Changes to Furlough and SEISS schemes 30th May 2020
Here’s the low down…
You might well have heard snippets of info about the just announced changes to both the furlough scheme for employees and the Self employed support scheme.
Thankfully, and perhaps unexpectedly, there has been an extension to the Self employed scheme, although not at the same level of support. But it’s certainly better than nothing. We wondered if, because self employed are allowed to continue to trade if they can while being supported, that the government would say ‘sink or swim’. Thankfully that is not the case.
There’s also changes to the furlough scheme with employers effectively being weaned off reliance on the government support. Read on to find out exactly what is in store.
In a nutshell
- SEISS support for Self employed will reduce to 70% for the next quarter (June to August incl)
- Portal for applications for self employed scheme for quarter two will open in August
- You can apply for the SEISS scheme for the 2nd quarter even if you didn’t apply for it in May
- For the Furlough Scheme, employees will be allowed to work part time from July
- The minimum period for furlough is one week (it was three)
- Employers will pay for the hours worked
- No new employees admitted onto the scheme from July (cut off date for system 10th June)
- Employers will start paying NI & Pension Contributions from August on furlough element
- Employers will have to contribute 10% (in Sept) and 20% (in Oct) towards 80% furlough cost
AND FINALLY, IF YOU ARE A SMALL BUSINESS WHO HASN’T BEEN ELIGIBLE FOR ANY GRANTS, PLEASE SCROLL TO THE BOTTOM TO SEE THE NOTES ABOUT THE NEW DISRETIONARY FUND BEING OPERATED BY THE LOCAL COUNCILS.
Here’s what you need to know:
Self Employed Scheme (SEISS)
You may already have applied for the scheme to cover three months profit which related to March, April and May (if your business was struggling) and if you were eligible for that one, and your business is still being affected (this element is important) you will be able to apply, when the portal opens in August – so like before, a three month wait. This will relate to June, July and August.
N.B. When you account for these grants on your tax return you will use the dates that you received the money, so both lump sums will be in the tax return for year 20/21 even though in theory, the support for ‘March’ was in 19/20. You will need to show the lump sums as income.
So what’s the main difference?
The rate has reduced to 70% of the profit as opposed to 80%.
The maximum capped payout for the three months will now be (at 70%) £6,570 as opposed to (at 80%) £7500 last time, so do bear this in mind for your cash flow.
IMPORTANT NOTE: if you didn’t claim for this grant in the first possible period, because maybe your business was not suffering, you will be able to claim for the second period, if things have now changed for you and your business.
Key date: more information about this SEISS extension will be shared on June 12th
The Furlough Scheme
Interesting developments here.
- For a start, they had announced that the changes would start on 1st August but actually they are starting on July 1st.
- From 1st July employers are allowed to combine the furlough system with bringing their staff back part time.
- So the idea is that the employee gets the reassurance of the 80% income for the time they are not able to work during July, and the employer gets the support, but if there is some work for the employee, they can be brought back into work and WILL BE PAID FOR THE HOURS THEY WORK BY THE EMPLOYER.
As a result, the minimum furlough period lowers from three weeks to one week.
This is to accommodate the flexibility needed to take into account the part time work on full pay, which the employers are being encouraged to provide.
So again, good record keeping and another unique set of payroll submissions will be in order.
How exactly this will work remains to be seen. No doubt there will be some more guidance soon. I think they are just giving the heads up that from 1st July most employers are expected to be bringing staff back on some sort of basis if possible. This will require some careful planning and negotiation and I imagine, new contract arrangements.
The other main difference with this extension is that it’s a staggered system where each month employers are required to pay more towards the income of their furloughed employees.
There’s a really important point to note – could you be claiming more?
When you claimed your furlough amount, did you also claim extra for the employers National Insurance AND the minimum pension requirement? Perhaps some did not realise as the figure of 80% was bandied about so much? But yes, you could have claimed that. I am pointing this out because the government said ‘Around 40% of employers have not made a claim for employer NICs costs or employer pension contributions’ and for the periods you apply for up til the end of June, do claim that extra element if you need to.
Last date for applying for the final three weeks of existing furlough scheme is 10th June with the scheme as it stands now ending on 30th June
From July onwards, only employers and employees who have already been on the scheme will be able to claim.
So if you are likely to furlough more staff, get them in the system as soon as possible (you’ve got til 10th June) as the minimum period for furlough currently is three weeks.
What happens in August?
Again the 80% figure is there for employees, to pay them for the time they are not working, but the employer will be expected to pay the employer NI and minimum pension contribution. (as apparently 60% of employers didn’t claim for this element, that won’t make much difference to most).
There is no suggestion that you HAVE to bring your staff back at this stage. But whatever you do, if you keep them furloughed, you will have to pay the employer NI and Pension contribution.
What happens in September?
This is arguably the biggest change. If you have furloughed employees, you will be expected to contribute to their furloughed 80% income. The government will pay 70% of the figure up to a cap of £2,187.50 and the employer is required to top up the salary for the employee with the final 10% plus the NI and Pension contribution as before, to bring the wages up to the familiar maximum monthly cap of £2,500.
What happens in October?
For your furloughed employees, you will be expected to contribute more towards their furlough pay. You would already be paying them for the hours they are working of course. So whereas the figure for support from the government was 70% last month, it lowers to 60% for October with 20% of the furlough pay to be topped up by the employer, plus NI and Pension contributions as before. With the cap still being £2,500 for the income generated from the furlough scheme.
Warning: ‘Employees who believe they are not getting their 80% share can also report any concerns to the HMRC fraud hotline. HMRC will not hesitate to take action against those found to be abusing the scheme.’
If you would like to read up on the government’s website, here’s the link : https://www.gov.uk/government/news/chancellor-extends-self-employment-support-scheme-and-confirms-furlough-next-steps
NOTHING HERE FOR YOU? read on!
IF YOU HAVE NOT BEEN ELIGIBLE FOR ANY GRANTS SO FAR, THE LOCAL COUNCILS ARE NOW IN POSSESSION OF A NEW FUND FOR DISCRETIONARY SUPPORT
You have to apply.
YOU HAVE JUST LESS THAN THREE WEEKS – APPLICATIONS CLOSE 5pm on 19th June.
Here’s the information relating to North Herts District Council.
The priority is to help support the businesses who ‘fell between the cracks’ of the last scheme. So small businesses who would probably have qualified if they were on the business rates register. For example,
- Are you are in serviced offices?
- Or pay council tax rather than business rates (bed and breakfast establishments).
- Or run a market stall?
There’s others types of business set ups supported.
If you have high fixed costs you will be prioritised if you meet all the criteria.
You can apply here for North Herts District Council:
And here are the criteria for applications, which will be awarded on a case by case basis.
Please look on your local council website if you’re not in this area.