HM Revenue & Customs publishes detailed guidance on calculating furlough claims from July onwards

HM Revenue & Customs has published detailed guidance on the operation of the Coronavirus Job Retention Scheme (CJRS) from 1 July 2020 onwards, including examples of how to calculate claims for the new flexible furlough option.

The CJRS currently provides grants to employers covering 80 per cent of the usual wages of furloughed employees – who remain on the payroll but must not carry out any work – up to a cap of £2,500 a month as well as employer National Insurance Contributions (NICS) and pension contributions.

However, from 1 July employers will be able to make new flexible furlough agreements with employees that enable them to return to work on a part-time basis, while the employer will still be able to claim a CJRS grant for the hours not worked. Only employees who have been furloughed for a full three-week period up to this point will still be eligible to be furloughed.

From 1 August, CJRS grants will cease to cover the costs of employer NICs and pension contributions in respect of furlough pay.

Then, in September, the value of CJRS grants will reduce to 70 per cent of furloughed employees’ usual wages, with employers required to top-up the remaining 10 per cent so that furloughed employees still receive 80 per cent of their usual wages, capped at £2,500 a month.

Finally, October will see the value of CJRS grants fall to 60 per cent of furloughed employees’ usual wages, with employers having to contribute the remaining 20 per cent.

Employers are responsible for calculating the correct amounts to claim from the scheme, with HMRC expected to take a hard line on errors that are not corrected quickly.

The new guidance walks employers through the various calculations needed to work out the amounts they need to claim in respect of furloughed employees in different circumstances over the remaining months of the scheme.

This includes information about:

• Calculating flexible furlough claims;
• calculating employer NICs and pension contributions on hours worked and furlough hours;
• dealing with considerations around the National Living Wage (NLW) and National Minimum Wage (NMW);
• employees returning from parental leave;
• employees returning from Statutory Sick Pay (SSP) and
• the reduction in the value of the main grant in September and October.

To help employers deal with the potentially wide range of permutations, HMRC has published example calculations dealing with different situations.

Where employers find that they have overclaimed, they can report this as part of their next claim, which will be adjusted down to take the previous overpayment into account. HMRC says it is working on a mechanism to deal with circumstances where an employer has overclaimed but does not wish to make further claims. In the event of underclaims, employers should contact HMRC directly.

As part of the changes to the scheme, HMRC has also confirmed that claims for periods ending up to 30 June must be made by 31 July, while claims periods from 1 July onwards must begin and end in the same calendar month and last at least seven days. If an employee is furloughed in June and continues to be furloughed for their full hours in July, separate claims will need to be submitted, even if this differs from an employer’s own pay periods.

Further clarification issued on eligibility for second round of Self-Employment Income Support Scheme

HM Revenue & Customs (HMRC) has issued further details of eligibility for the second round of the Self-Employment Income Support Scheme (SEISS), which will provide taxable grants to self-employed individuals.

The grants will be 70 per cent of average monthly trading profits, capped at £6,570 and paid in a single instalment.

HMRC has now clarified that in order to qualify for the second grant, a self-employed individual must confirm that their trading has been adversely affected by the coronavirus outbreak on or after 14 July 2020.

This means it is possible for a self-employed individual not to have qualified for the first round of funding by virtue of not having been adversely affected, but to qualify for the second round because they have subsequently been adversely affected. This might be in circumstances where they become unwell with Coronavirus in July and are then unable to trade as a consequence.

However, this also means that some self-employed individuals who were able to confirm that their business was adversely affected for the first round of funding may find that this is no longer the case and so do not qualify for the second round of funding.

The criteria to qualify for the scheme otherwise remain unchanged and apply to self-employed individuals and members of partnerships:

• you traded in the tax year 2018 to 2019 and submitted your Self-Assessment tax return on or before 23 April 2020 for that year
• you traded in the tax year 2019 to 2020
• you intend to continue to trade in the tax year 2020 to 2021
• you carry on a trade which has been adversely affected by coronavirus

Applications for the current round of funding, worth 80 per cent of monthly trading profits and capped at £7,500 in total remain open here until 13 July 2020.

Meanwhile, details of the second round of funding will be published at a later date.