Can you bear the costs of furlough?
For the first time since the furlough scheme (Coronavirus job retention scheme) was introduced in April, businesses now need to start bearing some of the cost.
Having had discussions with a number of Accountants it is apparent that many of their clients are holding on to an increasingly unrealistic view that furlough will be extended and they are not seeking appropriate help and advice. Accountants have said that clients are not yet ready to consider all the positive alternatives to business closure.
We can not recommend more strongly that now is the time to take action.
How will the furlough scheme changes impact your business?
Last week the chancellor conceded that there would be “a very difficult time for the economy over the next few months”. His reluctance to extend the furlough scheme received backing from Andrew Bailey, the governor of the Bank of England, who said that despite the threat of rising unemployment it was right to close down the scheme as planned in October. Andrew Bailey told the BBC it was important that policymakers helped workers “move forward” and not keep them in unproductive jobs.
Creating a plan to respond to the economic challenges ahead is the responsibility of all business owners. There is a lot of information to help you on BuisnessSupport.co.uk or FA Simms.co.uk. Please read our ‘Covid-19 business survival guide’, ‘Weathering the storm with a Company Voluntary Arrangement’ and consider your options with ‘Positive alternatives to business closure’.
We are always happy to discuss the alternatives in a free consultation and help you plan your way forward. Please do not hesitate to ring me or my team on 01455 555444 for impartial, professional advice.
What are the changes to the furlough scheme
More than 9.3 million employees have had 80% of their wages (up to a cap of £2,500) paid by HMRC during Lockdown. Part-time ‘flexible furlough’ is now possible. However, from 1st August the amount an employer can claim starts to reduce until the scheme finishes at the end of October 2020.
- 1st August onwards employers must pay National Insurance and pension contributions
- 1st September onwards employers must pay National Insurance and pension contributions and 10% of the employee wage cost (government will pay 70% of wage cost)
- 1st October onwards employers must pay National Insurance and pension contributions and 20% of the employee wage cost (government will pay 60% of wage cost)
The way forward
In July, chancellor Rishi Sunak announced that firms that bring back furloughed workers and employ them continuously earning a minimum of £520 a month until at least 31st January 2021, will be awarded £1,000 per employee as part of a jobs retention scheme bonus. This scheme is designed to help keep people in work as the economic crisis from the Coronavirus pandemic continues to unfold.
However, employers will only be able to claim the Job Retention Bonus after they have filed PAYE for January and payments will start to be made from February 2021. Therefore, it is not going to help with cash flow problems in the short-term. It is also taxable so the whole amount must be included as income when calculating taxable profits for Corporation Tax or Self-Assessment
If this ‘emergency’ measure is not going to be sufficient to support your business then now is the time to take advice and take action.