Coronavirus – To Furlough or not to Furlough?
The self-employed will receive grants to help them during the coronavirus outbreak but those who operate through a limited company are not eligible for the scheme. It has however been confirmed that limited company directors are eligible for the Coronavirus Job Retention Scheme (CVRS), if they operate a PAYE scheme.
Who is the CVRS available to?
It is available to employees / directors on the payroll as at 28 February 2020.
Should I furlough?
This is a question directors will now be asking themselves. Many directors take a salary of £719.33 per month, which is very tax efficient ordinarily, but which only equates to a refund amount of around £575 pcm at 80% if furlough is opted for. It is therefore a case or weighing up the needs of your business and servicing your clients (if you are still able to) against claiming the £575 refund (or so) available per month over the next few months.
How does it work?
The scheme pays a grant (not a loan) directly to the employer through a new online system which is being built for this purpose.
The company will pay the director through payroll as usual, using the Real Time Information (RTI).
What are the rules?
The rules are that if you decide to furlough, you should not work at all during the period of furlough (and those who do work could be prosecuted).
What can I claim?
A maximum grant will be calculated per director/employee and is the lower of 80% of the salary, up to a cap of £2,500 per month.
The scheme does not extend to dividends, only the salary is relevant to the scheme.
How do I furlough?
The scheme will be administered by HMRC:
• Relevant employees and directors must be ‘designated’ as furloughed employees.
• Employers / directors will submit information to HMRC through a new online portal.
• As this will take time to build, businesses should look to the Coronavirus Business Interruption Loan (CBIL) for the time being for short term cash flow issues.
Please let us know if you intend to furlough.
Can I furlough my partner?
Only if they are a director or an employee and they will not be working at all in the business.
Can I back date?
The Coronavirus Job Retention Scheme will cover the cost of wages backdated to 1 March 2020 and is initially open for 3 months but will be extended by HMRC if necessary.
How will I get the refund?
HMRC will send a refund to the business in due course. How and when this happens has not yet been confirmed.
Please see our other emails for additional business support schemes available including deferred VAT and July Self Assessment payments, SSP for two weeks for directors and employees who contract coronavirus, the coronavirus business interruption loan and the grants available for businesses who pay rates, or get small rate relief.
In addition, if you have not done so already, please call your insurance company to see if you are covered for pandemics, prepare a cashflow for your business if you think you may need to access a loan, and consider calling your mortgage company for a payment holiday.