Furlough, latest guidance

[Porky]

As the end of Tax year P60s have been issued in lots of cases can’t we use the figure on that and divide by 12 or the number of months worked to calculate monthly average earnings figure?

As ever with HMRC they over complicate everything. You can bet your life once the dust settles they will be employing staff to go over every claim and try and catch you out and claw it all back later if you haven’t understood the guidelines of the scheme, let’s face it we are on page 15 here with still confusion, so it’s evidently not a clear cut scheme.

 

[recruiter_25]

I first read that commission was not to be included and now read that it can be?

Also, pay run has been completed for March and closed off using the basic pay (and no commission) as furlough.

 

[Newchodge]

As the end of Tax year P60s have been issued in lots of cases can’t we use the figure on that and divide by 12 or the number of months worked to calculate monthly average earnings figure?

As ever with HMRC they over complicate everything. You can bet your life once the dust settles they will be employing staff to go over every claim and try and catch you out and claw it all back later if you haven’t understood the guidelines of the scheme, let’s face it we are on page 15 here with still confusion, so it’s evidently not a clear cut scheme.

You can do that if you did not furlough anyone before 6 April. If you did you cannot work out how much furlough to pay them in March if you need to have the March figure available to calculate that amount.

 

[UKSBD]

A step by step guide for employers here [17th April] - https://assets.publishing.service.g...n_Scheme_step_by_step_guide_for_employers.pdf
[PDF]

Updated [17th April] Guidance - including calculations is here - https://www.gov.uk/guidance/work-ou...-through-the-coronavirus-job-retention-scheme

 

[UKSBD]

I first read that commission was not to be included and now read that it can be?

Also, pay run has been completed for March and closed off using the basic pay (and no commission) as furlough.

It depends if it is discretionary or non-discretionary

"What to include when calculating wages
The amount you should use when calculating 80% of your employees’ wages is regular payments you are obliged to make, including:

• regular wages you pay to employees
• non-discretionary overtime
• non-discretionary fees
• non-discretionary commission payments
• piece rate payments

You cannot include the following when calculating wages:

• payments made at the discretion of the employer or a client - where the employer or client was under no contractual obligation to pay, including:
  • tips
  • discretionary bonuses
  • discretionary commission payments
• non-cash payments
• non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay"

source: https://www.gov.uk/guidance/work-ou...-through-the-coronavirus-job-retention-scheme

 

[recruiter_25]

I will have to check the contracts for the detail but commission is usually paid 2 months in arrears and is based on placements made. So that is non-discretionary?

 

[Newchodge]

I will have to check the contracts for the detail but commission is usually paid 2 months in arrears and is based on placements made. So that is non-discretionary?

If you look at the Direction

https://assets.publishing.service.g...4/200414_CJRS_DIRECTION_-_33_FINAL_Signed.pdf

Section 7 it makes it clear that you cannot include payments that are made on the basis of the effort the employee has put in so I think that commission is excluded.

 

[recruiter_25]

Thanks, I agree. I wonder what commission is actually allowable then.

 

[Newchodge]

I have a client who pays 'commission' to a member of staff. It is the same amount every month and there is no requirement that the employee achieve anything to receive it.

 

[UKSBD]

If you look at the Direction

https://assets.publishing.service.g...4/200414_CJRS_DIRECTION_-_33_FINAL_Signed.pdf

Section 7 it makes it clear that you cannot include payments that are made on the basis of the effort the employee has put in so I think that commission is excluded.

Is that not overridden by 7.4 (d)
"arises from a legally enforceable agreement, understanding, scheme, transaction or series of transactions."

Would that not mean that if it said in the contract
"Sell X+ and you get Y commission" the commission could be included?

Also, if there is an understanding that "The person sells X+ they get Y commission" the commission could be included?

7.4 (d) appears to override 7.5

Edit to add: If it is in the contract that a person gets X commission if reaching a Y target it. I assume that would be classed as non-discretionary.

 

[Newchodge]

Is that not overridden by 7.4 (d)
"arises from a legally enforceable agreement, understanding, scheme, transaction or series of transactions."

Would that not mean that if it said in the contract
"Sell X+ and you get Y commission" the commission could be included?

Also, if there is an understanding that "The person sells X+ they get Y commission" the commission could be included?

7.4 (d) appears to override 7.5

Edit to add: If it is in the contract that a person gets X commission if reaching a Y target it. I assume that would be classed as non-discretionary.

My brain hurts

 

[Newchodge]

There is 1 bit in the employer's guidance that worries me:

HMRC will check claims made through the scheme. Payments may be withheld or need to be repaid in full to HMRC if the claim is based on dishonest or inaccurate information or found to be fraudulent.

Some of the guidance is so convoluted the chance of using inaccurate information must be high!

 

[valakot]

Upcoming pay period. Or the payroll you are about to run, so probably April. Not the one after that.

Thanks for clarification on this. So if the employee will be furloughed until say end of June, we will have to make a claim every month (not earlier than every 3 weeks as the HMRC guidance says). But if the employee has been furloughed from lets say 21st of March, and since we are now into our April payroll (monthly pay) first claim can be made for 11 days of March + whole April (30 days of April) I suppose?
Than after 3 weeks we can make another claim for the whole May, and than after another 3 weeks for the whole June?
And I suppose each claim can be made before the RTI Submission?

Thanks in advanced for the answer.

 

[Newchodge]

The claim every 3 weeks has vanished from the more recent guidance. It is now claim when or just before running payroll.

 

[recruiter_25]

I appreciate that the time scale was tight but they really should have released this latest guidance before month 12 payroll.

 

[recruiter_25]

just come across this...


What parts of my pay are included in the calculation?

The grant paid to your employer will be calculated based on your regular, contractual pay. It will include:

• Regular wages. These are the normal wages or salary set out in your contract for doing your job.
• Non-discretionary overtime. This applies to guaranteed overtime set out in your contract.
• Non-discretionary fees. These are fees your employer has contractually agreed to pay for you, eg, chartered membership fees if your role requires you to be part of a professional association.
• Non-discretionary commission. This is commission that's promised to you in your contract, eg a certain proportion of a car's sale price for motor dealers.
• Piece rate payments. This applies if you're paid for your output rather than your time, eg, a jeweller paid per ring or a journalist paid per article.

 

[Newchodge]

just come across this...


What parts of my pay are included in the calculation?

The grant paid to your employer will be calculated based on your regular, contractual pay. It will include:

• Regular wages. These are the normal wages or salary set out in your contract for doing your job.
• Non-discretionary overtime. This applies to guaranteed overtime set out in your contract.
• Non-discretionary fees. These are fees your employer has contractually agreed to pay for you, eg, chartered membership fees if your role requires you to be part of a professional association.
• Non-discretionary commission. This is commission that's promised to you in your contract, eg a certain proportion of a car's sale price for motor dealers.
• Piece rate payments. This applies if you're paid for your output rather than your time, eg, a jeweller paid per ring or a journalist paid per article.

Why on earth is that explanation not in the employer's guide?

 

[Newchodge]

I appreciate that the time scale was tight but they really should have released this latest guidance before month 12 payroll.

I know. It is adding to the nightmare. They also changed the guidance on calculating varied pay from average 2019/20 tax year, so 6 April to 5 April, to 6 April (or start date if later) to start of furlough. Which makes more sense but is NOT what they said before 4 April.

EDIT: They have also added para 7.12 in the Direction, (15 April) which appears to state that, if you paid anything during furlough you have to have paid at least 80% of the correct total figure, or correct it to at least 80% before making the claim. I hope that means correct the RTI, as I know lots of businesses that could not pay 80% but paid something to help their employees, pending getting the money.

 

[recruiter_25]

Why on earth is that explanation not in the employer's guide?

I know, would have been helpful. Seems like they want people to make mistakes.

Not sure what to do as March was based on average salary excluding commission. Can we now change April to average including commission? Payroll closed off for 19/20 so it will not allow to go back and adjust payslips.

 

[Newchodge]

I know, would have been helpful. Seems like they want people to make mistakes.

Not sure what to do as March was based on average salary excluding commission. Can we now change April to average including commission? Payroll closed off for 19/20 so it will not allow to go back and adjust payslips.

I would do an EYU - earlier year update. Do you use basic Tools?

The reason I would do that is that HMRC may well query an increase in the reference pay that shows on RTI's when an RTI already includes furlough pay.

 

[recruiter_25]

I would do an EYU - earlier year update. Do you use basic Tools?

The reason I would do that is that HMRC may well query an increase in the reference pay that shows on RTI's when an RTI already includes furlough pay.

I have used the PAYE tools in the past and find them an absolute nightmare to use. I don’t know if they have improved them at all recently?

 

[Newchodge]

I have used the PAYE tools in the past and find them an absolute nightmare to use. I don’t know if they have improved them at all recently?

Not a lot. What software are you using?

 

[recruiter_25]

It is called Moneysoft.

I have managed to find copy of contract used at my home office. Well the template that was used.

It states discretionary so that means I do not need to include in the calculations and I can use their basic Feb salary pay as first thought.


8 BONUS
8.1 The Company may from time to time award a bonus to the Employee in recognition of his personal performance or the performance of the Company as a whole. Any such bonus shall be at the absolute discretion of the Company (as to whether to declare a bonus and, if so, the amount of any such bonus) and shall not give rise to any contractual entitlement on the part of the Employee to receive a bonus. Payment of a bonus on any particular occasion shall not entitle to the Employee to receive a further bonus on any subsequent occasion.
8.2 Notwithstanding clause 8.1, the Employee shall in any event have no right to receive a bonus (or any pro ratapart of a bonus) if:
8.2.1 he has not been employed throughout the whole of the relevant financial year of the Company; or
8.2.2 his employment terminates for any reason or he is under notice of termination (whether given by the Employee or the Company) at or prior to the date when a bonus might otherwise have been payable.

 

[Newchodge]

It is called Moneysoft.

I have managed to find copy of contract used at my home office. Well the template that was used.

It states discretionary so that means I do not need to include in the calculations and I can use their basic Feb salary pay as first thought.


8 BONUS
8.1 The Company may from time to time award a bonus to the Employee in recognition of his personal performance or the performance of the Company as a whole. Any such bonus shall be at the absolute discretion of the Company (as to whether to declare a bonus and, if so, the amount of any such bonus) and shall not give rise to any contractual entitlement on the part of the Employee to receive a bonus. Payment of a bonus on any particular occasion shall not entitle to the Employee to receive a further bonus on any subsequent occasion.
8.2 Notwithstanding clause 8.1, the Employee shall in any event have no right to receive a bonus (or any pro ratapart of a bonus) if:
8.2.1 he has not been employed throughout the whole of the relevant financial year of the Company; or
8.2.2 his employment terminates for any reason or he is under notice of termination (whether given by the Employee or the Company) at or prior to the date when a bonus might otherwise have been payable.

Bonus is definitely excluded.

For future reference, in case you ever need to, you can use Microsoft to update a previous year.

 

[Dahu371]

For staff whose hours vary and are paid every week, is it correct that we can use the higher of the average or the same week last year?

Say an employee last year was paid £102, £90, £150 and £150 in weeks 1 to 4. The average would be £123 but we could choose to pay them this in weeks 1 and 2, and £150 in weeks 3 and 4. It doesn't feel right. Or do we have to use one method consistently and not pick and choose?

 

[Newchodge]

The guidance assumes everyone is paid monthly. However, my view is that, if you pay weekly, you have to reassess every pay period which is higher - same pay period last year or 2019/20 tax year average ending on day before furlough and pay (then claim) the higher amount each pay period

 

[Dahu371]

The guidance assumes everyone is paid monthly. However, my view is that, if you pay weekly, you have to reassess every pay period which is higher - same pay period last year or 2019/20 tax year average ending on day before furlough and pay (then claim) the higher amount each pay period

Thank you. It's a bit of a pain working this out but it will result in more money for staff, and in some cases quite a lot more (e.g. for zero-hour staff £0, £0, £0, £200 now will be £50, £50, £50, £200).

Would we be running a risk though that HMRC could turn around and say "no, you can't do it like this"? I want to do the best for the staff but not sure if I can take a risk here.

 

[Porky]

Dahu

I’m taking it as the average monthly, ie 52 weeks divided 12 and taking the risk. That’s what the guidance notes say but like you I don’t have any confidence in the scheme. You wonder if it’s designed specifically confusing on purpose so they can catch you out later!

At the moment it’s survival if they come back later and say the calculation was wrong I will deal with that then, that’s all I can do.

 

[manwithnonames]

I know, would have been helpful. Seems like they want people to make mistakes.

This.
Given HMRC's track record-- I can quite easily foresee a situation where some third party comes in at a later date and offers to "verify" past claims for a 10% cut of HMRC's recouped funds.

As the sole Director of a Ltd - I'm looking at the paltry sum equalling 80% of PAYE and wondering if its even worth the risk.
Will some algorithm decide I claimed furlough whilst organising a supplier payment and suddenly we're looking at the costs associated with defending a fraud accusation ( see Post Office).

 

[Newchodge]

Dahu

I’m taking it as the average monthly, ie 52 weeks divided 12 and taking the risk. That’s what the guidance notes say but like you I don’t have any confidence in the scheme. You wonder if it’s designed specifically confusing on purpose so they can catch you out later!

At the moment it’s survival if they come back later and say the calculation was wrong I will deal with that then, that’s all I can do.

That is entirely wrong. It is the higher of the same pay period last year (and the way to calculate that is not straightforward) or the average in 2019/20 tax year up to the day before furlough (and the way to calculate that is not straightforward). doing it any other way risks the entire claim being rejected.

 

[UKSBD]

Thank you. It's a bit of a pain working this out but it will result in more money for staff, and in some cases quite a lot more (e.g. for zero-hour staff £0, £0, £0, £200 now will be £50, £50, £50, £200).

Would we be running a risk though that HMRC could turn around and say "no, you can't do it like this"? I want to do the best for the staff but not sure if I can take a risk here.

If you are using a week as a period I would assume the calculation will be for the period too.

Edit to add: The calculator is now live - https://www.tax.service.gov.uk/job-retention-scheme-calculator/claim-period-start

Edit again: it doesn't do calculations for variable weekly pay yet

 

[UKSBD]

Thank you. It's a bit of a pain working this out but it will result in more money for staff, and in some cases quite a lot more (e.g. for zero-hour staff £0, £0, £0, £200 now will be £50, £50, £50, £200).

Would we be running a risk though that HMRC could turn around and say "no, you can't do it like this"? I want to do the best for the staff but not sure if I can take a risk here.

As I suggested earlier a period doesn't have to be a month
If you pay weekly the period can be a week and you divide by 7 days

so in your example of paying £0 in 1 week 0 /7 = £0
You can't use the monthly average in your week 4 it will be 200/7 multiplied by the days they are on furlough (7) x 80% = £160

so in your example above (if working out on weekly period)
it will be
£0, £0, £0, £160

"Example of claiming for the same period last year

A Ltd pays an employee on a weekly basis. The employee’s pay period starts on 23 March 2020 and ends on 29 March 2020. The employee was paid £350 for 23 March 2019 to 29 March 2019. The employee was furloughed for the whole week.

1. Start with £350 (the amount they earned in the same period last year)
2. Divide by 7 (the total number of days in this pay period)
3. Multiply by 7 (the number of furlough days in this pay period)
4. Multiply by 80% - this is £280"

source: https://www.gov.uk/guidance/work-ou...ugh-the-coronavirus-job-retention-scheme#calc

 

[JosDH]

Like many, Im paying the staff at 80% since late March.

One of the staff's weekly wages has increased since April due to the minimum wage going up, so ive been giving him 80% of his new gross wage.

Im assuming I can still claim the higher amount from April ?

 

[Karimbo]

This.
Given HMRC's track record-- I can quite easily foresee a situation where some third party comes in at a later date and offers to "verify" past claims for a 10% cut of HMRC's recouped funds.

As the sole Director of a Ltd - I'm looking at the paltry sum equalling 80% of PAYE and wondering if its even worth the risk.
Will some algorithm decide I claimed furlough whilst organising a supplier payment and suddenly we're looking at the costs associated with defending a fraud accusation ( see Post Office).

Supplier payments are bills for me. I.e. annual payment for SEO services directories, domain fees, web hosting fees etc. Would this be regarded as statutory duty (paying bills) or offering services to the business?

What about doing VAT returns, tax returns etc.

 

[UK Contractor Accountant]

Annual Pay not catered for on the HMRC Portal?

 

[JosDH]

Damn this is confusing.

If i paid someone £375 in mid to late March and the Employer NI was £28.84.

Claiming furlough for week 52 at 80% meant his wages was £300 and the Employers NI was £18.49.

Can i still claim 80% of the £28.84 or 80% of the £18.49 ?

 

[Karimbo]

i think thread needs to be locked and a new one opened with the latest guidance as per HMRC. With a FAQ on the opening post.

There is so much speculation and incorrect conclusions by posters as the rules on furlough weren't solidified by the treasury.

A lot of people will be skimming through this thread and getting the wrong impression based on other posters.

The furlough elegibility start date, re-employing redundant employees and putting them on furlough, clarification for directors of sole director businesses furloughing themselves have been clarified and changed since the first announcement.

 

[valakot]

Hi sorry if it's been already asked and answered but - if 2 employees have been furloughed and I am claiming the 80% salary grant, am I allowed to top up 20% of salary of 1 employee but not top up the salary of another employee if both employees agree of course? The idea is I am one of this employees and I want to pay myself 80% of the salary but top up 20% to pay 100% to my other employee.

 

[Newchodge]

Like many, Im paying the staff at 80% since late March.

One of the staff's weekly wages has increased since April due to the minimum wage going up, so ive been giving him 80% of his new gross wage.

Im assuming I can still claim the higher amount from April ?

No you can't. The guidance is absolutely clear that the rate of pay for all periods of furlough is the rate before 19 March. The actual calculation is also set out. There is a very clear statement that the minimum wage does not apply to people on furlough as they are not working.

I take it all your staff have stopped working?

 

[Newchodge]

Supplier payments are bills for me. I.e. annual payment for SEO services directories, domain fees, web hosting fees etc. Would this be regarded as statutory duty (paying bills) or offering services to the business?

What about doing VAT returns, tax returns etc.

Paying bills is providing a service. Filing accounts is allowed.