As a way of supporting businesses and employees throughout the UK during the unprecedented coronavirus pandemic, the government has unveiled the Coronavirus Job Retention Scheme (CJRS). You are now able to claim using this scheme, as the system went live on Monday 20th April.
This article is a quick guide that has been written for contractors operating with a personal service company (PSC) and small limited companies with only a couple of directors set up on the payroll system.
Some useful information before you make your claim
- As things stand, employees can be furloughed up to 1st June 2020 and backdated from 1st March 2020. This could change in the upcoming weeks.
- You are only able to claim via the Coronavirus Job Retention Scheme for employees that have been furloughed for a minimum of three weeks.
- Initially, the government said that employees were only eligible for being furloughed if they were on the company’s payroll as of the 28th February 2020. This date has now been amended to the 19th March 2020.
- If an employee has been furloughed, they are not permitted to carry out any work for the business. The government state that “when on furlough, an employee cannot undertake work for, or on behalf, of the organisation or any linked or associated organisation. This includes providing services or generating revenue”.
- When an employer is deciding to furlough an employee, they should make a conscious effort to officially record this (the date furlough started, etc.) – be it via a meeting or written communication. This should be kept safe for the future – should the government require more information.
- To make a claim via the Coronavirus Job Retention Scheme, you must have enrolled online for PAYE services (through an HMRC portal account). If this information is not available to you or you haven’t registered online before, your accountant may be able to provide you with the information you require. Please get in contact with them if you are having any problems. If you are an existing Churchill Knight & Associates Ltd client, please send an email to your Account Manager.
- Whichever period you are claiming for – you can only do it once. Therefore, you must have every piece of information to hand. However you decide to do it – make sure everything is covered for that period. For example, if you are doing it on a month-by-month basis – you cannot go back to that month at a later date and claim for another employee. Therefore, if you still have decisions to make – do not rush and risk submitting information that you may wish you had done differently down the line.
- Before you go about making a claim, make sure you know how much you are claiming. Do your research and calculations in advance.
- Moving forward, please remember to continue making your RTI payroll submissions. The CJRS is there to support employers by paying them back for salaries to employees. Consequently, payroll needs to be submitted correctly – as you have been doing.
You must have the following information to hand
To make a claim, the government confirm you’ll need the following pieces of information:
- to be registered for PAYE online
- your UK bank account number and sort code
- your employer PAYE scheme reference number
- the number of employees being furloughed
- each employee’s National Insurance number
- each employee’s payroll or employee number (optional)
- the start date and end date of the claim
- the full amount you’re claiming for including employer National Insurance contributions and employer minimum pension contributions
- your phone number
- contact name
Additional information that you’ll also need to provide when claim is either:
- your name (or the employer’s name if you’re an agent)
- your Corporation Tax unique taxpayer reference
- your Self-Assessment unique taxpayer reference
- your company registration number
Making a claim
If you are satisfied that you’re eligible to claim via the Coronavirus Job Retention Scheme, please click here to be redirected to the correct starting point on the government website.
Please read the information that is available to you on the page before scrolling down and clicking on the dark green button that states “Claim now” (screenshot below).
The government has tried to make the claim form as user-friendly and straightforward as possible. However, they have not had a long time to develop this new portal and give it the thorough testing it needs. As a result, the following information may be useful when trying to complete the form for yourself.
When selecting the type of employer, if you are a Churchill Knight client, you’ll be a limited company. You will want to make sure you choose the option that states that the employer submits a tax return – even if you are required to submit a self-assessment tax return as the Director of your limited company.
You can claim back to the 1st March 2020. To keep things easy and to avoid any unintentional confusion, it is recommended that you claim for easy-to-remember periods. We recommend you do it on a month-by-month basis.
How much you are claiming
You can claim 80 percent of furloughed employee salaries, up to £2,500.00 net – per month. You are not able to claim for any dividend payments – only salary. For example, if your monthly salary is £719.00, you can claim for 80 percent of this – £575.20.
Sometimes, it won’t always be as straightforward as this, but don’t worry, you will need to claim pro-rata. Below is a quick example based on March.
If your monthly salary is £719.00 and you were furloughed on Friday 6th March – you worked 6 days of the month and you were furloughed for 25 days. Therefore, the amount you would be claiming for is £463.87.
Why? Well 80 percent of £719.00 is £575.20 and you are claiming for 25 out of 31 days (25/31). Simply divide £575.20 by the days in the month (31) and then multiple this amount by the days you are claiming for (25). The total claim amount is £463.87.
Your Pension and Employers NICs
The government confirmed that employers “can furlough employees and apply for a grant that covers 80% of their usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised furlough pay.”
If you have been making voluntary contributions towards a private pension pot, the government will not reimburse you for this amount. Also, it is unlikely that limited company contractors can claim back any Employer’s NICs because this amount is likely to be covered by the employment allowance.
Unfortunately, the above is likely to apply for most Churchill Knight clients.
You can go ahead and ignore the “Payroll number” when submitting a claim, but make sure you enter the name of every employee you are claiming for, along with their National Insurance number.
Choosing the bank account for funds to be paid to
We recommend you ask for the funds to be paid into your business bank account, rather than opting for it to be sent to a personal account. Please be aware that when you are filling out the form, it’ll ask you for your bank’s address. This may initially cause alarm bells, especially with so many banks being predominantly online (in fact, some are all online). Don’t worry – give the account number a quick Google search and you should find the information you need.
Churchill Knight recommends you enter your own contact details, and not the details of your contractor accountant. Your accountant is probably very busy assisting concerned clients and entering your details will be the most efficient option.
Record your application
Whatever you do, make sure you record your request for funds via the Coronavirus Job Retention Scheme. It is worth noting down your response to every question, as well as screenshotting the confirmation page, along with your claim reference number (this is vital information for you to keep safe). An automatic email confirming your application will not be sent – so following these instructions is vital for peace of mind.
The government say that successful applications should result in payments within 6 days. Keep checking your bank account. If there are no signs of any payments within 6 days, it is worth contacting HMRC.
We’re here to support our clients
While the current circumstances are not ideal, Churchill Knight is doing everything we can to continue offering our limited company clients professional and dependable accountancy services. This includes ongoing email support.
We want to thank our clients for their understanding during the coronavirus pandemic. To keep our employees safe and to follow government guidelines, our business, like every other UK-based business, has undergone unprecedented changes. However, our staff are doing everything they can to ensure your limited company continues to run smoothly and every bit of support is shared with you as soon as it becomes available. Please keep checking your emails and visiting the Churchill Knight Blog.
If you have any questions, please contact your Churchill Knight Account Manager by email. Thank you for your cooperation.