The Job Retention Scheme has been designed for employers that cannot maintain their current workforce because operations have been severely affected by the coronavirus pandemic.
It allows those employers to retain employees and help protect the UK economy. The employer can furlough employees and apply for a grant to cover 80% of their usual monthly salary.
The scheme is temporary and is in place for 4 months starting from 1st March 2020.
Employees You Can Claim For
The scheme allows employers to claim for furloughed employees that were on the PAYE payroll on or before 19th March 2020.
When an employee is furloughed, they cannot undertake any work on behalf of the employer, and this includes providing services and generating revenue.
Company directors are eligible to be furloughed and receive support through the Job Retention Scheme. Directors can carry out certain statutory obligations whilst furloughed, such as filing accounts, but should not carry out work to provide services or generate revenue.
To be eligible for funding, employers must confirm in writing to their employees that they have been furloughed and records must be kept for 5 years.
How Much Can Be Claimed
Employers can claim 80% of furloughed employees wages, up to a maximum of £2,500 per month. The claim is based on the last pay period prior to 19th March 2020.
If the pay varies for an employee and they have been employed for 12 months or more, the claim will be the highest of either:
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Average monthly earnings for the 2019/20 tax year
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Same month’s earning from the previous year
If the employee has been employed for less than 12 months, a claim can be made for 80% of the average monthly earnings since they started work.
Any employer national insurance and pension contributions that will be payable on the furlough pay can also be claimed.
How to Claim
HMRC have launched the online system on 20th April 2020 and this is the only way to make a claim.
To make a claim online, the following information will be needed for furloughed employees:
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Name
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National Insurance number
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Claim period and amount (minimum of 3 consecutive weeks)
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PAYE reference number
If Gorilla Accounting are authorised to deal with PAYE on your behalf, we can make a claim on behalf of the company. Therefore, if you are interested in making a claim, please contact your accountant for further details.
After the Claim
When HMRC have checked the claim, they have confirmed it will be paid into the company bank account within 6 working days.
All of the grant received for the gross pay must be paid to the employee.
Tax Treatment
Income received by the employer is included as income and will be included in the calculation of profits for Corporation Tax.
With all of the grant being paid to the employee, this will be included as employment expenses when calculating Corporation Tax so will effectively cancel out the additional income.
