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Beyond the balance sheet

The Furlough Scheme extension & other COVID-19 developments

Christina Nawrocki 05/11/2020 7 minute read

Christina Nawrocki FCCA explains the furlough extension and other coronavirus support initiatives for businesses.

Did it all come too late?

The government's imposing of a second national lockdown to deal with the latest wave of COVID-19 has led to various announcements from the Chancellor. Chief among these is the extension of the Coronavirus Job Retention Scheme (CJRS), also referred to as the furlough.

In this post we explain how this latest iteration will work and the other developments and support available. Unfortunately with previous local restrictions impacting so negatively on trade, many SME businesses will have already implemented cost cutting measures to survive the winter.

Owner managers will therefore have likely already taken the desperately difficult decision of implementing redundancies. This means the U-turn over the UK Furlough Scheme probably hasn't come in time for many workers and their employers. 

Help to access the Furlough Scheme and trade through the pandemic >

In this post we cover the furlough extension and other key support measures you need to know:

1. The latest changes to the furlough scheme

2. New furlough rules

3. What the furlough extension means for the Job Support Scheme and Job Retention Bonus

4. Secure a Bounce Back Loan

5. Grants for businesses forced to close

6. A mortgage payment holiday

7. More support for the self-employed

8. The self isolation £500 payment that may apply to your employees

1. The latest changes to the furlough scheme

Since August the furlough scheme has been wound down with employers asked to increasingly share the cost, contributing 10% and then 20% to furlough pay. The latest outbreak of COVID-19 and subsequent national lockdown sees this policy reversed.

As of Thursday 5 November 2020, the Government will once again pay 80% of wages up to £2,500 a month for furloughed staff. This means as an employer you will only be liable for the National Insurance and pension contributions of your employees.

 

2. New furlough rules

New criteria sees the scheme open potentially to far more employees than previously, meaning those who missed out last time could now benefit. 

Your employees will qualify for furlough so long as they were employed through your PAYE payroll on 30 October 2020 by 23.59. The furlough scheme rules are as follows:

  • You have to have made a Real Time Information (RTI) submission for your employee(s) to HMRC by the above time and date
  • Your employees can be working through any type of contract
  • Calculations for claiming the grant will follow the same method as previously for CJRS, namely by stating the hours your employees have not worked compared to their usual working hours for the claim period
  • You must report on the usual hours an employee would have worked in a claim period along with any hours they do work in that timeframe
  • You need to report and claim for a minimum period of 7 consecutive calendar days
  • Where there are hours worked by your staff, you will be responsible for paying them along with the tax and NICs liability

CJRS will be extended until the end of March 2021 but will be revisited in January to assess if economic circumstances have improved sufficiently for employers to contribute more.

3. What the furlough extension means for the Job Support Scheme and Job Retention Bonus

The Job Support Scheme (JSS) had been scheduled to replace CJRS from 1 November 2020.

The furlough extension means the JSS start date is now delayed indefinitely.

The Job Retention Bonus will not be paid in February 2021. The scheme offers businesses a payment of £1,000 per worker for existing staff and apprentices who are taken off of CJRS and brought back to work. Given CJRS won't end till March means the government will look at similar measures after that date. 

Other COVID-19 developments to be aware of:

4. Secure a Bounce Back Loan for your business

The Bounce Back Loan scheme has been extended until 31 January 2021. If you haven't done so already then you should act now and apply for a 100% state-backed (unsecured) loan worth between £2,000 to £50,000. It should be noted that the amount is capped at 25% of your total turnover but no interest is charged and repayments aren't made in the first 12 months. After that all banks charge a fixed annual interest of 2.5% with the loans lasting for 12 years.

Lenders will require you to book a background-check appointment. You can repay the loan early without incurring any penalties and in some cases you can part-repay or even overpay. If you haven't borrowed the maximum amount permitted then there is now the option to top up your Bounce Back Loan. This will be available from Monday 9 November 2020 and you can only use this option once.

However, MoneyWeek reports that banks in recent weeks have been making it harder for businesses to access these loans. There were 28 banks and finance providers that signed up to the government's Bounce Back Loans scheme. Unfortunately, some of these lenders stopped lending because they were overwhelmed by applications. Reports suggest some banks are even restricting applications to all but their existing customers.

In some cases, they're restricting this lending to businesses that were with them before the scheme was launched in May. This means if you can't get a Bounce Back Loan from your current bank, it could be challenging to secure it elsewhere. There is nothing to stop you looking to other banks but beware, some may offer you loans with conditions such as taking out an invoice finance facility. Furthermore some applications have taken up to 12 weeks to complete. 

The message is clear; if you haven't done so already and you think you're eligible, apply now!

5. Grants for businesses forced to close

Businesses that are forced to close in England by the national lockdown will be eligible to receive grants of up to £3,000 per month under the Local Restriction Support Grant.  Local authorities are to be given £1.1bn distributed on the basis of £20 per head, for one-off payments to enable them to support businesses.

 

6. A mortgage payment holiday

Homeowners will continue to be able to take the option of a mortgage payment holiday to last up to 6 months. This was due to end on 31 October 2020 but has been extended.

If you've already started a mortgage holiday you can top up to 6 months without it being recorded on a credit file. Be warned however, interest will accrue during this period on what you owe.

7. More support for the self-employed

Support for the self-employed will be increased for the latest national lockdown with £4.5bn of support from November 2020 to January 2021. The government will  increase the grants from the current 40% to 80% of average trading profits for November.

The Self-Employment Income Support Scheme (SEISS) is calculated over 3 months. This means that along with the 40% level of trading profits for December and January, the 3rd grant will cover 55% of trading profits up to £5,160.

Grants will also be paid faster than previously with the claims window opening at the end of November rather than the middle of December.

8. The self isolation £500 payment that may apply to your employees

If your staff receive Universal Credit and other means-tested benefits and they're forced to self-isolate under the track and trace system then they could be eligible for the self isolation grant. Being at home and not able to work will result in them losing income meaning they can claim the payment of £500.

This came into effect from 28 September 2020 meaning it can be backdated. It applies to each period of self isolation qualifying employees are required to undertake and is administered through local authorities from 12 October 2020.

Job Support Scheme

The content of this post was created on 03/11/2020 and updated on 05/11/2020.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.

 

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