It really pees me off when the govt announces BIG changes that affect LOTS of people, on a Friday afternoon. Because, whilst you're all desperate to know more details - as my Inbox, Facebook and WhatsApp messages will attest - almost zero guidance is published to back up what Sunak says on the podium - as per the above 60-second video (or watch here, if the video doesn't play).
I've tried to convey the main points below for both the Flexible Furlough and the Self-Employed Income Support Scheme.
Less is more right now, and we are told that full guidance for both schemes will not be published until 12th June. So, you'll have lots of questions and nobody has the answers yet.
We will let you know the full details when they are published
Also, for those with time on their hands, and would like to earn some money whilst also making sure this year's harvest doesn't go to waste in the fields, I'm also including some information below about the "pick for Britain" scheme.
Furlough Scheme Changes
The scheme changes appear complex but can actually be considered as two separate schemes, as follows:
Phase 1 - for staff who are 'fully furloughed'
- Scheme continues to be available to 31 July in its current form, for those who have furloughed staff up to 10th June.
- From 1st August, scheme continues BUT with the Gov't only paying 80% of gross wages - employers will need to fund the Employer's National Insurance and Pension contributions.
(Employers Allowance means you may not have NIC to pay anyway - give me a call if you want to check)
- From 1st September, Gov't wages support reduces to 70%, capped at £2,190 per employee, with employers paying 10%, plus 100% of NIC/pensions, if applicable.
- From 1st October, gov't support goes to 60%, capped at £1,875, with employers making up 20%.
- The over-riding point to make here is the amount paid to staff does not change; you cannot reduce their salary to, say, 70% to avoid contributing 10%.
As the furlough scheme moves away from being "free money", firms with no realistic prospect of reopening in the next couple of months may have to make some hard decisions about redundancies.
We don't provide employment advice but I can direct you to someone who can help. Advice is free for clients with Tax Investigation Insurance.
But, hopefully, you DO have SOME work for staff to do, so read on...
Phase 2 - for staff who return on reduced hours
For staff who have already been furloughed in June (or earlier), Sunak is encouraging staff to return, where work is available, on a part-time basis without jeopardising the furlough claim.
Originally it was suggested this would start from 1st August, but it's been brought forward to 1st July.
Remember, under Phase 1, a furloughed staff member can do NO work whilst on furlough, and that furlough period must last for at least 3 weeks. That's tough, because you can't have staff simply on reduced hours - it's all or nothing.
Phase 2 removes the minimum furlough requirement to make it more flexible for employers.
The theory is simple: employers pay staff, as normal, for hours they work. The gov't will then contribute for the days not worked, capped at the amounts in Phase 1, above.
The execution, however, we expect to be far from simple; we do know that HMRC will require information of hours worked, hours furloughed, and regular (pre-Covid) hours.
For full-time staff this should be straightforward. For part-time or flexible/zero-hours staff, we envisage some detailed calculations will be required every month.
We will not be amending our fees for preparing claims under Phase 1. We expect the current fee, however, will not cover our costs for claims under Phase 2. Once the full detail in published, we'll review what HMRC requires and advise on costs.
The first Phase 2 claims won't be made until the end of July at the earliest.
Self-Employed Income Support Scheme
For the self-employed, there is good news. The scheme has been extended, to reflect the furlough extension above. This is very simple:
The eligibility criteria remain unchanged (see our email from mid-April)
You will be able to make a second claim, for 70% of your average three-month profits, capped at £6,570.
You do not need to have claimed the first grant to be eligible for the second grant, and of course, you MUST be able to show your business is still affected by Coronavirus when you claim.
As an aside, the portal for the first round of claims will close on 13th July, to give HMRC time to reconfigure the portal. So if you haven't yet been able to make a claim please speak to me ASAP before you lose your chance.