Since the outbreak of Covid-19, business owners have worked harder on their businesses than ever before. Whether that involves hard work to keep up with demand, or hard work trying to keep afloat, everyone has definitely worked to their limit. Throughout the Covid-19 pandemic, we have all been thrown into unprecedented circumstances, meaning that we have had to adjust our processes and business procedures like never before.
The new normal
And now that ‘normality’ is slowly returning, here at Kirkwood Wilson, we are speaking to more and more people who are feeling burnt out with the stress of the last few months. We have been advising people to slow down and take stock.
As we have all been through very unusual circumstances in recent months, it is important to slow down our thought processes, limit our stress levels, and pause for a moment. As many of us know, some of our best ‘light bulb’ moments often happen when on a walk or in the shower, usually when you are away from your desk or laptop and having a moment of rest.
Whether you’ve been busier than ever before or your business has been so quiet that you may have thought about closing down, now is the time to hit pause and take a look at everything that has happened, what could happen again, and ways in which we, your accountants, can help.
Kirkwood Wilson are here to help
We are proud to say that we have helped so many clients to get their business fully set up in the cloud, with Xero, ReceiptBank for bookkeeping, stock systems, appointment software, invoice chasing software, virtual meeting software – you name it, we’ve done.
We recommend to our customers that by building up your bank of business apps, the easier it is to stay on top of all your accounting requirements. All of these types of apps and software help with the day to day running of your business online, sometimes eliminating the need for any extra staff, sometimes even eliminating the need for a business premises. What a saving that would be!
The biggest addition to our own ‘app stack’ is Futrli, which helps to manage cash flow which in turn helps you to better manage your business and do what you love.
In these new ‘different’ times, automation of so many simple tasks is one of the main priorities for many business owners. Without doubt, these are difficult times, for many different reasons. We recognise this, and we are here to help.
If you would like help putting together your own digital support please just get in touch with us today. We can help and advise on the best software and apps available. Call the team today on 01704 546000.
Many of our clients await the details of the furlough extension and on Friday we received an update from the Chancellor. Please find below the government updates, it is important to note that from August onward the government scheme will slowly be tapered.
June and July
- The government will continue to pay 80% of wages up to a cap of £2,500, plus the employer National Insurance and the minimum pension contributions. This is very similar to the scheme since it commenced, however from 1 July the scheme has enhanced flexibility
- The flexibility of the scheme from 1 July onward allows employers to bring previously furloughed employees back to work part-time, with the government continuing to pay 80% of wages for any of their normal hours they do not work up until the end of August. This flexibility has come in one month earlier than planned as it aims to get people back into work.
- You can decide the hours and shift patterns that your employees will work on their return and you will be responsible for paying their wages in full while working. This means that employees can work as much or as little as your business needs, with no minimum time that you can furlough staff for.
- Any working hours arrangement that you agree with your employee must cover at least one week and be confirmed to the employee in writing. We will need you to keep a track of these hours and arrangement as this information is needed for the furlough claim
- Do not worry if your employees cannot return to work or you have no work for them as you can continue to claim as you have in prior months.
- The government will continue to pay 80% of wages up to a cap of £2,500.
- But, employers will pay ER NICs and pension contributions – for the average claim, this represents 5% of the gross employment costs that they would have incurred if the employee had not been furloughed.
- The government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work
- Employers will pay ER NICs, pension contributions and 10% of wages to make up 80% of the total up to a cap of £2,500.
- The government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work
- Employers will pay ER NICs, pension contributions and 20% of wages to make up 80% of the total up to a cap of £2,500.
It is also important to note the cap on the furlough grant will be proportional to the hours not worked.
We will continue to support you during this crisis, and we will calculate all of the claims for you over the period of time. Whether this means your employees remain fully or partially furloughed we will handle this for you. We just wanted you to be aware of the scheme changes over the coming months as the employers contribution towards wages commences in August and increases gradually until the scheme is expected to cease in October 2020.
Late last week we were informed that the government are making changes to the furlough scheme one month earlier than originally planned.
From 1 July, employers can bring back to work employees that have previously been furloughed for any amount of time and any shift pattern, while still being able to claim the furlough grant for their normal hours not worked.
We feel this new flexibility of the scheme can significantly benefit our clients as we have had many clients furlough employees and some that have been reluctant to do so as their business cannot run without them employees.
Are you one of those businesses that have struggled to pay your staffs wages but have not yet furloughed any of your employees because of the strict criteria that ‘your employee cannot conduct ANY work if on furlough’? If so, please do get in touch!
The scheme flexibility from 1 July, allows your staff members to work per your agreed shift pattern and the remaining hours not worked would be subsidised via the furlough scheme. This means that you would only pay out the hours you can afford for your staff to work, rather than running your business into the ground.
The government have launched this flexible scheme to support businesses and to protect the UK economy and we therefore advise where possible to use this scheme if your operations have been severely affected by the coronavirus crisis.
There are key dates to be aware of as the scheme closes to new entrants from 30 June. This means the latest date your employee can first become furloughed is 10 June.
Our clients that have previously made a claim through the furlough scheme will remain entitled to the reclaim from HMRC. This information is only crucial to the employers that have not yet furloughed any employees but do expect this crisis to continue to negatively impact the business operations.
We will be creating a separate blog based on the changes to the scheme as from August to October 2020, but for now please do get in touch if you feel the above applies to you and your business.
Here at Kirkwood Wilson, we do not want any clients to suffer financially any more than they already have, and this scheme could just be that extra support you need to get through these challenging months ahead.
Choosing an accountant that uses Xero will open your business up to countless bookkeeping opportunities, from allowing you to access valuable pieces of information within a click of a few buttons to enabling employees to preview performance measures. Read on to find out more about Xero Accounting.
How to use Xero Accounting
Finding an accountant who uses Xero doesn’t have to be difficult. If you require an accountant with experience of using Xero accounting systems in your industry, then look no further than Kirkwood Wilson Accountants. We’ve got Xero gold partner status, are highly skilled in Xero accounting, and all things digital accounting related.
So how will Xero accounting work for your business? Here at Kirkwood Wilson, we’ve compiled the following list of examples for how to use a Xero accounting system:
- Log into Xero to view real-time information on cash flow.
- Make informed decisions on improving the efficiency of your business
- Xero accounting will help you get one step ahead with Making Tax Digital (MTD).
- Say goodbye to missing sheets of paper, with Xero accounting system you can store information in one simple place.
- Add in customisable quotes for each task or transaction so you can easily identify transactions.
- Effectively manage clients, including invoicing, reporting and keeping contact details.
Benefits of choosing an accountants with Xero bookkeeping
If you’re a small business owner, you might be thinking that a good way to save money is by completing your own accounting yourself. This can include late nights invoicing and getting to grips with tax returns. In some situations, rookie errors can occur.
Choosing an accountant with a strong knowledge of Xero is the surest path to effectively integrating
a Xero digital accounting system into your business. They can explain the necessary steps needed to streamline your bookkeeping.
Here are just some of the benefits of choosing a Xero gold partner, like Kirkwood Wilson:
- Limit the chances of any ‘rookie’ errors, Xero accounting system helps digitise your accounts and invoice digitally.
- Your accountants will help you to set up your Xero accounting system and talk you through the necessary processes.
- Your accountants will help you to ensure you never miss a tax return deadline.
- Your accountants will provide you with useful information about how to streamline your invoicing payments, helping with cash flow.
Get a Xero accounting system from Kirkwood Wilson Accountants
At Kirkwood Wilson Accountants, we’re dedicated to helping businesses streamline their accounts and a Xero accounting system is perfect for the job. With a click of a few buttons, businesses can access their digital bookkeeping activities and gain valuable insights on cash flow quickly and easily.
Whether on the way to a business meeting or out of the office on leave, employees can access the Xero accounting system from anywhere with an internet connection.
So if you’re on the lookout for a digital bookkeeping system and an accountant who can advise on a Xero accounting, Kirkwood Wilson Accountants can show you how Xero accounting can work for your business!
Why not speak to one of our expert Xero accounting system accountants today by calling us on 01704 546 000?
I sit at my desk as I write this blog, my computer on one side of me, my printer on the other side. The window slightly ajar, I can hear the song of the birds in the trees. My phone buzzes and yep, it’s a client getting in touch as they do each quarter to find out the dreaded VAT bill.
You’d be forgiven for thinking that this was a normal day for me. I guess to some degree it is. I mean, the content of the day in many ways remains the same as it did 8 weeks ago. I still speak with Caroline more than I do the majority of my family members, the staff still groan when I make a cheesy joke mid-conversation, and I still use Xero like it’s going out of fashion.
The difference is I do it all from home.
COVID-19 has arrived in the country like some sort of bullet train and we’ve all had to adjust to this ‘new normal’ whether we like it or not.
At Kirkwood Wilson, we actually began working from home before the lockdown was announced. Dan and I spent time ensuring that we had enough WiFi dongles that everyone could get set up at home. We even had a trial day where we each tested the systems we’d be using at home so we could be certain it would be very much business as usual.
And that’s exactly what it is for us: business as usual. Yes, the scenery is different but we work as efficiently as we ever have.
Questions about Benefits-in-Kind have now been replaced with queries about the various Coronavirus help schemes introduce by HMRC. VAT returns are in the majority filed and our focus is very much on completing the furlough claims for March and April for our clients. Year-end accounts have, for the last week or so at the very least, taken a sensible back seat whilst we concentrate on transferring payroll schemes from our old systems to the new Xero Payroll software.
We have never been busier nor needed more by our clients, but I truly believe we’ve excelled in challenging circumstances. The staff have pulled together in ways I don’t think any of us could have imagined. We have an incredible team at KW and each one brings something unique to our incredibly cohesive unit. Twice weekly meetings on Zoom now start our Monday and Thursday mornings in the best way possible.
Microsoft Teams has meant that we can still keep our juniors’ knowledge expanding on a daily basis and allows us to connect with our clients to get year-end meetings boxed off and accounts out of the door. Clients remain informed of tax liabilities well in advance of their deadlines.
Clients will be missing the sound of Ash or Jo’s friendly voices as they would usually pick up the phone and pass you over to one of the staff should you have a query for us. We’re now contactable by mobile phone and I for one can vouch that my phone’s been taking a beating with phone calls the last few weeks.
What that’s meant though is for the client, everything appears seamlessly integrated with our former methods of working. The client experience, in our opinion remains as high, if not higher than ever and we really do believe this period is laying the foundations for the practise to move forward in the best shape possible.
The ‘new normal’? More than likely not forever. I for one think this will usher in a new way of working for everyone, and one in which adaptability becomes the new buzzword.
First of all, and most importantly, we sincerely hope that you are keeping in good health and managing to cope day to day with the restrictions currently in place. This pandemic certainly brings home the fact that health is the most important factor in our lives!
I thought that it would be useful to update everyone on how we at KW are coping with the crisis.
I am truly grateful that we made the important decision to move all of our operations onto ‘the cloud’ some time ago. As a result of this, we were simply able to leave the office and work from home with a very minimal amount of disruption.
We are managing to keep everyone working and have not had to furlough any of our team and, as long as our clients keep the work flowing in, then we will be able to continue with this approach. We have regular Zoom meetings with the entire team so we all know exactly where we are up to and what’s happening with you, our clients.
Here’s an update on each team:
All of the accounts team are managing to keep on top of all of their bookkeeping, VAT and year end workload. Fortunately, 90% of our accounts clients use cloud-based software so we can carry on as normal. In other cases, there is always an innovative solution to retrieving data electronically!
All of the team are accessible on their mobiles and we have spent the last two weeks reassuring our clients, helping them plan their cashflow and advising regarding the various grants and schemes available.
Whilst we appreciate that, for many clients , the monthly bookkeeping load will reduce, we still have to prepare and submit VAT returns and year end accounts.
We intend to press on with this work so that we keep as many clients as possible up to date with the statutory duties.
Payroll has undoubtedly been our busiest department and we would like to thank our clients for being patient whilst we have been answering the hundreds of emails requiring specific advice.
We are currently completing the payroll year ends and then we will be starting the April month ends and coping with the two short weeks for the Easter break!
Please let us have your payroll information as soon as you possibly can (this might be relatively easy if all of your team are furloughed!).
We have just started the new tax year and Ange, Julie and Kirsty are raring to go! Please let us have your tax return information as soon as possible so that we can look at your payments on account and help you with the self employed grant claim, where appropriate.
For some clients, the thought of having to pay for the tax work might deter them from providing the information. We are always happy to accommodate a payment plan to suit your needs and please talk to us about this if it is a concern.
Ad hoc work
Please do not hesitate to contact us if you simply need some advice or someone to talk to about your finances. We are here to help and we definitely won’t be raising any extra fee notes where clients need to chat.
We are all in this together and the more clients that we can help to survive this crisis, the better we will feel in the long run.
Updates are going up on our Facebook page, so please ‘like’ and follow us to keep up to date.
Finally, we would like to wish you a happy Easter and all of our best wishes in these difficult times.
Caroline and Dan
The Small Business Grant Funding can now be claimed for online, please use your local councils website to access the relevant portal.
The below link will help you find which local authority you come under if you are unsure:-
The details required to make the claim are as follows:
- Company Name
- Company Number
- Address of Premises
- Business Rates Account Number *
- Property Reference Number *
- Property Description *
*Can be found on your rates demand letter
Business Bank Account Details
You will also need to know the rateable value of the property, if you do not have a rates demand letter available, please use the link below to obtain this information:-
The small business rates grant is £10,000 for businesses with little or no business rates.
The Retail and Hospitality Grant Scheme is also now open for applications which provides business in the retail, hospitality and leisure sectors with a cash grant up to £25,000 per property.
Businesses in these sectors with a property that has a rateable value of up to £15,000 may be eligible for a grant of £10,000.
Businesses in these sectors with a property that has a rateable value of over £15,000 and less than £51,000 may be eligible for a grant of £25,000.
Please ensure you are claiming for the correct grant.
We have received feedback from clients who have made their claim that the processing time for these claims are 7 days. Once the claim has been approved the amount will be within the business bank account within 7 days of your local authority approving the claim.
We are unaware whether these timings will alter due to the level of applicants, therefore we advise you to apply ASAP. This should help you obtain the business grant within the next week or two to support your cashflow needs.
An employee furlough refers to a temporary leave or modification of normal working hours for a specific amount of time. It’s a leave of absence given to an employee with the promise that they will still have their job once the leave is over.
There are numerous reasons why employers implement a furlough employee policy, such as plant shutdowns, seasonal work, company reorganisations and reduced demand due to COVID-19.
Don’t rush into implementing an employee furlough policy without talking to your lawyer or HR specialist first.
If you decide that putting employees on furlough is the best option for you and your employees, then you need to prepare a notification letter. Your furlough notice letter should contain the following:
- Address – This is a formal letter, a furlough notice should clearly state the date, employee’s name, and their address
- Purpose – State the purpose of the letter. Get straight to the point. Include the employee’s position, department, reason for the furlough, and information about any changes to employee benefits. It is advisable to tell the employee that this action does not reflect dissatisfaction in job performance
- Detail – Explain what a furlough is, determine the length of the furlough, and communicate employee benefits during this period to employees
- Future communication – Offer a way for the employee to keep in touch. End the letter on a positive note.
An example of a furlough letter to your employee
Here is an example of the kind of letter you might send to your employees (feel free to copy this);
(Send to employee’s address or email. Note you should discuss and record employee agreement to be Furloughed before you send this letter)
Dear [Employee name],
NI NUMBER AND / OR PAYROLL NUMBER
The purpose of this letter is to formally notify you that your position as [INSERT] on the [XXX DEPARTMENT] is being closed temporarily due to the downturn in business as a result of the COVID-19 Pandemic.
Your last official day of work will be [INSERT DAY]. Your salary and benefits will continue at their current level during the Furlough period. Please understand this action in no way reflects dissatisfaction with your job performance.
The length of this furlough is [insert future date or unknown currently].
We will provide regular information as the current Pandemic unfolds and when we return to normal working routines.
A Furlough is a short-term paid temporary leave of absence at 80% [AS APPLICABLE] of current salary. The furlough period and provisions may be changed or terminated at the sole discretion of the Company, and does not create any employment contract, express or implied.
During the furlough period, your pension and other benefits will continue [IF APPLICABLE].
Thank you for your contributions to the business and if I can help in any way, please contact me.
PLEASE NOTE: THIS IS AN EXAMPLE ONLY AND SHOULD NOT BE RELIED UPON UNTIL YOU HAVE CONFIRMED CONTENTS WITH YOUR LAWYERS AND / OR HR SPECIALISTS. WE RECOMMEND SEEKING HR ADVICE WITH ALL EMPLOYMENT MATTERS
This blog is for people who have income from self employment whether that be as a sole trader or partnership.
On Thursday, the Chancellor announced a further support package for the Self-Employed, the Self-employment Income Support Scheme (SEISS). We have tried to summarise the information provided as much as possible, and we understand that there will still be many questions from clients.
We believe that the main reason for the delay in this information being delivered is because it has been so difficult to devise a scheme that is fair to all, and a solution that could be implemented quickly and as efficiently as possible.
Firstly, we must clarify that being a Limited Company director does NOT mean that you are self-employed. Self-employed is defined as follows (taken from the HMRC website);
“A person is self-employed if they run their business for themselves and take responsibility for its success or failure.
Self-employed workers aren’t paid through PAYE, and they don’t have the employment rights and responsibilities of employees.”
Here are the main points of the scheme:
- You must be self-employed or a member of a partnership to qualify, and STILL be trading now
- Your loss in trading profits MUST be because of the Covid-19 pandemic
- Your trading profits MUST be under £50,000 for 18/19 OR the average (under £50,000) over years 16/17, 17/18 and 18/19 (they are the only 2 options, you cannot pick and choose years)
- This grant is available for 3 months and maybe extended
- The maximum payment per month is £2,500
- Self-employment needs to be the majority of your overall income to qualify.
Individuals who have registered as self-employed from 6th April 19 will NOT qualify
Access to the scheme will be available no later than the beginning of June and HMRC will contact those that qualify directly, guidance specifies that you should NOT contact HMRC to check eligibility. A form will be completed, and the payments will be paid directly into your bank account. 3 months payments (for March, April and May) will be made in June. The scheme may be extended.
Some of the questions that we have had so far:
What if I haven’t filed my 18/19 tax return? – You have until 26th March 20 to file it – without penalty.
Will I have to pay tax on the money I receive? – Yes, the amount MUST be disclosed on your 20/21 tax return.
I haven’t made a profit in the last 3 years, what can I claim? – You will not be able to claim anything under this scheme.
How can I prove that I’ve lost income because of the Coronavirus?
Unfortunately, this is not something with a defined answer. People are being advised to take a “responsible approach”, and when your tax return for 20/21 is filed, checks will be made to find that you did make a reasonable loss. No information has been released on whether there will be penalties for any ‘inaccurate’ information submitted.
If you need help with your business in the interim, the Business Interruption Loans are available. These will need to be paid back, however they are interest free for 12 months.
We will of course help all our clients through this process however please bear with us as the details of how this will work are yet to be released. Please keep checking our Facebook page for updates.
- The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020
- It is designed to support employers whose operations have been severely affected by COVID-19
- The scheme is open to all UK employers that had created and started a PAYE payroll scheme by the 28th February 2020 and have a UK bank account
- Full time employees, part-time employees, employees on agency contracts and flexible or zero-hour contracts all are eligible for this scheme
- The scheme also covers employees who were made redundant since 28 February 2020, if they are hired again by their employer
- It is important that the employee conducts no work for the business whilst on furlough pay
- This scheme does not apply to anyone hired after 28th February 2020. Therefore, these staff members cannot be furloughed and no reclaim for their wages can be made
- If an employee is working but on reduced hours or reduced pay, they will NOT be eligible for this scheme
The scheme is available from 1st March. Can I backdate my claim to 1st March?
- This scheme as mentioned above is also available for employees who have been laid off or made redundant before this scheme was announced, along with any employees who will be laid off as a result of this crisis in the next three months (subject to extension by the government)
- Therefore, if your business had started to struggle and you laid an employee off or made them redundant in early March you can bring them back into employment and furlough them, so they remain on the payroll but do not conduct any work for you.
- Your claim would then be from the date the employee was furloughed.
- For many this may be from the date this scheme was announced or possibly later in March when stricter lock down procedures came into force.
- However, some businesses were adversely affected from the crisis in early March so this scheme ensures their employees who had already been paid off or made redundant would be brought back and will receive 80% of their usual salary.
When can we process the reclaim and do we pay the staff wages before we receive this repayment?
- The scheme is expected to be up and running by the end of April.
- Please note this means no repayment grants for the wages will be available before this date. However, claims will be back dated to the date your employee was furloughed.
- This means employers will pay their staff the new agreed 80% salary and then when the repayment mechanism is up and running, they will receive a grant from HMRC to recover this cost
- We understand many companies will suffer from insufficient cashflow and may struggle to pay the wages out before the scheme is live. The government has also introduced the grants and Business Interruption Loans and companies should seek further information on this to help with their current cashflow issues. (Facebook videos and emails from Kirkwood Wilson should help here)
What to do as an employer?</h2?
- 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.
- As an employer you should write to your employees confirming that they have been furloughed and keep a record of this communication
- We can provide this letter template for you.
- Once your employee has consented to this form of leave, please provide this evidence to your payroll processor. I.e. Kirkwood Wilson, if we complete this for you.
What can we claim as an employer?
- An online HMRC portal will be used once up and running to claim 80% of furloughed employees usual monthly wages.
- At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 gross per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
- The employees usual wage calculation cannot include fees, commission and bonuses. It relates purely to salary / hourly wages (Which will be calculated on an averaged basis, discussed below)
- The cap of £2,500 per employee per month relates to gross pay.
- If an employee’s salary exceeds £2,500 per month then you can only claim the £2,500. The remaining amount payable to the employee would be at the expense of the employer.
- The claim for associated Employers National Insurance contributions and minimum automatic enrolment employer pension contributions on that employee’s wage is in addition to the £2,500 cap.
- This means if your employee’s salary at 80% is £2,500 you can still claim for the associated cost for Employer National Insurance and Employer pension contributions. As this claim is in addition to the £2,500.
- Many directors take a small monthly salary and higher dividends for tax planning purposes
- This scheme does not include dividends.
- Therefore, if a director is furloughed as the business has temporarily closing due to this crisis, they will only be entitled to a reclaim of 80% of their salary processed via the payroll system as at 28th February 2020
Tax on income
- The furlough pay is a replacement of earnings and therefore will be subject to usual income tax and other deductions (Therefore, your staff will still pay tax on their income)
Employee pension contributions
- Automatic enrolment contributions for the workplace pension will still be payable by the employee
- Unless they have already opted out of the scheme
How to calculate the 80% pay?
Full time and part time employees
- For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.
Employees whose pay varies
- If the employee has been employed for a full twelve months, you can claim for the higher of either:
– the same month’s earning from the previous year (I.e. March 2019)
– average monthly earnings from the 2019-20 tax year
- Employed for less than a year:
– claim on an average of their monthly earnings since they started work.
- Only started in February 2020:
– Use a pro-rata for their earnings so far to claim
What you need to make a claim
- Your ePAYE reference number
- The number of employees being furloughed
- The claim period (start and end date)
- Amount claimed (per the minimum length of furloughing of 3 weeks)
- Your bank account number and sort code
- Your contact name
- Your phone number
If we complete the payroll for you, we will have the majority of this information, as mentioned above it is vital you send us the dates in which you furloughed your staff members and also their written confirmation to the new retention scheme.
You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Again, if we complete the payroll we will help with the administrative burden when this portal becomes live.
How will I receive this money back?
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.
Compliance with the scheme
Claims made must be made in accordance with payroll records.
Your employees must receive the full 80% of their pay declared, in no way as an employer can you benefit from such scheme. Therefore, no fees can be charged to your employees from the money that is granted.
What happens if business struggles after the scheme ends?
When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
Employee rights and entitlements
Employees that have been furloughed have the same rights as they did previously.
Including Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
Will the business be taxed on this repayment received?
Yes, the income received under this scheme is made to offset against the staff wages cost
This income will therefore be included in the business’s calculations of its taxable profits for Income Tax and Corporation Tax purposes.
Wage cost illustration
Example, Salary of £1,650 per month –
Amount to process via the payroll system £1,650*80%= £1,320 (GROSS)
This will be processed as ‘Furloughed pay’.
If the remaining 20% is going to be payable by the employer you would put the remaining £330 through the payroll system on the usual salary line.
The £1,320 furloughed pay above will them be declared on the HMRC portal as this is lower than the £2,500 cap and therefore the full amount is recoverable.
You will receive payslips for your staff members as normal, making the net payments to them like you do each month.
When you receive the grant from HMRC, this will be the gross salary total for all your furloughed employees.
This includes PAYE, Employees’ NI and Employees’ Pension. As the employer you would have already paid this out in your usual monthly PAYE bill, and therefore your grant covers this for you also as you only pay your employees the net figure.
Employer NIC and Employer Pension cost –
This will be calculated on an employee by employee basis.
Your payroll software will calculate this for you, again if we do your payroll, we will declare this on the portal to reclaim this cost back for you.
Hopefully this explains that employees on the furlough scheme, receiving only 80% of their wage results in the employer paying nothing.
The only difficulty firms will face is cash-flow issues as discussed above, please refer to other government financial support to help you through this difficult time.