On you marks, get set… Furlough!

Tomorrow, Monday 20th April, the HMRC gateway opens for applications to get the Coronavirus Job Retention Scheme (CJRS) or the furlough grants.  

Over the last week there have been a number of updates from HMRC about how to apply for the scheme. We won’t know exact details of the application process until it opens but, in the meantime, we do at least have a draft plan to help you apply for the grant.

Key changes in the last week

  • The biggest announcement was that the application process will open on Monday 20 April 2020
  • The scheme will span 4 months from 1st March 2020 to 30th June 2020. We don’t know if it will be extended further but it’s quite possible 
  • The scheme now covers staff who were on included on a payroll submission to HMRC before the 19 March 2020 (previously this was stated as 28th February). This extension isn’t quite as generous as it seems based on an update on the 17 April stated.  If you process your payroll on the 25th of the month and you took on a new member of staff on the 1st March 2020 the new starter still won’t be covered.  If you run weekly payrolls then you would have made an RTI submission for at least 2 weeks of March, so a 1 March 2020 starter would be covered. In short, this extension will only help a limited number of employers and employees.
  • The grant payment is expected to take 10 days from application acceptance

Details you will need to apply

1. Access to your online government gateway account or that authorisation for A4G to have full agent access to PAYE. 

This is not always automatic because HMRC have a file only system that some of our older clients will be registered under, but for most clients that have employees and monthly payslips we should have this access sorted. If you run your own payroll, we will need to help you remotely using your log in – you will need to be a little more involved in the process if this is the case, I am afraid.

2. Bank details for receiving the money: You will need the sort code and account number for a UK bank account that you want the grant to be paid into. I would say that there may also be a requirement to evidence that this account is in the name of the employer applying for the grant.

3. Name and contact details for the person responsible for the claim and keeping the data if there are questions. This might be us, but it may also be whoever is responsible for the HR in your business. It should be the person who can answer HMRC questions quickest if they were to call to check details of the application

4. Your HMRC Business References: This includes your employer PAYE Reference for the employment scheme, the business’s UTR number (a 10-digit reference that is included on all HMRC correspondence for your business). If your business is a limited company, you will need to have Companies House Company Number to hand as well as the.

5. Employee Details and claim value per employee: Our furlough log will help you summarise this information, but the key items are:

    • Employee’s full name
    • Employee’s National Insurance number, 
    • Start and end date within this claim period they are furloughed (more on this below)
    • Value of the claim for this employee (being the adjusted gross pay for the employee in this specific furlough period and the apportioned Employers NI and Employers Pension contribution.  Currently we are calculating this on our furlough logs. HMRC have released guidance on the 17th and we have updated the logs in accordance if you had this direct from the marketing team the update is being issued to you on Monday. Failing that ask your Client Manager for details)

6. Total value for the claim

7. The date range for the furlough claim (this bit is important!).  More detail on this below.

Restrictions on applications

You can apply for the grant multiple times. In other words, it is expected that you will make one claim per month in line with how you run your payroll.  

You cannot claim more than once in a three-week period. This means if you apply tomorrow, on the 20 April 2020, then you couldn’t apply again until the 11 May 2020. This has come under criticism because it doesn’t really cater for weekly payrolls very well.

It does appear that you can apply up to 14 days in advance of the payroll run (HMRC are yet to confirm this but a collection of reliable sources have repeated this claim so I hope this proves to be true!) 

If you use this correctly then you can then get into a routine where you might get the grant money before the monthly wages are due to be paid. This is why getting the correct date range for the claim is important. Getting the timing wrong will delay your next claim.

If you pay furloughed staff weekly, you will have to batch your claims together.  The way that you do this will depend on if you also have monthly paid staff furloughed as well.

Employers National Insurance: a note to be careful

On the 17 April HMRC announced confirmation about the treatment of the employers’ allowance and how this affects grants for furloughed workers. This is the allowance that reduces the employers National Insurance payable so that the first £4,000 of employers’ NI is not payable.  

Understandably the CJRS doesn’t want to pay employers for employers’ insurance that the employer doesn’t have to pay, so they have put a rule in place that NI can only be claimed if there is NI payable.

This adds some complexity to the calculation. If you have no NI payable in your March and April payrolls, then it is easy – you have no NI to claim through the grant. If you do have some NI pay but utilised the employer’s allowance which reduced your NI bill, then the updated rules are not clear on how this affects your claim. It would appear that you would claim Employers’ NI on each employee until the total employers’ NI claimed totals the amount you are paying in that month (complicated huh?)

Practical pointers:

  • If your employers NI bill usually is under £4,000 in a year, claim employers’ allowance on the payroll as normal and note that you should not include an employers’ NI figure in your application for the grant
  • If you usually exceed £4,000 in employers NI in a year and the majority or all of your staff are furloughed then you may want to not apply the Employers’ Allowance until once the Job Retention Scheme has ended, or you have stopped using it, later in the year.  Essentially this will mean that you get the benefit of the £4,000 allowance when you have more staff back at work rather than HMRC getting some or all of the benefit of this allowance now, leaving you with none when this part of the crisis is over.
  • This may be a case by case thing to consider for larger employers and I am sure more guidance will be released later this month / early next month as it will become more pressing for the May and June claims.

A general plan for claims

Below is a rough guide based on current information. You may need to edit this slightly for your particular circumstances but the plan here is to align your applications to get the best cashflow position out of the grant:

First Claim (week starting 20 April 2020)

On the week starting 20th April you should claim for any staff furloughed between 1 March 2020 and 30 April 2020.  In most cases this will mean including figures as per your March and April payroll.

You will need to have to hand the list of 7 items above and you will need to be sure that the values applicable to the furlough are within the criteria of 80% of normal pay capped at £2,500 in a month for that staff member. If they were furloughed for part of the month then this claim will only be for the days that they were furloughed.  I would recommend using working days in month for this.  

Example of Pro Rata Furlough Claim:

Based on a 5 day week there were 22 work days in April 2020, if a member of staff was furloughed for 15 of those days then they would get full gross pay for 7 out of 22 days, and the 80% grant value for the 15 out of 22 days they were furloughed.  If the employee was earning £24,000 a year (i.e. £2,000 a month) you would run the payroll showing:

Full pay for 7 days: £2,000 x 7 / 22 = £636.36

Furlough Pay for 15 days:  £2,000 * 80% x 15 / 22 = £1,090.91

Total Gross pay for April 2020 = £1,727.27

Of which only £1,090.91 should be noted on the furlough claim (plus Employers NI and Employers Pension if this applies)

Following months

Assuming you pay your staff on the 25th of each month, then in May 2020 you would then look to submit your next claim on the 11th May to ensure that funds are received as early as possible to help fund the May wages payments. This is using the ability to make a claim 14 days ahead of running your payroll.  This increases the likelihood that you will get the grant money in before having to pay your staff. 

NB – There is a risk here: if you make a claim the full 2 weeks before you run the payroll then there is a chance that furloughed staff may change status before the payroll is processed.  Only make an early submission if you are confident that the staff set out as furloughed will remain correct.

Including weekly wages

If you have both weekly paid and monthly paid staff, then you will want to include the weekly paid staff so that they fit within the reporting structure. 

You may therefore want to include 4 or 5 weeks at a time with each claim (depending on when your weekly pay date is processed). For example, if your weekly wages are processed on a Friday, you could include that staff paid weekly from 6 March to the 1 May 2020 payroll processing dates in the submission for April 2020.  Then in the May submission include the weeks ended 8 May, 15 May, 22 May and 29 May.

I am sure we will need to update some of the details here as we learn more with each application actually made.  We will let you know as we learn more.

For A4G Clients if you want us to help process the application for furloughing staff please make sure you let your Client Manager know the details from point 5 at the being of this article as soon as possible so that we can then get this applied for.

Otherwise, please email us at discovery@a4g-llp.co.uk if you are not a client and would like our help with furloughing.

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