Changes to the furlough scheme & Self-employed Grant (SEIS) – July 2021
Important changes to the Coronavirus Job Retention Scheme (furlough) come into force from 1st July 221, with employers now required to contribute a percentage towards their employees wages for hours normally worked but not worked due to furlough.
- 1 July 2021 -The government will reimburse employers 70% of a furloughed employee’s salary (up to £2,187.50 per month). The employer will need to top up 10% (up to £312.50) to make the 80% the government has been paying. The employer will continue to pay national insurance and pension contributions.
- 1 August 2021 -The government will reimburse employers 60% (up to £1,875 per month) with the employer having to contribute 20% (up to £625.00) and pay national insurance and pension contributions.
Should holidays be taken during furlough?
Employers can require that holidays be taken (within certain rules) and many employers are requesting that workers take a proportion of holiday by certain dates. The risk for employers is that those returning from furlough may have built up substantial holiday entitlement.
We understand that unless otherwise agreed in a contract of employment or collective agreement, an employer can require an individual to take holiday by giving notice which is twice the length of the period of holiday to be taken.
Clearly notice should not be given to take a holiday on a day that would otherwise not be a non-working day.
Be aware that employers have to top up the furlough pay for those holiday days as the worker is entitled to 100% of pay whereas under the furlough scheme the employer only has to pay 80% although they can choose to pay more.
PAYE, NI, Employers NI and pension deductions?
PAYE, NI and pension deductions are applied as normal to the gross salary, but these are non-recoverable through the furlough scheme so are a cost to the employer. The employer will then be able to recover 70% of furloughed hours but must pay the worker 80% and apply PAYE, NI and employers NI as normal along with pension contributions based upon that 80%. For days taken as holidays the employer must pay 100% of salary and apply PAYE, NI & Employers NI plus pension costs and will only be able to recover 70% of the salary cost.
Self-employed – 5th SEIS Grant
A fifth grant covering May 2021 to September 2021 will be open to claims from late July 2021.
Please note the grant is treated as taxable income and paid in a single instalment. We are hearing stories of others elsewhere not realising that the self-employed grant is treated as the self-employed persons taxable income.
To be eligible for the grant:
- You must have traded in the tax years 2019/20 and submitted your tax return before 2 March 2021;
- You must have traded in the tax year 2020/21;
- You must be either currently trading but impacted by reduced demand or have been trading but are temporarily unable to do so due to coronavirus;
- You must intend to continue to trade;
- You must reasonably believe that there will be a significant reduction in your trading profits due to reduced business activity, capacity, demand or inability to trade due to coronavirus from May 2021 to September 2021.
How is the grant calculated?
The amount of the fifth grant will be determined by how much your turnover has been reduced in the year April 2020 to April 2021. HMRC will first look at your 2019/20 self-assessment tax return. Your trading profits must be no more than £50,000 and at least equal to your non trading income. If you are not eligible based on your 2019/20 tax return then HMRC will look at the earlier tax years.
When can you claim?
If you are eligible HMRC will contact you from mid-July 2021 to give you a date from which to make your claim. If you believe you are eligible but are not invited then you should contact HMRC. If you are invited but do not believe you should be eligible then you should tell HMRC as they plan to conduct further enquiries and may take a dim view.