Following many questions from clients, we have compiled a list of frequently asked questions regarding COVID-19.
The Coronavirus Job Retention Scheme
Who is eligible to be furloughed?
Any employees of the business who were on the payroll as at 28th February 2020 will be entitled to the furlough payment. If they were employed after this, then they will miss out.
Are employees on zero-hour contracts eligible to be furloughed?
Yes. For casual and zero-hours contract workers who are on the PAYE system with variable hours, their previous pay can be used as a benchmark for furlough pay.
How do I calculate the 80% figure for furloughed employees?
Employers claim for the higher of either:
- the same month’s earning from 2019; or
- average monthly earnings from the 2019-20 tax year.
If the employee has been employed for less than 12 months before the claim, then the employer has to use an average of the actual monthly earnings since the employee’s start date.
Can my employees work for another employer whilst on furlough?
Yes, they are allowed to do other work, however we recommend they speak to you as their employer prior to doing so. Furloughed employees are required to come back to work for you as and when you decide, so you need to make them aware that they will be required to do this.
Can my employees do work for me when on furlough?
No. Furloughed employees should not undertake any work for the company. They can undertake training though.
What do I need to do now?
You must write to all employees and receive their signature agreeing to the furlough. Apart from that you just need to process the pay at either 80% or 100% until we hear otherwise.
How do I apply for the furlough funding?
The application process will be online and HMRC expect this to be operational from the end of April. You will do one claim every three weeks for all your furloughed employees.
Are payments made to furloughed workers a loan or a grant?
You will receive a grant which you do not need to pay back, however this will still need recorded through your accounts/tax return.
When will I receive my funding?
At the moment we don’t know. The government has not confirmed timescales.
The Self-Employment Income Support Scheme
What can I claim?
Self-employed people can claim taxable income support worth 80% of their average monthly income, capped at £2,500 per month.
What are the key eligibility criteria?
- You must have submitted a tax return for 2018-2019.
- You must have trading profits in 2018-2019 of under £50,000.
- You must have traded in the tax year 2019-2020
- You must be trading when the application is made (or would be trading except for the pandemic)
- You intend to continue trading in 2020-2021.
- You must make more than half of your income from self-employment.
How is the grant calculated?
This will be calculated by taking the average of your income over the last three years. Income is based on PAYE salary not dividends which do not count towards the average income.
I’ve only been trading since 2018 and have only completed one tax return. Am I still eligible?
Yes. You do not need to have three years completed returns. If you only have one or two then this will be used as the basis for the average.
I started trading after 6th April 2019, am I eligible?
No, unfortunately not. You must have submitted a 2018/19 self-assessment tax return as a minimum in order to be eligible for the grant.
I’ve still not done my 2018/19 tax return yet, will I miss out?
Self-employed people whose tax return has not been submitted and is still due after the 31 January 2020 deadline, can still submit a late tax return for 2019 for a further four weeks from 26 March 2020.
Can I continue to work and claim the funding?
Yes, you can claim the income support payments and continue working for your business.
How do I apply and when will I receive my payment?
It is understood that HMRC will contact you directly with instructions on how to apply. If you are eligible, the grant will be paid directly into your bank account in one lump sum payment. Effectively, you will get your grant for March, April and May’s as a lump sum in June.
I am a company director, what am I entitled to?
As a company director, in HMRC’s eyes you are not ‘self-employed’ therefore you will need to furlough yourself if you cannot trade.
Can I continue to work as a director whilst on furlough?
No. You should not undertake any business which would help contribute to the revenue of the company. You can continue to undertake your legal responsibilities for the company – accounts, VAT returns, administrative duties etc.
I only pay myself dividends, can I claim the furlough payment?
If you pay yourself only in dividends, then you are not eligible for support under either the Job Retention Scheme or the Self-Employed Income Support Scheme.
What other funding is available for me?
Those operating their businesses as limited companies are not covered by the Self-Employed Income Support scheme, but you can access the Business Interruption Loans available. You may also be entitled to a local authority grant depending on the nature of your business. One of the key criteria is that you must have business premises and are registered as a rate payer with your local council. Even if you get 100% rates relief you may still be entitled to a payment.
Are the local authority payments grants or loans?
They are taxable grants. You will not need to repay them, but you must report them through your accounts/tax return as income received.
How do I apply?
Please check your local council’s website for details on how to apply.
I have applied for the local authority grant, how will I know if my application has been successful and when will I receive my payment?
This will differ from council to council, but the general consensus I am getting at the moment is that your council will contact you approx. one week after your claim to confirm receipt (and in some cases, your eligibility). Payments will again differ from council to council, but most are stating payment within 10 working days of your application.
My only option is Universal Credit, how do I apply for this?
Please visit https://www.gov.uk/universal-credit for further information on Universal Credit. The system is quite complex, and eligibility depends on a number of criteria and on a case to case basis. It is generally paid monthly but for some people in Scotland, it is paid twice a month. You can request an advance on your first payment after this has been calculated and you will normally find out the same day if you can get this. Note, this must be paid back when you receive your first payment.