Furlough Scheme - Is your business still eligible to claim?

It was recently announced that the government believes that up to £3.5bn may have been unlawfully claimed or wrongly paid out since the launch of the Furlough Scheme in March of this year. The Furlough Scheme was initially created with the aim of saving thousands if not millions of jobs and businesses during the COVID-19 pandemic. The scheme is due to come to an end on Saturday 31st October 2020.

The error and fraud rate for the scheme has now been estimated at somewhere between 5% and 10% by HMRC. The government has so far made £35.4bn in furlough payments, according to the latest figures announced. It means that somewhere between £1.75bn and £3.5bn could have been wrongly paid out.

It is believed that some of this was due to intentional fraud however some wrongful pay-outs may have been caused by genuine error due to confusion over the ever evolving terms and conditions laid out within this brand new scheme.

How do you ensure your that business is fully compliant?

To ensure that you have all of the facts that you need to make sure that you are still eligible to claim, we have included below the current eligibility criteria set out by government. It’s worth taking the time to ensure your business is still eligible to claim as false claimants can face fines, be made to pay the money back as well as face the prospect of legal prosecution if unlawful activity can be proven.

To utilise the scheme, you’ll need to take the following steps:

1.     Check if you can claim – You can now only claim if you have previously furloughed your employee before 30 June and you submitted a claim for this by 31 July. This may differ if you have an employee returning from statutory parental leave.

2.     Check which employees you can put on furlough - You can claim for employees on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed. Grants under the scheme are not counted as ‘access to public funds’, and you can furlough employees on all categories of visa. You can only claim if you have previously furloughed your employee before 30 June and you submitted a claim for this by 31 July. This may differ if you have an employee returning from statutory parental leave.

3.     Steps to take before calculating your claim – Before you can calculate how much you can claim from the Coronavirus Job Retention Scheme you’ll need to work out your employees’ wages. To do this you must work out: The length of your claim period, what you can include when calculating wages & your employees’ usual hours and furloughed hours

4.     Calculate how much you should claim – visit gov.uk to see use their claim calculator or speak to your company accountant or tax advisor to ensure your calculations are accurate.

5.     Claim for your employees’ wages online – You’ll need to be registered with PAYE online to make a claim and will also need various other bits of information to submit a successful claim. Visit gov.uk to find out more.

6.     Report a payment in PAYE Real Time Information – You should check if you need to report payments on the PAYE Real Time Information system, as this will depend on whether you are using the grant to:

-       Pay wages

-       Reimburse wages that you’ve already paid

Under both circumstances you must deduct any income tax and employee National Insurance contributions on the full amount that you pay the employee, including any scheme grant and pay it to HMRC.

Important points to remember about the Furlough Scheme

From September 1st, the government grant towards the employee wages has been reduced to 70%. From October 1, the government grant will be reduced again to 60%. During these months you will be asked to contribute towards the cost of your furloughed employees’ wages to ensure they continue to receive at least 80% of their wages for the time they’re on furlough, this allows for employers to operate a flexible furlough system.

Flexible furlough agreements

There is no minimum furlough period, agreed flexible furlough agreements can last any amount of time. Employees can enter into a flexible furlough agreement more than once.

Although flexible furlough agreements can last any amount of time, unless otherwise specified the period that you claim for must be for a minimum claim period of 7 calendar days.

You cannot claim for:

·       additional National Insurance or pension contributions you make because you choose to top up your employee’s wages

·       your employees’ wages for any time they spend working, or any National Insurance or pension contributions you make on these wages

·       any pension contributions you make that are above the mandatory employer contribution

You can choose to top up your employees’ wages above the minimum 80% furlough pay amount but you do not have to. Employees must not work or provide any services for the business during hours which they are recorded as being on furlough, even if they receive a top-up wage.

If you feel that you or your business would benefit from HR advise or support on the above topic or any other issues, please do not hesitate to get in touch, Polly will be delighted to speak with you and assist.

Disclaimer: The information contained in this article is intended to be a guide and is not intended to be exhaustive. No action should be taken on the basis of information contained herein without obtaining the necessary advice. No responsibility can be accepted for loss or damages occasioned to any person acting or refraining from acting as a result of the material contained herein.