First off, give yourself a pat on the back for not having a cheap accountant. Because we don't try and cut corners to be the cheapest, I've got capacity to commit my weekend to digesting the full guidance on Furloughing from 1st July, which was slipped out quietly on Friday night without any fanfare 🤔
Even as things feel like they are "calming down", timely information is perhaps even more important now as we head towards a period where employers have to make a decision about sharing some of the furlough cost with the govt, or perhaps uttering the R-word.
Not reinfection. Redundancy.
See below for our summary of what changes on 1st July. But for those of you without employees and who don't really give a toss about furlough, here's what else you may have missed:
(NB: No more news on the SEISS portal for the second claim. Watch this space).
🚀 It's the High Street, Jim, but not as we know it
On Friday, I had to buy a new iron for Mrs Penguin. "Not an essential purchase," I said. She disagreed. So, I took a walk down to Taunton high street, which was an eye-opener. Some shops appear to have thrown in the towel. Accessorize, Monsoon, Next and Starbucks by the looks of things. I'm sure there's others who won't re-open.
But credit to the council, they were out in force with their "2m distance" stickers, helping shopkeepers set up pavement queuing systems in advance of tomorrow's small steps back to normality.
So, regardless of where you are in the country, if you need to buy "stuff" and - like me - have become addicted to Amazon and other tax-dodgers during the lockdown, please think about going down and supporting your local stores if it's safe for you to do so.
But wash your hands, and take an umbrella ☔
🛑 Ban on Evictions - Extended by 2 Months
Does what it says on the tin...for those unable to pay their rent, landlords will be barred from starting civil eviction proceedings against tenants.
This doesn't mean you don't have to pay your rent - it's still due unless you agree a reduction or deferment with your landlord.
Note, this applies equally to commercial AND residential property.
More Bounce Back Loan Scheme Lenders 👍
In the last two weeks, another TEN lenders have been added to the BBLS offering. This could be good especially if your own bank didn't previously offer the BBL, as we've seen almost all lenders offering ONLY to existing customers.
The new lenders include challenger bank Tide and some more unusual candidates such as JCB finance.
Starling (who got a big fat bollocking on social media for messing people about and having a truly terrible onboarding system) is still listed as a BBL lender, but are operating on an invitation-only basis. So don't waste your time there.
As a reminder, the scheme offers a 12m interest-free loan, with no repayments for a year, and then just 2.5% interest - with no early repayment fees.
If you're struggling to get any traction from this, I can put you in touch with some finance broker "heavies" who will make the bank see sense.
FFS!....or as HMRC call it, "Flexible Furlough Scheme" 🤷♂️
Ok, so Friday night saw the publication of a metric sh*tload of guidance over how the furlough scheme will change from 1st July.
This is a whole new furlough scheme - Phase 2 - with a whole new claim portal, so a lot of what you're used to can go in the bin.
EVERY MONTH from July to October will see new rules come in to force, but guidance beyond July is sketchy to say the least. We'll keep you informed well in advance of each months' changes - for now, I just want to talk to you about changes for JULY.
If you have insomnia (or don't trust accountants!), click here for the horse's mouth.
The caveat to all of this is the furlough scheme doesn't replace your contractual agreement with staff - you MUST agree any changes with them. Remember they don't have to accept an extension to furlough, or flexible working, but it's a damn sight better than redundancy.
If you want to speak to an HR professional, let me know. It may even be free.
Flexible, you say?
Yup. Up to 30th June, employees couldn't do any work, or you'd lose the right to claim the furlough grant. It was an all or nothing claim, which wasn't great if you have *some* work to be done.
From 1st July, you can bring staff back part-time and still claim the furlough grant for the time they are NOT working. Or, if you still have no work for them, the "old rules" will apply.
HMRC may request proof e.g. timesheets, so make sure you keep records. There will clearly be a temptation for some naughty folk to bring staff back but continue to claim the full grant. 🙅♂️
How do the numbers work?
If you thought calculating 'full furlough' was painful, hold on to your hats 🎩. The flexible scheme drills right down to hours and calendar days, which appears OTT and I'm keeping an eye out for a relaxation, especially for those with regular salaries.
Take your employee's usual furlough claim amount (from 'Phase 1')
Divide by usual hours worked
Multiply by furloughed hours
Simples, eh? Well, it would be except for the calculation of "Usual Hours".
Usual Hours - Fixed Salary Staff
This isn't too painful.
Take the hours per working pattern stipulated in the contract (e.g. "you will work 37 hours per week"), divide by the number of calendar days in the working pattern (in this case 7), multiply by the calendar days in the pay period (e.g. 31 days for July if payroll is monthly).
Hence unlike Phase 1, the usual hours will be different depending on the number of days in the month.
Usual Hours - Variable Hours Staff
Get your biggest calculator out.
First, take the total hours worked in the 2019/20 tax year, and divide by the number of calendar days they were employed by you. Exclude days on furlough up to 5th April 2020. Multiply this by calendar days in the pay period, and round up to a whole number. Call this (A).
Next, look at the number of hours worked in the EXACT same pay period last year. For monthly paid staff, that's ok - look at hours worked in e.g. July 2019, and this will give you (B).
For weekly, fortnightly or 4-weekly paid staff, it's not so fun - you cannot just look at the nearest period last year. Oh no! That would be too easy. You need to get pro-rating 📐.
E.g., for the week of 6th to 12th July 2020, you need to look at the hours worked in 1-7 AND 8-14 July 2019. Then you take 2/7ths of the first week (C) and 5/7ths of the second week (D), and add these together and round up, to give you a value for (B).
The higher of (A) or (B) is your 'usual hours' figure.
In all cases, you INCLUDE paid holiday and overtime. Overtime is treated as 'normal hours' even if you pay at e.g. time and a half.
With Me So Far? 🤯
I was about two G&Ts in in at this point, so don't be afraid to crack one open 🍸. It's probably tax-deductible...
We now need to look at the number of hours physically worked in the FFS pay period. Call this (E).
Subtract this from the higher of (A) or (B), to give (F).
Then, calculate the furlough grant about which would be due if the employee was fully furloughed (G).
Your final claim for the month is therefore (G) / [higher of (A) or (B)] x (F) - and that's what you can claim.
Don't forget, you also need to pro-rate the Employer NIC and Pensions cost (if applicable) so as to just claim a proportion of these too. Use the same formula above.
It's clear that Phase 2 is going to be a bumpier road, requiring more time for the poor soul who has to work through these numbers 🙋♂️. As before, we'll continue to support your furlough claims but will need to implement a minimum fee for those with staff who are 'flexibly furloughed', just to cover our own staff costs in preparing all the additional calculations.
Once we have sight of the workings of the Phase 2 portal, we'll be able to advise you. There will however be no change to the cost of preparing "full furlough" applications.
Lastly, I thought you might like to see the follow stats from HMRC, showing not only the number of people furloughed but the cost to the Chancellor. No wonder they are keen to start sharing some of the cost with employers!