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Furlough Scheme

In an attempt to combat the ongoing COVID pandemic, the UK Government has announced a second lockdown.  The lockdown started on Thursday 5th November and is expected to run until Wednesday 2nd December.  The month-long lockdown will automatically close all pubs, restaurants, gyms and non-essential shops.  The announcement has left millions of people concerned about when the next paycheque will arrive.  As a result, the Government have announced an extension of the Furlough Scheme, otherwise knows as the Coronavirus Jobs Retention Scheme.

When did the Furlough Scheme Start?

Furlough was introduced in March 2020 when the first UK-wide lockdown was announced.  The scheme was introduced to prop up the economy, prevent mass redundancies and subsidise the wages of people who were unable to do their jobs.  It is estimated 10 million people have claimed through the Furlough scheme.  Around two million people were still on Furlough at the end of October.  By mid-October Furlough claims had amounted to £41.4 billion and expected to rise to over £50 billion,

Prior to the announcement of the second lockdown, the Government was due to replace the Furlough scheme on 1st November with the Job Support Scheme.  As part of the announcement of the latest lockdown, Chancellor Rishi Sunak, announced the Scheme will run until the end of March 2021.

Is the new Scheme any different to the Original Scheme?

The scheme is similar to the first scheme launched in March.  Employers won’t notice any real difference to their pay packets, although employers will receive more support from the Government.  Employers will now pay less towards the scheme, with the Government making up the difference.  The Government paid up to 80% of wages up to £2,500 in March.  This was recently reduced to 60%, with employers topping up furlough wages by the other 20%.

The new scheme reverts back to the Government paying in the full 80% of an employee’s wage.  The employer now only covers the employee’s Pension and National Insurance contributions.  As with the original scheme, employers can choose to top-up an employer’s salary beyond £2,500.

Who is Eligible for the new Furlough Scheme?

All employees must be on the payroll by 30th October 2020.  All employee’s on the payroll are eligible regardless of status i.e. they could be part-time, full-time or on flexible or zero-hour contracts.  They do not necessarily need to have been on the scheme previously.  An individual is unable to apply to be on furlough by themselves.  Equally, it is important that both employer and employee are in agreement to go on furlough and this is in writing.  It is ultimately the employer’s decision to put an employee on furlough, and they are not obliged to do so.

What is not included in the new Furlough Scheme?

The new scheme doesn’t include people who were not in work on 30th October 2020.  Other examples of people not eligible include Limited company directors who earn a large proportion of their salary through dividends.  Furthermore, people who earn a low basic salary that is topped up with a non-compulsory commission aren’t eligible.

If you would like any advice on your Tax Affairs, Kinsella Tax are the Tax experts.  If you have any form of investigation and would like help or advice, call Kinsella on 0800 471 4546.

 

Nigel Carr
Nigel Carr
Nigel is a freelance financial writer and Author at Kinsella Tax. A business graduate he writes on financial matters as well as music for a number of high quality websites.
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