click here for more information on eligibility for the Coronavirus Job Retention Scheme.
Work out how much you can claim
From 1 August you can claim for 80% of wages up to a cap of £2,500 but employers will have to pay ER NICs and pension contributions.
Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they are written to confirming their furloughed status.
HMRC have a calculator that you can use to work out what you can claim.
Only submit one claim per pay period – you can’t submit another claim for overlapping periods; this means that in each claim you should include all furloughed employees paid during that period.
This is the information you will need to use it:
- start date of your claim
- end date of your claim (for example, date of next payroll run)
- employee’s pay dates (when they get their pay)
- end dates of the periods of time (for example monthly) that they are paid for
- how much they are paid (before deductions)
- when their furlough started (and ended, if not ongoing)
- their National Insurance category letter
To make a claim you will also need:
- to be registered for PAYE online
- your UK bank account number and sort code
- your employer PAYE scheme reference number
- the number of employees being furloughed
- each employee’s National Insurance number
- each employee’s payroll or employee number (optional)
- the start date and end date of the claim
- the full amount you’re claiming for including employer National Insurance contributions and employer minimum pension contributions
- your phone number
- contact name
You also need to provide either:
- your name (or the employer’s name if you’re an agent)
- your Corporation Tax unique taxpayer reference
- your Self Assessment unique taxpayer reference
- your company registration number
If you’re claiming for employees who are flexibly furloughed, you’ll need to have agreed the furlough arrangement with the employee (or reached a collective agreement with a trade union) and keep a written agreement that confirms the furlough arrangement.
For the claim period you’ll also need:
- the number of usual hours your employee would work in the claim period
- the number of hours your employee has or will work in the claim period
- you will also need to keep a record of the number of furloughed hours your employee has been furloughed in the claim period
There is now an option to save your progress whilst making a claim, this means that you can return to a partially completed claim, rather than having to do it all in one go.
After you’ve made a claim
Once you’ve claimed, you’ll get a claim reference number. Keep a note or a print-out of your claim reference number – you won’t receive a confirmation SMS or email. HMRC will then check that your claim is correct and pay the claim amount by BACS into your bank account within 6 working days.
You must also:
Keep a copy of all records, including:
- the amount claimed and claim period for each employee
- the claim reference number for your records
- your calculations in case HMRC need more information about your claim
- for employees you flexibly furloughed, usual hours worked including any calculations that were required
- for employees you flexibly furloughed, actual hours worked
Tell your employees that you have made a claim and that they do not need to take any more action and pay your employee their wages, if you have not already.
You must pay the full amount you are claiming to your employee and pay the associated employee tax and National Insurance Contributions, even if your company is in administration. If you’re not able to do that, you’ll need to repay the money back to HMRC. The same applies in relation to employer NICs and pension contributions you claim regarding your employee. The full amount you claim in respect of these must be paid or you will need to repay the money back to HMRC.
If you make an error when claiming
If you have made an error in a claim that has resulted in an overclaimed amount, you must pay this back to HMRC.
You can now tell HMRC about an overclaimed amount as part of your next claim. You will be asked when making your claim whether you need to adjust the amount down to take account of a previous error. Your new claim amount will be reduced to reflect this. You do not need to take further action but should keep a record of this adjustment for 6 years.
If you have made an error that has resulted in an underclaimed amount, you should contact HMRC to amend your claim.
If you have made an error in a claim and do not plan to submit further claims you will need to make a payment to HMRC.
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.
Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) are not taxable on grants received under the scheme. Domestic staff are subject to Income Tax and NICs on their wages as normal.