A Furlough Update
Our HR and OD partner Sarah Brewster from Fresh Seed offers an update around furloughing. From what it now means for Company Directors within the scheme, to bounce back loans and what you can and can't do whilst furloughed...
Company directors have at last had recognition within the scheme
There has now been clarification in the latest government update and this should bring good news for you. I would advise that you talk to your accountant to clarify that you fall into the payment of earnings tax year and that you have submitted the correct RTI (Real Time Information). RTI relates directly to the up to date information HMRC has on you, and is key to you being eligible for the scheme:
“Those paid annually are eligible to claim, as long as they meet the relevant conditions. This includes being notified to HMRC on an RTI submission on or before 19 March 2020, which relates to a payment of earnings in the 19/20 tax year. The requirement for there to be payment of earnings in the 19/20 tax year applies for any employee being claimed for under the scheme, irrespective of how frequently they are paid (e.g. weekly, fortnightly or monthly). This will be relevant for those on an annual pay period if the last payment notified to RTI was before 5 April 2019 and no further payments were notified until after 19 March 2020. An employer can make their claim in anticipation of an imminent payroll run, at the point they run their payroll or after they have run their payroll.”
For those of you who are classed as sole traders and therefore fall into the Self Employed Scheme you may find the following useful...
Treasury Direction: Self Employed Scheme
The Treasury has published its Direction to HMRC giving statutory footing for the government's self-employed income support scheme.
Some points arising:
- a claim may only be made in relation to a trade, the business of which has been adversely affected by coronavirus or coronavirus disease (para 4.2(a)). This departs from my previous understanding, which was that the grant applied to any self-employed person (provided they fulfilled certain financial criteria)
- the claimant only needs to have completed a tax return in one of three relevant years (it is no longer confined to completing a tax return for 2018/19), albeit they need to have traded in 2018/19, 2019/20 and intend to trade in 2020/21. They need to have had an income (profit before tax) of under £50,000pa.
- the grant (now called a SEISS payment) is 80% of 3 months' earnings, typically (but it's complicated) averaged over the last three years. As was believed to be the case, no credit is given for any actual earnings received by the individual. So if they lost, say, only £100 of trading profits because of coronavirus, they would still receive up to £7,500 (the maximum SEISS payment) - para 6.
Bounce back loans - launched today
These bounce back loans are for small businesses and apply for quick and easy loans with the cash expected to land within days of application.
- businesses will be able to borrow between £2,000 and £50,000 with the cash arriving within days
- loans will be 100% government backed for lenders, and businesses can apply online through a short and simple form
The government has also agreed with lenders that an affordable flat rate of 2.5% interest will be charged on these loans. And any business that has already taken out a Coronavirus Business Interruption Loan of £50,000 or less can apply to have these switched over to this generous new scheme.
Communication whilst furloughed
Please remember, if you opt to furlough yourself, you are unable to carry out work for the period of furlough - the minimum period is three weeks. You are able to rotate that period, and take time off between furlough periods - i.e. 1 week in every four - to carry out duties for the business, such as promoting it, client work or updating companies house etc but whilst you are furloughed you must not carry out work that generates an income or provides a service, even voluntarily.
So what can you do? You can continue to talk to your employees, and even clients as long as you are not working. Be creative about the comms you send out - in our industry that cant be such a stretch - and develop ways through newsletter, video or whatever...
If you remain unclear and feel you need further guidance, Fresh Seed continues to offer this support completely free of charge, if it relates directly to Covid-19.