The last few weeks have been very busy with new legislation and guidance from HMRC on how the scheme has changed since 1 November 2020. Initially there were lots of queries, which HMRC have now tried to clarify with more narrative and examples on their website. Their furlough calculator on their website has also been updated but does still not fit all scenarios. The one obvious example it does not work for is annual director payroll schemes.
Directors annual fees
Many owner managed limited companies pay directors fees once a year. Under the old scheme if these were processed after the 19 March (many would have been 31 March or 5 April) then you were not eligible under the scheme. The new scheme has been updated so this is no longer the case and a huge proportion of annually paid directors are now eligible to be claimed under the furlough scheme. This means that directors who were paid say £8,632 on 31 March can now claim 80% of their monthly salary if they are furloughed under the new scheme. HMRC have still not clarified whether the annual fee of £8,632 should be divided by 12 to calculate the monthly salary and this has currently been left to interpretation. However, it would seem abusive to claim that the £8,632 was a monthly amount that can be subjected to the 80% calculation and then capped at the maximum £2,500. We will no doubt hear more from HMRC on the subject in the coming days.
The bad news is that some directors who were previously eligible will not be now. If you were eligible last time because you had an annual pay period before the 19 March but have not had any earnings since 6 April 2020 you will now be outside of the scheme rules.
Pay changes since March
If an employee was eligible (even if not claimed for) for the first two schemes, i.e. on an RTI submission by 19 March you must use the original calculations which were in the first and second CJRS. The employee may have had a pay rise, increased or reduced hours since that date but you CANNOT change the furlough payment you make to the employee or claim back to adjust for this. This does mean that new members of staff can potentially be paid more than a member of staff who earned the same as them in October.
Under notice of redundancy
Under the old scheme you could claim furlough for an employee who was under notice of redundancy. This is no longer the case. The third CJRS is aimed at continuing employees and hence you cannot claim for people who you are intending to make redundant.
Tight claim window
As reported previously, claims for November need to be made by 14 December. This does mean that payrolls which cross the calendar month have an impossible task. A payroll which covers earnings from 15 November to 15 December and is processed on that day will not be able to meet the deadline. The advice from out Institute at the moment is to submit a claim on 14 December as an estimate and you then have 14 working days after the claim to make an increase. This seems wholly unsatisfactory, but we will update you if this changes.
Christmas shutdown
HMRC have been asked whether the annual Christmas shutdown would allow you to furlough your staff. They have clarified that this would not meet the criteria as it is not linked to the COVID outbreak. Of course, if you were forced to close in advance and this covered the Christmas period then you would be eligible to claim. You must be careful to ‘top up’ pay when the employee is actually on holiday.
Government extends £1Million tax break to stimulate investment in UK Manufacturing
Businesses including manufacturing firms, can continue to claim up to £1 Million tax relief through the Annual Investment Allowance for capital investments, such as plant and machinery. The extension was originally due to revert to £200,000 on 1 January 2021. Any large capital investments up to £1 Million pounds need to be made before 1 January 2022 to claim for full tax relief. There are some restrictions to the total amount if group companies are involved, but speak to your normal Wheelers contact if you need further advice.