COVID-19 - Job Retention Scheme

We have received a number of enquiries in relation to the new ‘furloughed’ status for employees and we therefore wanted to provide an update to provide some further guidance based on the rules as we understand them as at 23 March 2020. Further detailed information will be released by HMRC in due course.

Summary of the Coronavirus Job Retention Scheme

1.     It is available to employees on the payroll as at 29 February 2020. We are still awaiting clarity on any employees who have been employed after this date and whether they will be eligible.

2.     All UK businesses are eligible.

3.     Furloughed workers must not work for the employer during the period of temporary leave.

4.     The scheme start date is from 1 March 2020, so it will be backdated. It will last for at least 3 months and will be extended if necessary.

5.     The scheme pays a grant to the employer. This is not a loan and will not need to be repaid.

6.     The grant will be paid to the employer through a new online system, which is being built for this purpose.

7.     The employer will pay the employee through the payroll in the normal manner.

8.     The Government will pay 80% of 'wages', up to a cap of £2,500 per month. It is our current understanding that this includes Employers' NIC and pension contributions, although we are awaiting additional guidance in this respect to understand what is covered.

9.     It is at the discretion of the employer to decide if they wish to top up the pay of furloughed workers above the 80% or £2,500 cap limit.

10.  Many owner managed company director/shareholders pay small salaries and the balance of income as dividends for tax efficiencies. The scheme does not extend to dividends. Only the salary will be relevant.

11.  The earnings criteria for seasonal staff or those with regular commission, overtime, etc have not yet been defined by the Government.

12.  It is unclear whether workers can move in and out of the 'furloughed' status, although we would expect this to be the case.

13.  The matter of which employees an employer decides to furlough will be a matter for negotiation with staff and employment law.

14.  An employee does not have to accept the 'furloughed' status, although the alternative might be redundancy if the business cannot continue to pay the employee, depending on the employment contract.

Please note that the guidance for Directors is still unclear, although it is likely that most Directors may not meet the eligibility criteria (see our example below) unless the company employs two or more Directors and the administration of the company is handled by one sole Director. In that instance, those that cease involvement or work for the company should qualify based on our current understanding of the legislation.


In this example, we have used a Hair Salon that has closed due to COVID-19.

Mr & Mrs Smith have salaries of £8,600 each and withdraw profits of £30,000 each in the form of dividends.

The Hair Salon employs 5 permanent staff members on the monthly payroll.

Mr & Mrs Smith close the business due to Government advice and decide to furlough all staff other than Mr & Mrs Smith who are dealing with the company administration. The 5 permanent staff members have agreed to accept a pay reduction to 80% of their normal salaries.

Our understanding is that the Hair Salon will be eligible under the Coronavirus Job Retention Scheme to receive a grant for the monthly wages of the 5 permanent staff members. No grant support is available to support the living costs of Mr & Mrs Smith.

Mr & Mrs Smith will need to consider other financial measures introduced by the Government for themselves.

Please be aware that the legislation has not yet been passed and we are awaiting further clarity on a number of items. We are expecting the Government to issue the relevant guidance within the next week and will provide further updates once these are available.

We are aware that these measures impact almost everyone at some level, so please feel free to share this with friends and family members.

We would also like to ask for patience and consideration for our team that deal with your payroll requirements. As you can appreciate we have had a large number of calls to our offices to deal with the current uncertainty due to the global pandemic. We totally understand how important these issues are to our clients and we are working tirelessly to respond to everyone in good time, which include the mailers that we hope all of you receive.

This email is an abbreviated summary of legislation announced by the Government in respect of the COVID-19 outbreak at the time of the e-mail release. Please note that this is not intended to be advice, and should not be relied upon as such.  Honey Barrett will take no responsibility for any decisions or actions taken based on the information included here.

If you have any questions please do not hesitate to contact your normal contact at Honey Barrett, who can assist with any enquiries.

Chancellor increases financial support for businesses affected by COVID restrictions Job Support Scheme expanded for local lockdowns Lockdown grants welcome but more support needed, say business groups Second round of grants for the self-employed opens ICAEW warns taxpayers have 90 days to notify HMRC of overclaimed COVID-19 grants Ensure interaction between VAT and Eat Out to Help Out is understood, ICAEW urges FSB calls for further help for employers as furlough wind-down begins More firms to benefit from CBILS following changes to loan rules Mixed picture for retail sector, CBI finds Public warned to watch out for top coronavirus scams NIESR calls for furlough scheme to be kept open Committee suggests many have 'fallen through gaps in support schemes' Fifth of small firms expect poor performance in next three months, data suggests UK economy 'still stuck in first gear' FRC urges companies to provide high-quality disclosures on impact of coronavirus Claims deadline approaching for first phase of furlough scheme Lockdown has 'negatively impacted young people's labour market outcomes' Business groups cautious on easing of lockdown restrictions Coronavirus borrowing now over £46 billion Homeworking creates new opportunities for cyber criminals, research finds Welsh government to reduce LTT rate Scottish government to reduce LBTT rate Recovery advice scheme launched for small businesses HMRC scraps benefit-in-kind charge on coronavirus tests Business groups react to Summer Economic Update Chancellor announces Job Retention Bonus in Summer Economic Update Chancellor to deliver Summer Economic Update VAT cut on PPE extended Private sector off-payroll reforms given go ahead for April 2021 LITRG urges self-employed to check eligibility for SEISS FSB finds late payment crisis has worsened during coronavirus lockdown Furlough scheme now covering 9.3 million workers Business warned about rise in impersonation fraud Job retention scheme closing to new entrants Overseas VAT claims subject to COVID delays COVID-19 - Job Retention Scheme IoD urges government to support jobs and investment after coronavirus lockdown Government-backed coronavirus lending now over £40 billion Government urged to consider emergency VAT reduction UK public calls for greater transparency on tax avoidance and evasion Businesses urged to reinstate VAT direct debits HMRC updates CJRS guidance for employers HMRC updates guidance for self-employed coronavirus scheme MPs call for VAT reduction to help firms affected by coronavirus LITRG warns self-employed that SEISS is taxable Government extends furlough scheme for parents on statutory leave £35 billion loaned to businesses through coronavirus schemes Business debt 'will slow economic recovery' from coronavirus pandemic, IoD warns Deadline looming for new entrants to Coronavirus Job Retention Scheme HMRC delays VAT reverse charge on construction services One in five highly skilled freelancers face business closure to COVID-19 Strong economic recovery likely, but not certain Over £31 billion borrowed through coronavirus schemes Manufacturers call for coronavirus support Chancellor announces changes to Job Retention Scheme IPSE gives cautious welcome to extension of self-employed scheme Research shows 5.2 million people have fallen victim to scams during coronavirus crisis Coronavirus Statutory Sick Pay Rebate Scheme goes live Government publishes revised Coronavirus Job Retention Scheme legislation Survey suggests one in ten firms cannot implement coronavirus guidance safely IPSE urges government to extend self-employed support scheme Future Fund launches to give start-ups coronavirus support Government set to launch Coronavirus Statutory Sick Pay Rebate Scheme Loan size increased to £200 million under large business interruption scheme BCC survey suggests firms ready for gradual reopening of UK economy One million apply to self-employed grant scheme in 48 hours Close to £15 billion lent through government's coronavirus schemes Chancellor extends Job Retention Scheme until October Self-employed grant scheme to open to applications HMRC extends tax appeal deadline due to pandemic Business groups need more guidance and financial support for return to work UK Finance warns firms over Bounce Back loan repayments Chancellor outlines Winter Economy Plan HMRC publishes guidance on claiming Job Retention Bonus HMRC begins contacting individuals eligible for coronavirus income support scheme Over 110,000 businesses apply for Bounce Back loans on day one Government changes ISA rules to help individuals affected by coronavirus Business leaders eager for lockdown to ease, says IoD Lenders relax evidence requirements for business interruption loan scheme applications CIPD urges government to make Coronavirus Job Retention Scheme more flexible Government launches small business micro loan scheme FSB urges government to increase 80% guarantee on coronavirus business loans Government launches support finder tool for businesses SMEs access £2.8 billion through business interruption loan scheme BCC finds significant number of UK businesses have furloughed employees Coronavirus pandemic 'has already cost SMEs £277,000 each', research suggests Government unveils support package for innovative businesses affected by coronavirus Coronavirus Job Retention Scheme goes live as it is extended to end of June Pensions regulator issues auto-enrolment guidance for pandemic Government widens eligibility for job retention scheme HMRC releases guidance on coronavirus Self-employment Income Support Scheme Coronavirus Job Retention Scheme set to launch on 20 April Chancellor announces financial aid package for charities Firms struggling to access emergency coronavirus loans UK economic output reduces to 31% as result of coronavirus lockdown Chancellor announces changes to Business Interruption Loan Scheme Majority of UK firms have less than three months' cash reserves Government publishes details on coronavirus grant schemes for small businesses Directors on PAYE can furlough under job retention scheme Government relaxes insolvency rules during coronavirus pandemic Bank of England announces £100 billion stimulus package for UK economy HMRC publishes guidance on recognising genuine government contact HMRC urges businesses using VAT deferral to cancel direct debits Chancellor unveils help for self-employed workers Government and financial regulators tell banks to keep lending UK facing 'worst recession in modern history' COVID-19 Business Measures - job retention and tax deferrals Coronavirus Business Interruption Loan Scheme goes live Information for businesses and employers

Home | Contact us | Site map | Accessibility | Disclaimer | Privacy Policy | Help |

© 2020 Honey Barrett Limited. All rights reserved. We use cookies on this website, you can find more information about cookies here.

Honey Barrett Limited, 53 Gildredge Road, Eastbourne, East Sussex BN21 4SF
Bexhill Office : 48 St Leonards Road, Bexhill-on-Sea, East Sussex TN40 1JB
Wadhurst Office : Pharmacy Chambers, High Street, Wadhurst, East Sussex TN5 6AP

The Registered office is: Honey Barrett Limited, 53 Gildredge Road, Eastbourne, East Sussex BN21 4SF
Company registered in England & Wales, number 06137832
The ICAEW audit registration number for Honey Barrett (Audit) Ltd is C005419803.
VAT No. 725 2398 29