London accountants Davis Grant is urging businesses to prepare for important changes to the furlough scheme in the weeks ahead.
Earlier this year the Government confirmed an extension to the Coronavirus Job Retention Scheme (CJRS), more commonly known as the ‘furlough scheme’.
Since then, HM Revenue & Customs (HMRC) has published a series of useful documents offering guidance to employers on changes to this key financial support measure. The updates cover the changes to the scheme, as it is extended to 30 September 2021.
“Many businesses have relief on the furlough scheme to remain open and retain talent as they await the easing of restrictions,” said Neil Driver, Director at Davis Grant.
“Many welcomed the extension to the scheme earlier this year, but they must now prepare for important changes on the horizon, which may lead to added complexity and cost in administering this support measure.
“Many sectors that were previously closed are now re-opening but businesses across the UK still face cash flow issues and reduced trading. These latest changes could, therefore, put some businesses at risk of failure.”
Despite the changes, furloughed employees will continue to receive 80 per cent of their usual wages capped at £2,500 a month, or equivalent weekly or daily figures, for usual hours not worked under the extended scheme.
The CJRS grants will continue to cover the full 80 per cent paid to employees in May and June, while employers must cover the costs of the associated Employer National Insurance and workplace pension contributions.
However, employers will need to make a 10 per cent contribution in July and a 20 per cent contribution in August and September, as the Government reduces the amount of financial support on offer.
The calculation of usual wages is based on the last pay period before the employee became eligible for furlough. Businesses should also be aware that these dates will vary, depending on whether the employee was reported to HMRC on or before 19 March 2020, 30 October 2020, or 2 March 2021.
Neil said: “The latest changes add extra complexity, to what is already a fairly complex system of support. Accurately calculating furlough payments can be challenging and distract business owners from helping their business to rebuild and recover from the impact of the pandemic.
“Employers should seek advice to ensure they continue to effectively manage and administer the scheme, as they could face substantial penalties if they make any errors that lead to an overpayment of the CJRS grant.”
The Government’s latest guidance also clarifies and changes several technical points relating to the calculation of furlough pay in various circumstances. Full guidance for the CJRS is available here.
To find out more about Davis Grant’s accountancy, tax and business services, and for advice with changes to the furlough scheme, please contact us.
