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resources 15.06

What is a flexible furlough? How do I put employees on flexible furlough?

Yes we had another late Friday night update and a client with much greater HR expertise than us has kindly shared the following with us with regards to a number of questions that might be raised.

What is a flexible furlough?

From 1 July 2020, employers can bring furloughed employees back to work for any amount of time and any work pattern.

You will still be able to claim the furlough grant for the hours your flexibly furloughed employees do not work, compared to the hours they would normally have worked in that period.

How do I put employees on flexible furlough?

From 1 July 2020, only employees that you have successfully claimed a previous grant for will be eligible for more grants under the scheme.

This means they must have previously been furloughed for at least 3 consecutive weeks taking place any time between 1 March and 30 June 2020. For the minimum 3 consecutive week period to be completed by 30 June, the last day an employee could have started furlough for the first time was 10 June.

You should have a discussion with employees who you wish to place on the flexible furlough scheme because you will need to agree the arrangements of their part time work. The agreement should be confirmed in writing and you must keep a written record of the agreement for five years.

You do not need to place all your employees on furlough. In addition, you can continue to fully furlough employees if you wish.

How long can flexible furlough last?

Flexible furlough agreements can last any amount of time. This means that they do not need to last for a minimum of 3 weeks. However, the period that you claim for must be for a minimum period of 7 calendar days. Any flexible furlough period of less than this cannot be claimed for via the scheme.

Employees can enter into a flexible furlough agreement more than once.

What do I pay an employee on flexible furlough?

You will pay the employee for the hours they work, along with national insurance contributions and pension contributions for those hours.

The scheme will allow you to recover the remainder of wages to a maximum cap. Wage caps are proportional to the hours an employee is furloughed. For example, an employee is entitled to 60% of the £2,500 cap if they are placed on furlough for 60% of their usual hours.

The amount that the scheme will cover will begin to decrease from September 2020, and you will be responsible for all of the national insurance and pension contributions from August 2020, regardless of the employee being on flexible furlough.

Claims under the new scheme will be open from 1 July 2020.

When claiming for employees who are flexibly furloughed you should not claim until you are sure of the exact number of hours they will have worked during the claim period. This means that you should claim when you have certainty about the number of hours your employees are working during the claim period. If you claim in advance and your employee works for more hours than you have told HMRC about, then you will have to pay some of the grant back to HMRC.

What records do I need to keep?

You’ll need to keep records of how many hours your employees work and the number of hours they are furloughed during flexible furlough. For example, you will need to record that an employee who normally works for 37 hours a week is actually working for 15 hours and is furloughed for 22 hours.

Can my employees work for me during ‘down time’ in flexible furlough?

During flexible furlough, employees are not allowed to do any work for you or any linked or associated organisation during the periods that you record them as being on furlough.

Employees on flexible furlough can do training during the hours that they are recorded as being on furlough, but must be paid at least national minimum wage for those hours.

How do I calculate normal working hours?

If your employee is flexibly furloughed, you’ll need to work out your employee’s usual hours and record the actual hours they work as well as their furloughed hours for each claim period.

There are two different calculations you can use to work out your employee’s usual hours, depending on whether they work fixed or variable hours.

You should work out work out usual hours for employees who work variable hours, if either:

  • your employee is not contracted to a fixed number of hours
  • your employee’s pay depends on the number of hours they work

Where the employee’s working hours are fixed, or their pay does not vary with the amount of hours worked, the reference period for calculating their hours is the hours your employee was contracted for at the end of the last pay period ending on or before 19 March 2020.

Where an employee works variable hours, you will use the higher of:

  • the average number of hours worked in the tax year 2019 to 2020
  • the corresponding calendar period in the tax year 2019 to 2020.

 

Webinars (NOT TO BE MISSED)

One of the first and most important lessons that I have learnt is the time lost with family whilst I was working on the business and this is where Joe Laws of Joe Laws Photography will be joining us to discuss what he has planned to help people always appreciate this.  Already I have scheduled in our family photoshoot and these are memories that whilst might have in the past have been forgotten, but in the future, will always be remembered.

Family versus work versus you
Book here to join us at 11.30 on Thursday 18 June.

In our second webinar, planned for two weeks’ time on Thursday 25 June, I will be discussed what I think lies ahead and what we can potentially anticipate.

What to expect next
To join click here on Thursday 25 June at 11am where I will discuss my thoughts and make this as interactive as possible for those attending to help people plot a route forward.

Don’t forget that you can register for webinars previously missed by clicking on the links on past newsletters to access a recording, going to our website, or visiting our company YouTube channel.

resources 02.06

Government Support Update

Rather than rush to get this out to you on Friday evening, we’ve taken a closer look at this and the detail then followed so can now summarise the latest announcements below.

Furlough changes
From 1 July 2020, businesses will be given the flexibility to bring furloughed employees back part time. This is a month earlier than previously announced to help support people back to work.

Individual firms will decide the hours and shift patterns their employees will work on their return, so that they can decide on the best approach for them – and will be responsible for paying their wages while in work.

The scheme updates mean that the following will apply for the period people are furloughed:

  • June and July: The government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (ER NICS) and pension contributions. Employers are not required to pay anything.
  • August: The government will pay 80% of wages up to a cap of £2,500. Employers will pay ER NICs and pension contributions – for the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.
  • September: The government will pay 70% of wages up to a cap of £2,187.50. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 14% of the gross employment costs the employer would have incurred had the employee not been furloughed.
  • October: The government will pay 60% of wages up to a cap of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.

Self-employment income support scheme extension
Rishi Sunak announced last week that the Self-Employment Income Support Scheme will be extended – with those eligible able to claim a second and final grant capped at £6,570.
Those eligible under the Self-Employment Income Support Scheme (SEISS), which has so far seen 2.3 million claims worth £6.8 billion will be able to claim a second and final grant in August. The grant will be worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.

New Funding/further updates

Local authority grants:

It now appears that local authorities are gradually starting to drip feed out the discretionary grants that we mentioned on previous newsletters though they appear to each be operating at different speeds.  If you feel like you fell between the cracks then contact your local authority today for an update or keep an eye on their website.

There is also other financial support still out there that is not all directly related to COVID-19 with us including just a handful below:

General support for start-ups and those businesses looking to grow:

https://nbsl.org.uk/
https://www.rtcnorth.co.uk/

A great resource for finding grants generally:
https://www.grantfinder.co.uk/

WEBINAR 29.05

Webinars: finance, cash flow, Government support

Building on what might lie ahead, please do make a point of registering for as many of these webinars as possible; even if you just access the recording at a later date.

Protect and build a better business and life
Tuesday 2 June, 2pm (book here)

Covid-19 has forced us all to rethink.  Our teams have been working in different ways, our customers have wanted to interact with us differently, and our supply chains have been disrupted.

Join us for our “Protect and Build Better” webinar, where we’ll share a 5-step framework for delivering short-term actions while looking forward and (re)building a business based on purpose, values, and profitability.

We’re only at the start of the financial struggles, we have a long road ahead!
Wednesday 3 June, Midday (book here)

As uncertain times ahead loom, but a degree of optimism returns, we must be cautiously optimistic.

Join our webinar where we consider several ‘what-if’ scenarios around cash flow, Government support and how best to act to avoid losing your business.

Finance not just for today but for the future
Thursday 4 June, 11am (book here)

With the amount of financial support out there it is very easy to consider that once accessed that is it – job done!

We need to be looking at our finances on an ongoing basis and putting these to work and ensure the right sort of finance is accessed at the right time and utilised in the right way.

In this webinar we will cover some common mistakes currently being seen and look at how best you can structure financially for what lies ahead in these uncertain times.

april 1

Import update on HMRC direct debits

We thought we should send an update out, given how quiet things have been over the past few days.

In short, the detail behind the Government announcements is where there is change hence there has been very few updates and thus our newsletters may become more sporadic again over the coming weeks.  Don’t worry though, if anything new comes to light for us to urgently share we will continue to do so.

One important update though; can you please cancel any direct debits to HMRC in respect of your VAT or self-assessment if you plan to take advantage of the ‘deferring payment’ otherwise money will still be taken automatically. 

As we continue to focus more on the detail and roll out of everything introduced by the Government, we are asking everybody take advantage of any extra time they have on their hands to ask themselves the following:

  • If you could start your business from scratch today; knowing what you have learnt and with the resources that you have accumulated, how would you structure it differently?  What will you do differently going forward?
  • Given the troubled times we are now facing; if you had known in advance that they were coming, what would you have done differently to prepare?

Now that we can start to focus on what changes need to be made, finance accessed etc. we can focus on how we bounce back positively on the other side of this so you will notice a change in direction in terms of being more upbeat again as we take on you the next step of making the best of a horrible situation.

A friend or contact in need

Never has it been more important to stick together in such times and no more than ever we are here for you to support you however we can.

Can we kindly ask that you listen out across social media, in your circle of friends and contacts, for anybody who too would benefit from the same support that you too are receiving.

Even if they just registered for our newsletter; which they can do by just clicking onto our website here, or if they were to take advantage of our newly introduced and dedicated COVID-19 (click here) and Cash Flow SOS page (click here), you would be helping them out.

Together, we can get through this.

Further help on it’s way

Whilst we have provided you all with a deluge of updates and information we acknowledge that we can do more.

Naturally we are stretched significantly as it is so would like to get this help out to as many of you at the same time as possible but appreciate that a newsletter may not always be the best method.

In light of this, we propose to run a series of live webinars; that will be not be more than say 30 minutes in length; allowing for a 15-20 minute update from us and 10 minutes for questions.

The most popular areas that we are being asked about and that we would look to run a live webinar on include:

  • assistance for those that are self-employed
  • furloughing staff
  • access to finance including government grants
If any of these are of interest, please e-mail us at enquiries@gtaccountants.com and we will set up a group live webinar subject to demand.
summary covid19

COVID-19 Summary (28 March 2020)

Wow, it has been quite a week and I appreciate that we have been sending quite a few newsletters with updates so we thought we would summarise where things are here.  In addition, we have provided more detail below this regarding furloughed employees and finally provided an update regarding accessing the government grants.
The Chancellor has set out a package of temporary, timely and targeted measures to support public services, people and businesses through this period of disruption caused by COVID-19.

This includes a package of measures to support businesses including:

  • a Coronavirus Job Retention Scheme
  • deferring VAT and Income Tax payments
  • a Self-employment Income Support Scheme
  • a Statutory Sick Pay relief package for small and medium sized businesses (SMEs)
  • a 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England
  • small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
  • grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
  • the Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank
  • a new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans
  • the HMRC Time To Pay Scheme

More detailed guidance around each of the areas above can be found here

Furloughing Employees Update from HMRC

What is it?

It is a grant for employers to help fund employee wages, where certain conditions are met, that has temporarily been put in place for 3 months initially, but this may be extended.

Note that this is a grant and not a loan, so it will not be repayable.

Which Businesses can claim?

  • It is open to all UK employers who have created and started a PAYE payroll scheme on 28th February 2020
  • Any UK organisation can claim it is not based on profits but business must have a UK bank account
  • Special rules apply to those public sector employers, who are funded primarily from public grant funding, mainly as they are expected to still be delivering a public service.  Please do seek further guidance around this area though if you think it might impact you.

Which employees are eligible?

  • To claim for an employee that you decide to furlough, they must have been on your payroll as at 28 February 2020 and this is includes various types of contract such as full time, part time etc.
  • We understand the furloughing of employees can be done on an individual basis, however, you need to be aware of employment law, particularly around discrimination.
  • The scheme also covers employees who were made redundant after 28 February 2020, as long as they are rehired by their employer.
  • Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.
  • Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this, whilst employees who are shielding in line with public health guidance can be placed on furlough.
  • If the employee is on maternity leave and receiving maternity pay, SMP or maternity allowance, this will continue.  However, if you top the statutory payment up this can be claimed back through the furlough scheme as long as both parties agree; this also applies to other statutory payments such as Statutory Adoption Pay

Employee salaries and entitlements

  • During the furlough period the employee’s wages will still be subject to the normal income tax and national insurance deductions etc
  • If your employee reduces their hours, then they are still deemed to be  working for you, so the scheme will not apply.
  • If your employee has more than one employer they can be furloughed for each job. Each job is separate and the cap applies to each employer individually based on current guidance.
  • A furloughed employee can take part in volunteer work or training, as long as it does not provide services to, or generate revenue for, or on behalf of your organisation.
  • Employees that have been furloughed have the same employment rights as they did previously.
  • The government has also announced changes to carrying over annual leave, allowing workers up to 2 years to take unused holiday, for more info click here.

Making a claim

  • Employees will have had to have been furloughed before any claim can be made.
  • The reclaim amount which will be repaid into employers’ bank accounts by BACS, that is likely to be in arrears, can be up to 80% of an employee’s regular wage plus on-costs up to a maximum amount of £2,500.  Therefore a maximum amount that can be claimed is £2,500 salary plus on-costs for employer’s National Insurance and the required minimum pension contributions.  Employers will need to pay 80% of normal, regular salary without bonuses, commission etc. included or £2,500 whichever is lower. We are awaiting further guidance from HMRC on the calculation of the NI and pension contributions on the subsidised wages paid, so expect further updates on this one.
  • There are a couple of calculation methods for those on variable pay, either the same month’s earnings in the previous year, or average monthly earnings for the year (pro rata for less than a year)
  • As a worker will have been furloughed National Minimum Wage and National Living Wage will not be relevant unless training is being undertaken whilst furloughed
  • Once the scheme has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme
  • Payments received by a business under the scheme are made to offset these deductible revenue costs and thus will be taxed as income.
  • Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
  • There are a number of data items that HMRC will require when making a claim via their portal.  It isn’t yet clear what the portal might look like, or the format required for the data.

If you would like to share guidance with your employees to help them understand this legislation, please ask them to visit: https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme

 

Some further queries you might have

 

Do employers have to backdate the 80% March payment values in April payroll/tax year 2020/21 or does it all have to be completed on the March payroll tax year 2019/20?

Currently, our understanding is that furloughing applies from the date that you notify your employees that they are being furloughed, not the date that you make the payments. Our suggestion would be to notify your employees now that you intend to furlough, with the amount that you intend to pay. Naturally guidance around this might change and we always recommend you take professional HR advice around this.

If a worker is furloughed, can they be brought back into work early if say work commitments change? 

Yes, we believe you can bring back your employees early but again take HR advice around how this is worded to enable the option to be considered at some point during the period of being furloughed.

For owner/Directors who are on the payroll, will they be treated as employees or self-employed?

Legally, directors of a limited company are employees and should be treated as such.  Like employees, any claim will be based in the same way BUT WILL NOT take account of any dividends.

If it is a single director company, are they eligible for this scheme?

Based on the latest ICAEW interpretation of the HMRC guidance; as HMRC are silent on this matter, they too are eligible and can make a claim provided they meet the same eligibility criteria that other employees need to meet.

Will you guys help us out as a business when this scheme is launched fully?

Of course we will and just watch out for further guidance coming but we will coordinate this all as part of the payroll process.

For those clients that handle payroll themselves internally, we will also help you through the same process if you wish so you’re not alone.

Any further questions that you might have which are are not covered above; and any action taken regardless, we always suggest is taken with the sign off of a qualified HR person with the above to act as a guide as to what can be interpreted from what HMRC has issued.  Use this accordingly to plan ahead, we will keep things right with regards to the declaration and reclaiming of amounts from HMRC then; you alongside an HR expert, can ensure the paperwork and implementation side of things can be handled correctly.

Don’t forget, as clients of ours, you have access to unindemnified advice from the HR team at Avensure or you can contact ACAS whose details are here.

As local authorities start to develop varying strategies around issuing the grant funding being provided by the Government, we suggest all businesses who feel that they meet the eligibility requirements contact their local councils through their websites to lodge a claim.

Grant Update

The links for Newcastle, North Tyneside, South Tyneside and Northumberland Council Councils can be found below:

Newcastle City Council click here
North Tyneside Council click here
South Tyneside Council click here
Northumberland County Council click here

The process seems quite straightforward and we have already lodged our claim but any queries around this please direct these towards your local authority.
Screenshot 2020-04-24 at 15.14.17

COVID-19 Update (27 March 2020)

We are going to focus on the announcement for the self-employed yesterday but first want to clarify; before we are inundated with queries; this does not apply those clients who have a limited company.  These measures are aimed at those who act as a sole trader or as a partnership.  There are no known further announcements planned with limited companies but naturally things are moving quite fast so that could change.

So let’s summarise the key points:

  • The scheme will allow you claim a taxable grant worth 80% of trading profits up to a maximum of £2,500 per month for the next 3 months; though this may be extended.
  • There are certain conditions; that must be met if you are to apply, which can be found here.
  • To work out the average, HMRC will take 80% of the average profits across the 2016-17, 2017-18 and 2018-19 tax years.
  • The grant awarded will be paid directly into your bank account in one instalment.
  • You cannot yet apply for this scheme and instead HMRC will contact you by the beginning of June to apply online so do not yet contact HMRC.

As with all other recent announcements there will be a lot more detail to follow over the next week or so, so watch out for further updates from ourselves.

MAJOR Government Backed Loans Update

As we highlighted the varying approaches being adopted by the banks yesterday; we weren’t overly happy with this inconsistency of the ethics by which some banks might send you down a lending route where they would earn money from factors outside of your control rather than giving you the interest-free option also.

Thankfully we already have invested in a software company that has a lending platform that both encompasses the Government-backed interest-free loan options whilst also includes the normal commercial market and just today agreed our approach to this with them.

We have discussed with a number of you already the option of going down this route and mentioned it in previous newsletters but you must consider; at least, but not only, the following:

  • Can you afford to service the debt beyond the interest-free 12 month term; subject to getting access to the Government-backed loan?
  • What are the costs of taking on the debt beyond the initial interest-free term as over a longer period, a commercial loan might actually work out cheaper?
  • What information have you got behind this application to give lenders the peace of mind that this investment in you and your business is a worthwhile one?
  • What have you already done to mitigate the damage done/likely to be done as a result of the current challenges that we face?

Don’t forget, this option is not just open to limited companies but is also open to sole traders, partnerships and many more.

We can, and are, helping clients with such applications so please contact us if this is of interest to you.

We have also seen clients already go down this path completely independently and that too is fine but please factor in the considerations in the bullet points above.  There are also several other factors as the scary fact is that more often than not we spend less time searching for finance than we do booking a holiday and often rely on Google’s listing which can be led by those that pay the most to advertise.

For those that do this independently, can we just kindly repeat our ask from yesterday that if you are being asked for information that you already have/have had access to can you please ensure that you have this ready rather than ask us to supply this again.

Screenshot 2020-04-24 at 16.24.35

COVID-19 Update (26 March 2020)

Can we first of all say a massive thanks for all of the positive comments that have been shared with the firm and the team regarding the support we have provided so far and the support we have discussed that is still to come.  We will continue to work effortlessly to support you in these troubled times.

Two things first which we are commonly being asked and for which we can just give up an update (kind of):

  • We are still awaiting further guidance regarding the 80% funding towards furloughed staff and are hoping we get this imminently and as soon as we do we will share this rather than just share the various interpretations that are currently circulating over the internet.
  • There is expected to be a big announcement today for which we will share tomorrow once we have interpreted this with regards to the self employed but we know no more than you do at the current time.

Now what we can update you on today is the banks apparent stance when it comes to the Government-backed lending and that is what we wanted to share.

The key messages are:

  • Certain backs will force you to first apply for normal commercial funding and only if this is unsuccessful will they signpost you down the Government-backed route.
  • We do know of at least one bank; which is Barclays, who as of yesterday were first sending people down the Government-backed route.
  • From having spoken with a number of senior guys within the banks; we’re told banks are currently being allowed to decide their own approach with regards to the approach they take.
  • If you are going to try and suddenly jump ship in terms of banks to try and increase your chances of accessing the Government-backed loans then good luck as this transition process appears to be more lengthy than ever and in the meantime banks will naturally and understandably prioritise their own customers ahead of others.
  • Following the global issues that COVID-19 it is causing the banks;who are already massively under-resourced as we would expect, to be even more stretched, and the fact that call centres in India have been closed down due to the service not being deemed ‘essential’ across there will only slow down the application process further.

Our recommendation to clients is contact your bank the best you can and try to establish what information is needed.  Also, try to understand which approach they will be adopting.  Then fill in this short questionnaire that can be found here and liaise with us so that we can best support you should your first option not come through.

Alongside the rush to get this Government-backed funding from the banks and the soon to be announced measures to support the self-employed, we are soon expecting a deluge of requests for information from clients.

As mentioned above, and ask acknowledged by clients already, we face the same battles as a lot of clients and continue to go over and beyond existing letters of engagement for no additional charge.

However, can we kindly ask that if you are being asked for information that you already have/have had access to can you please ensure that you have this ready rather than ask us to supply this again.

We haven’t yet; but if we are regularly asked for information already supplied and repeating work, then this will only stretch us further and side tracks our efforts where they would be better spent that could subsequently be to the detriment of the long-term future of other clients including yourself. 

If this is ever the case we would have to consider revisiting how we are supporting clients including potentially charging for work that we repeating as we will not stand by and allow this to happen.

Let’s continue to work together in the best interests of one another.

We thank you for you your patience, support and kind words to date and we look forward to this time passing.

Stay safe and stay healthy!

Screenshot 2020-04-24 at 15.14.17

COVID-19 Update (19 March 2020)

As of today we thought we would provide you with the latest Government update but please note there is a scheduled further update planned for tomorrow and we continue to await further detail behind some of those proposals outlined below:

The Chancellor has set out a package of temporary, timely and targeted measures to support public services, people and businesses through this period of disruption caused by COVID-19.

This includes a package of measures to support businesses including:

  • a Statutory Sick Pay relief package for SMEs
  • a 12-month business rates holiday for all retail, hospitality and leisure businesses in England
    small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
  • grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
  • the Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank
  • a new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans
  • the HMRC Time To Pay Scheme

I’m a sole trader or have employees that are struggling so what options are available to me?

HMRC have a dedicated page in respect of this there now where you may be entitled to the Universal credit. For more information click here.

Client’s who have already benefited from above

We have already had a client call the HMRC helpline number and be offered the opportunity to postpone the payment of their VAT liability for three months; even though they acknowledged that they could pay this but wanted to be cautious. They were also advised that over and beyond this postponement they could thereafter agree a 12 to 24 month interest-free payment plan; depending on the size of the liability.

A client of a client has been able to access £60k extremely quickly from their bank without any fees or charges and been given an initial 6 month interest-free window. This same loan was even 80% backed by the Government. Naturally some banks are moving faster than others but this is consistent with the assistance we are told should be forthcoming from mainstream banks.

Please be warned that this advice is changing daily but take above as an indication of wheels slowly getting in motion.