The government’s plan to avoid mass redundancies by offering to cover 80% of workers’ wages was a central part of the unprecedented measures designed to tackle the expected economic damage caused by the coronavirus.

How can companies claim the grants?

HMRC is still working this out and confirmed details will be published on the coronavirus business support website.

If companies have employees on zero-hour contracts, they can use monthly salaries in February as a benchmark for each person when furloughed. If an employee did not work in February, they have to claim universal credit.

Do companies only pay 20% of employee’s wages?

No. Employers pay the employee’s salary in total (which can be reduced if existing employment regulations are adhered to) but will not be able to claim back more than 80% of £3,125 per month, equivalent to a gross salary of £2,500.

Do companies need to deduct tax and national insurance?

Pay should be processed using normal payroll systems, deducting tax and national insurance under the PAYE system.

How can companies without cash flow pay wages?

The main source of funds for wages should initially be the deferral of VAT payments for the quarter until June 2020.

Alternatively, HMRC expects companies to borrow in the short term until the job retention scheme is running. The details of both the business interruption loan service and the Bank of England’s commercial paper facility, designed for the largest investment-grade companies, are awaited to possibly help in this respect.

Cancel your VAT direct debit!

Companies with direct debits to HMRC to pay their VAT will need to cancel these immediately otherwise the payment will be taken automatically.

Is there any benefit for the self-employed?

It is expected that information on this will be released by the end of this week, but currently the government are claiming improvements in levels of universal credit will offer almost as much support as the job retention scheme. After removing the minimum income floor, the self-employed will be able to claim universal credit.

As always, as we know more, we will circulate further information.

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