Here is the latest detailed update from our accountants regarding the Government support packages that are available to anyone whose work or business is affected by coronavirus. The information is based on our current understanding of the guidance issued, which seems to be changing daily! If additional facts come to light or are published which alters anything, we will update this blog as soon as we can.
Job Retention Scheme
The Government guidance was updated on 4th April 2020 and now confirms that directors of personal service companies may claim under the scheme. Here are some extracts from the guidance which are particularly relevant:
- Salaried company directors are eligible to be furloughed and receive support through this scheme.
- Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.
- Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
- Employers are free to consider allocating any critical business tasks to staff that are not furloughed.
- Employees can be furloughed in one job and receive a furloughed payment but continue working for another employer and receive their normal wages.
- Any employees you place on furlough must be furloughed for a minimum period of 3 consecutive weeks. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.
- Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they written to confirming their furloughed status.
- For those where pay varies, if the employee has been employed for 12 months or more, you can claim the highest of either the:
- same month’s earning from the previous year
- average monthly earnings for the 2019-2020 tax year
- If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work.
Our understanding is that you will be eligible to claim the grant if you paid yourself salary in 2019/20. Since the majority of our clients pay themselves fluctuating amounts throughout the year, we anticipate that the basis used to calculate the grant will be the salary paid during the whole year, to calculate the average monthly earnings; total gross salary paid in 2019/20 divided by 12. HMRC are expected to publish further details on the calculations in due course.
You will need to pay yourself 80% of the average monthly salary from 1st April or the date of furlough if later. Ideally this should be paid to yourself in April and May. However, if you do not have the funds to pay it then we can still process the salary through BrightPay and you can transfer the funds/pay yourself once the grant has been received.
If you wish to claim from 1st March 2020, but did not pay yourself any salary in March, you may still claim the grant based on average monthly earnings in 2019/20, but only if you did no work at all in this month. If you worked for part of the month you can claim from the date you ceased working and the grant will then be pro-rated.
You will need to let us know the date you want to claim from. The date of furloughing should be the date you ceased all work for the company other than that required to carry out statutory duties such as updating your records or filing your VAT return. The start date can be no earlier than 1st March 2020.
As an example, if you paid yourself £8,632 in 2019/20 then your monthly average earnings would be £719.33, and the grant would be £719.33 x 80% = £575.47, plus employers NI on this amount. If you decided to furlough yourself from 1st April 2020 you would pay yourself a gross salary of £575.47 in April and the same in May, and these amounts would likely be recovered from HMRC in May/June.
If you paid yourself gross salary of £40,000 in 2019/20 then your monthly average earnings would be £3,333. The grant would be restricted to the lower of £3,333 x 80% = £2,667 and £2,500, so £2,500 plus employers NI. If furloughed from 1st April 2020 you would pay yourself a gross salary of £2,500 in both April and May.
If the furlough period starts part-way through the month, the salary payable and the grant receivable will be pro-rated accordingly. You may stop the furlough period at any time, for example if you start a small project, and can start it again when finished, but each furlough period must be of at least 3 weeks duration.
Competex will arrange to claim the first grant at the end of April, as soon as the portal for doing so becomes available. Our fee for making 2 claims per person, in April and May, will be £130 plus VAT. If the scheme is extended beyond May, we will charge an additional fee based on how many claims you make and this fee may be lower or higher than £65 plus VAT per claim, depending on how onerous and time consuming the process proves to be.
If you think you are eligible because you have paid salary in 2019/20, and have ceased working due to the Coronavirus, please reply to this email and confirm the following:
- Date you ceased work for the company
- Date you wish the furlough to commence (1 March 2020 being the earliest)
- Names of individuals
Once we have received your confirmation, we will send you a board minute which the directors will need to approve, and a letter addressed to each person who is being furloughed detailing the terms. We will also confirm the amount of grant we think you can claim and the salary you will need to pay yourself.
IR35 Off Payroll workers
There has been a recent update on off-payroll contractors working for Public Sector organisations who are described as ‘contingent workers’. These are workers engaged through umbrella and personal service companies in accordance with the IR35 rules introduced in April 2017.
The guidance states that any worker who can work from home should continue to do so and be paid as usual. However, if a worker is unable to work due to COVID-19, due to sickness, self-isolation, or the temporary closure of offices, they should be paid at 80% of their pay rate up to a maximum of £2,500 per month. This should be backdated to 1st March 2020 if necessary and will be available initially for at least 3 months.
Contingent workers who cannot work because of childcare responsibilities during school closures can be paid on the same basis for up to 7 days whilst they make alternative childcare arrangements.
Such workers will be required to submit a timesheet for 80% of their usual pay. Daily maximum earnings will be subject to a cap of £125 per day to a maximum of 20 days in the calendar month, giving total gross pay of £2,500.
Workers are entitled to this benefit, but only up to the point at which their assignment is due to expire. There is no obligation to extend the arrangement if the intention was that their assignment would naturally end.
The guidance, which can be found here, contains several worked examples showing what workers should enter on their timesheets.
Note that contingent workers will not be claiming under the Job Retention Scheme. Pay will continue to be paid in the usual way by their end client, who will continue to receive Public Funding.
Business interruption loans
On 3rd April the government announced that lenders will no longer be able to request personal guarantees for loans under £250,000.
Grant Funding Schemes
Something not previously mentioned is the Government support for small businesses, and businesses in the retail, hospitality and leisure sectors, who rent business premises.
The Small Business Grant Fund (SBGF) will be available to all businesses in England who on 11th March 2020 were in receipt of either Small Business Rates Relief (SBRR) or Rural Rates Relief (RRR) in the business rates system. These businesses will be eligible for a payment of £10,000.
Businesses with a rateable value of £51,000 or over are not eligible for this scheme. Businesses which are not ratepayers in the business rates system are not included in this scheme.
The guidance states that you will be contacted by your local authority if you are considered eligible and you do not need to do anything yourself. Enquiries may be addressed to: email@example.com. For more information please refer to the Government’s guidance https://www.businesssupport.gov.uk/small-business-grant-funding/
Statutory Sick Pay (SSP)
The Coronavirus Statutory Sick Pay Rebate Scheme will repay employers the current rate of SSP that they pay to employees for periods of sickness starting on or after 13th March 2020.
The repayment will cover up to 2 weeks, starting from the first day of sickness, if you are unable to work because you have coronavirus or cannot work because you are self-isolating at home.
To qualify for Statutory Sick Pay (SSP) you must:
- be classed as an employee and have done some work for your employer
- earn an average of at least £118 per week
- have been ill for at least 4 days in a row (including non-working days)
The £118 per week must have been paid to you as salary in the 8-week period prior to day 1 of sickness.
The current rate of SSP is £95.85 per week and you cannot claim this at the same time you are on furlough. As payments whilst on furlough are likely to be higher than SSP we think it is unlikely that many of you will wish to claim this. However if you do, and are eligible, please email Michelle.Gerrard@competex.co.uk to arrange the payment to you and the recovery from HMRC.
If you wish to be placed on furlough by your company, please let us have the details requested above as soon as possible. We will then be in touch with you individually.
Note that in these difficult times, we really only have time to help with further specific queries you may have on a chargeable basis.
Since our last update several clients have very kindly provided us with further useful information, for which we are very grateful.
You may be interested to know that IPSE are continuing with their lobbying on behalf of directors for more help from the Government, see latest blog here https://www.ipse.co.uk/ipse-news/ipse-blog/self-employed-coronavirus-gov-limited-company.html
There is also a Change.org petition currently in motion on behalf of small businesses operating through a company: http://chng.it/9YWQxQD7HW
We hope this is of use to you.
The Competex Team.