- 1st June 2020
- Posted by: team-glow
- Category: Current Affairs
COVID-19 Financial Support: Updates to Furlough and Self Employment Income Support Schemes
Over the course of the last month, there’s been a lot of speculation about how long the government can continue to financially support individuals and businesses across the UK.
Whilst many of the rumours weren’t backed up by facts, one particular speculation was confirmed by Chancellor Rishi Sunak two weeks ago; changes to the furlough scheme will occur.
Up until Friday 29th May, we had little idea about the changes that would come into force and how this would affect both employees and employers. However, the Chancellor has now confirmed what the amended scheme will look like.
So, what’s changed?
The CJRS currently allows business owners to furlough staff who are paid via PAYE and claim up to 80% of their wages back from the government up to a maximum of £2,500 for each employee. Up until the end of July 2020, the scheme will continue in its current form.
But then what happens?
- After 30th June 2020, employers will not be able to place any non-furloughed employees on furlough. Realistically, this means the employee must be on furlough by 10th June 2020 to complete the minimum 3-week furlough period.
- From 1 July 2020, employers can place employees on furlough on a part-time basis, the 3-week rule will no longer apply.
- Claims for furlough periods up to 30 June 2020 must be claimed by 31 July 2020.
- From 1 August 2020, employers can no longer claim Employer NI and pension contributions, but the government will continue to pay 80% of wages to a maximum of £2,500pm.
- From 1 September 2020, employers will be required to contribute 10% and the government will contribute 70%. However, the employee will still receive a minimum of 80% of salary/pay.
- From 1 October 2020, the employer will be required to contribute 20% and the government will contribute 60%. However, the employee will still receive a minimum of 80% of salary/pay.
- The furlough scheme will close on 31 October 2020.
How about the self-employed, do they get additional support?
In the daily briefing held 29th May 2020, Chancellor Rishi Sunak also advised that self-employed individuals will receive a second and final taxable grant.
This time, it will be 70% of trading profits to a maximum of £6,570 over a 3-month period- this equates to £2,190 pcm.
Claimants will be required to apply again in August, and it is expected they will receive notification from HMRC in due course in the same way as they did with the prior grant. Per our understanding, the eligibility for this scheme remains the same.
Shenward’s Insight and Analysis
Extension of Furlough Scheme
It’s certainly a welcome extension for businesses who have placed employees on furlough. During August, employers will be required to settle the Employer’s NI however, given that most small employers claim the Employers’ NI allowance of £4,000pa, they would only be required to fund 80% of the pension contributions thus we do not expect a significant impact to businesses’ cash flow.
Where we do expect an impact is from September and October where employers will be required to fund 10% and 20% respectively. Particularly for those industries which are most affected such as leisure and hospitality, if their businesses have not recovered by then, how will they able to afford 10% / 20% of employees’ wages?
Additionally, it’s certainly an interesting move from the Chancellor to close the scheme to new entrants from 1 July 2020 as a trade-off to allowing ‘flexible furlough’. Realistically, employers have until 10 June to decide whether they wish to place any non-furloughed employees and benefit from this flexibility.
Self Employed Income Support Grant
Shenward welcomes the extension to the SEIS grant although it’s set to reduce to 70%. Although our concerns raised through our survey https://www.bmmagazine.co.uk/news/alarming-number-of-self-employed-dont-qualify-for-government-support/remain valid. Particularly the directors of owner-managed businesses and new businesses established since 6 April 2019.
There are still several options that business owners and self-employed individuals can explore to help with cashflow during the pandemic. If you’d like tailored advice or support with applications, please email firstname.lastname@example.org.