I'm pleased to say we're starting to get into a more "forecastable" [is that a word? Ed] pattern, with the remaining financial support measures being broadly the Phase 2 furlough scheme, and the 2nd SEISS grant.
Today, we're going to update you on:
- Ending of Phase 1 of the furlough scheme
- Phase 2 of the furlough scheme
- Your next VAT payments
- What to do if you've accidentally (or deliberately?) claimed a grant you oughtn't to have.
There's no news on the SEISS v2 yet...
Finally, I want to update you on how we expect to reduce the frequency of our updates to you, replacing "one size fits all" advice with more tailored support for each business.
Goodbye, Furlough 1.0
Please remember, you need to make your furlough claims for June (or earlier!) as soon as possible. The deadline is 31st July, for claims up to 30th June, but for goodness' sake don't leave it that late.
If you miss the 31st July cut-off, there is no going back - and it could potentially impact your eligibility to use Phase 2! 😱
Hello, Furlough 2.0
For a reminder of the main point of this scheme, click here for last week's update
I know you've been spending this weekend wondering when the govt will publish the legislation for the new furlough scheme. No? Oh, ok. Just me then.
For all the guidance/advice/bluster emanating from the Govt announcements, and from the gov.uk website, none of the financial measures can actually "happen" without a legal framework.
With the new furlough scheme starting on the 1st July, we were getting perilously close to having no legal backing to the promises made by Sunak et al.
Remember, this scheme is designed to allow employers to have staff working part-time and hence start the economy moving again.
All the advice we, and anyone else, was able to give was based on undertakings made by the govt - there was no 'detail' to scrutinise. Sounds esoteric, but there were serious questions outstanding which could make or break whether you'd be able to claim furlough for certain staff after 30th June (!).
For example, as of last week the gov.uk website had THREE different methods for calculating "usual hours" for employees, depending on which page you were on 🤷♂️
On Thursday night, finally, we were sent a copy of the Treasury Directive which has the force of law. It's 34 pages long. If you are bored/interested/can't sleep/another accountant, let me know and I will send you a copy.
- Scheme runs 1st July to 31st October
- Payments must be returned to HMRC if not used for the purpose of the furlough scheme
- The employee MUST have been furloughed under Phase 1 except for armed forced reservists, or those returning from SMP/SPP etc..
- Claims cannot straddle calendar months. If staff are paid monthly, that's Ok, but if it's e.g. weekly then you'll need to do up to 6 claims per month, i.e. 4 full weeks and 1 or 2 part-weeks. What a faff!
- Confirmation of the methods for calculating "usual hours" that we've been waiting for. This runs to NINE pages, including the THREE different methods you can use 😭
- Sadly, also confirmation there is not going to be a "common sense" approach to claim period, and everything will need to be pro-rated. i.e. for staff contracted to work X hours per week, but paid a flat monthly rate, you will need to work back down the 'number of days worked' each month. Crazy, but there we go.
The important point here is that the amount HMRC will reimburse may be less than the employee is paid. The amounts will be small per employee, but for payrolls of 20+ staff it could be worth a calculation to determine if you can agree to pay staff on the same basis as HMRC's calculations.
- Usual hours are rounded UP (this was a big question, and HMRC's guidance swang both ways). This will be to the benefit of employers 🙌
- July will be the LAST month you'll be able to claim either Employer's National Insurance OR Pension contributions back
- Anti-avoidance provisions about furloughing staff and re-deploying them to e.g. another company in your group. Seems reasonable to me.
That's certainly not the full text! But hopefully, nobody here is in the middle of a group restructure and PAYE reorganisation? Oh, ok. In that case, you want section 39...
To date, we've been processing furlough claims for a set fee equal to the cost of running your payroll scheme. Profiting from the Coronavirus pandemic isn't cricket, but we are business and still have staff to pay when working on furlough claims, so we do need to cover our costs.
I've asked our payroll manager if she would work for free, but it didn't go down well 😉
Where certain staff remain fully furloughed in your business, we will be able to keep the cost of processing your July and onwards claims unchanged. Although the calculations are already more complex, we believe that we will be able to absorb this cost.
When it comes to processing claims which have an element of "flexibly furloughed" staff, we are going to have to take each employer separately, look at the complexity of the claim and advise the cost. Monthly paid, fixed-hours staff will be the least complex.
Those with staff on variable or zero-rate contracts will require a lot more work. As with everything we do, we'll confirm the cost before work starts so you always know where you are.
June VAT quarter
Ok, so everyone 'enjoyed' their VAT deferment for payments due to HMRC over the last 3 months. Great stuff.
But, remember, your June (or May, if applicable) VAT bill will be payable as normal. If you aren't going to be able to pay this - speak to HMRC asap. Don't wait til they chase you.
Also, if you were on a direct debit scheme and cancelled this to defer the last VAT payment, remember to set it up again. Or, make a manual payment, whatever suits you.
And for goodness' sake put a diary note for March 2021 when that deferred VAT does become payable.
So you've been a bit naughty...
Inevitably, in this swirling soup of advice, guidance, opinion and constant change, there will be examples where a claim was made that, in the fullness of time, turned out to be claimed in error.
For example, we *still* don't know what "adversely affected" actually means. If you had a bad March, claimed the SEISS grant, and then won a million-pound contract the day after the grant arrived, does that mean you claimed it in error? Who knows.
Or, on the downright dirty side [nobody here, I'm sure] there are reports of employers claiming furlough for staff who were in fact still working full time and bringing in the cash. That's not cool.❌
At the moment, the govt plan is quite a sensible one (IMO) and means that any grants claimed in error are taxable at a rate of 100%. This is quite different to any sort of suggestion that penalties will come raining down if you made the wrong call during a time of absolute financial carnage.
It simply means that, on reflection, in your next tax return you'll have the option to put your hand up and pay it back through your tax bill, along with any normal tax. no harm done and no questions asked.
Now, clearly, HMRC will be keeping very close eyes on your next tax return. Their systems will know if you've claimed the SEISS or Furlough grant because your UTR is included on the claim.
My advice to you is, of course, to keep any evidence that you can use to support your claim. For example, agreements with staff to be furloughed, timesheets (especially for flexible furlough) and in respect of the SEISS, your management accounts which show you'd been affected by Covid when you made the claim, even if everything is rosy again now.
What we do not know is how hard HMRC will investigate businesses once the dust settles. You can see below the cost of the furlough scheme alone, so even a small clawback would be a significant ££ amount for the treasury.
It's worth mentioning that you can purchase Tax Investigation Insurance, which will pay for a chartered accountant (👋) to fight HMRC on your behalf if the worst came to the worst.
A policy starts from £3pm for individuals, up to £12pm for a limited company, and whilst it's peace of mind for all the above reasons it applies equally to "peacetime" tax investigations. Let me know if you'd like more information. We try and offer these at a cost - our margin is about 50p a month on this, which just about covers the cost of running the scheme.