Coronavirus Job Retention Scheme (CJRS) - Your questions answered

Over the last week, there have been some recurring questions from you, our clients. In some cases the answers are straightforward, in others, I have had to give an opinion based on my knowledge. Remember, where the matter is one of HR, please take legal advice. Circumstances are changing rapidly, so keep checking back, I will update these frequently asked questions as regularly as I can.

Does the Government only reimburse 80% of the 80% salary which is calculated?

My view is that the Government will reimburse the 80% of the salary of the furloughed employee, up to a maximum of £2,500, plus the employer’s NI and the statutory minimum employer’s pension contribution relevant to that 80%.

I am on the Annual accounting basis for VAT. My understanding is that HMRC is only prepared to defer the 3 months VAT payments between 20th March and the end of June by 3 months. Is that right?

The Coronavirus VAT Deferral notes say the following:

If you’re a UK VAT registered business and have a VAT payment due between 20 March 2020 and 30 June 2020, you have the option to:

• defer the payment until a later date
• pay the VAT due as normal

It does not cover payments for VAT MOSS or import VAT.

If you choose to defer your VAT payment as a result of coronavirus (COVID-19), you must pay the VAT due on or before 31 March 2021.

Based upon what those guidance notes say, you should be able to defer VAT payments due in that period until 31st March 2021. Since the notes specifically state that it does not cover VAT MOSS or import VAT. I believe that if people, who are on the Annual Accounts basis, were to be excluded from the deferral until 31st March 2021 it would have been stated in black and white.

We incorporated and TUPE’d across the whole workforce on 1st March 2020. We have run the March payroll and paid the staff, can we now furlough the staff and claim through the Employee Retention Scheme? This is a separate PAYE reference to the self-employed status.

My personal opinion is, no. As it stands at present, the employer cannot claim through the Employee Retention Scheme as the company is a separate entity to the self-employed status and the employees were taken on board after 28th February.

My employer took onboard a new employee on 26th February and although contractually obliged to put the 3 days’ pay through the February payroll, for ease purposes, he paid the employee for the first time through the March payroll. If the employer furloughs the employee can the Employee Retention Scheme be used?

My opinion is… if the employment started pre 28th February and the employer was contractually obliged to pay the employee through the February payroll and failed to do so then he was in breach of employment law. He should rerun the February payroll to factor in those three days’ pay. Since that employee will legitimately be on the payroll as at 28th February the Employee Retention Scheme could come into play.

I am self-employed with a 31st March year-end and wants my accounts and Tax Return completed quickly to ascertain my position going forward. I am not sure whether I will be eligible to claim for the self-employed scheme and even if I’m eligible, the amount I would be entitled to. What will you (my accountant) put in for the potential March ‘Scheme’ payment?

Until we have completed your accounts we will not know exactly whether you will be eligible under the rules as they stand at the moment. For your accounts, I would reflect any March payment in the March 2021 accounts. If a Government edict is issued to the contrary, then I have until 31st January 2021 to amend the accounts and Return without an interest charge arising.

I am a farmer who made a £30,000 trading profit in 2017/18 but two years of losses either side. How is the average worked out?

There has been no clarification on this matter as of yet. My personal view is that the two loss years would be treated as nil and the average would therefore be £10,000 on which to base the 80% calculation.

My husband and I are in a partnership, can we both claim under the self-employed scheme?

Yes, I believe so. My view is that both you and your husband can potentially claim under the scheme as long as each one of you individually fits the criteria.

How does the National Minimum Wage (NMW) compliance work in respect of a furloughed employee and their ‘salary’?

My personal interpretation of that instruction within the guidance notes is that if the employee is furloughed and is not expected by the employer to do any training whilst furloughed, then, if the 80% calculation takes them below the NMW the employer would not have to top up the wages to the NMW level. Why? Because the employee is not working as laid down by the NMW regulations and therefore the 80% is deemed to have nothing to do with the NMW.

However, where the furloughed employee is expected by the employer to do training (which is allowed under this furlough arrangement), then, for the time spent training, the NMW would need to be paid across to the employee through the PAYE scheme. Why? Because training is deemed to be working under the NMW regulations. If that amount is above the 80% calculation then the excess has to be met out of the employer’s pocket.

Post 5th April 2020, as it stands at present, I would work the 80% on either the 2019/20 average income, the February 2020 salary or the equivalent month from the previous year.

Will the trading profit averaging be based upon the profit pre capital allowances or post?

There is no definitive answer yet on this. My personal view is that HMRC will base it upon the SA302 calculation, if for no other reason than for speed purposes and to aid the 50% comparison test against the total taxable income.

Presumably, the employer doesn’t have to pay the employees until they receive the grant from the Government.

The employer does have to pay the employees even if they have yet to receive the grant from the Government otherwise it would be an employment law breach.

Can only the self-employed defer their 31st July self-assessment tax until 31st January 2021?

No. Anybody can defer to 31st January 2021 who has a 31st July second payment on account due.

My self- employed private clinic work has come to an end due to COVID 19 but I have been offered temporary employment working for the NHS. Can I claim under the self-employed scheme?

There is no definitive answer yet from the Government/HMRC to this question. However, the latest Guidance notes as regards the self-employed state that to qualify the following criteria has to come into play:

You can apply if you’re a self-employed individual or a member of a partnership and you:

• have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
• traded in the tax year 2019-20
• are trading when you apply, or would be except for COVID-19
• intend to continue to trade in the tax year 2020-21
• have lost trading/partnership trading profits due to COVID-19

Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment. This is determined by at least one of the following conditions being true:

• having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
• having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period

If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.

Based upon the above, my personal view would be is that if your trading profits for 2018/19 are less than £50,000 or the average over 3 years is less than £50,000 and, in either case, it represented more than 50% of your total taxable income then you should be entitled to claim under the Scheme. You must also have submitted your 2018/19 Tax Return by no later than 23rd April 2020 and intend to continue to trade in the tax year 2020/21. The fact that you are helping out the NHS in the meantime should not prevent you from claiming.

I am self-employed and my trading income has dropped due to the COVID-19 situation, but I am continuing to trade can I claim under the self-employed scheme.

Yes, assuming you fit the rest of the qualifying criteria.

My client has a furnished holiday let (FHL) portfolio, as it is classed as a trade, presumably he can claim under the self-employed scheme?
There is yet to be clarity on what classes as a trade, in this respect, but I would be very surprised if FHL would fall within the self-employed scheme.

Can I furlough the same employee more than once?

I believe that you can furlough an employee a multiple of times, but the minimum furlough period has to be 3 weeks. I would also argue that each time the business furloughs an employee they have to formally agree with the employee to do so.

How does a self-employed person make a claim?

HMRC will be doing a review of the 2018/19 Returns and then will contact the individual concerned if they think that person is eligible to make a claim under the self-employed scheme. I assume they will do this by letter and ask the taxpayer to apply through the Gov.UK portal. Be careful of scammers asking for personal details through texts, email or by phone.

Is the self-employed grant taxable?

Yes. It will be necessary to include it within the client’s accounts as taxable income. It could affect such things as Universal tax credits or working tax credits.

Can a director be furloughed?

Yes, they can. However, it is important that a formal furlough agreement is put in place between the director and the company. It must be emphasised to the director that he/she can only carry out directorial duties in line with the Companies Act during the furlough period. No actions should be taken by the director with a view to making a profit or for the furtherance of their trade.

What happens if an employee refuses to be furloughed?

In my opinion, I would always take specialist employment law advice. However, as a layperson I see the options are:

1. 1. Try to renegotiate with the employee to agree to be furloughed.
   2. Provide them with work.
   3. Make them redundant ensuring that the proper statutory redundancy legal requirements are fully met.

Can a salaried member of an LLP be furloughed?
Yes, it is possible to furlough a salaried member to be furloughed. The member’s agreement may need to be changed to take account of the fact that the member cannot work and the impact it will have upon their remuneration. The ‘salary’ for this purpose will be the member’s profit allocation excluding any amounts determined be the LLP’s member’s performance or that of the LLP Itself.

M.A.D. Accountants are based in West Bridgford, Nottingham, and are specialists in tax and accountancy assistance for businesses and individuals. We're here to make a difference to your business and your life with no-nonsense, jargon-free advice and help.