Jenna McArtney
Chancellor Rishi Sunak announced on 12 May that the CJRS scheme will be extended until the end of October. The scheme will continue in its current form until the end of July with the Government paying 80% of employees’ wages up to £2,500 a month. For accounts purposes, the amounts received should be credited to a “grants received” account, and this will increase taxable profits of the business.
From 1 August to the end of October, HMRC will introduce more flexibility meaning employers will be able to bring their furloughed employees back to work part-time and contribute to paying employees’ wages while still receiving support from the scheme.
On Friday the 29th of May, the Chancellor announced that the Government will stop reimbursing NIC’s and pension contributions from 1 August 2020. From 1 September 2020 the amount reimbursed by the Government will be reduced to 70%, limited to £2,190. There will be a further reduction to 60% from 1 October 2020, limited to £1,875.
Sole traders and members of partnerships started making claims under the Self-Employed Income Support Scheme on Wednesday 13 May and many have already received their grant.
To be considered eligible, your self-employed profits in 2018/19 must not exceed £50,000 and must be more than 50% of your total income. If that test is not met, then the same £50,000 and 50% tests are applied to average profits and total income over the three years (or a shorter period) to 5 April 2019.
The amount of the grant that can be claimed is 80% of average profits for the three years to 5 April 2019. The grant is capped at £2,500 a month and the maximum amount is £7,500 for the initial 3-month period. The Chancellor has now announced that this scheme will be extended for 3 months from 1 June but reduced to 70% of average profits, limited to £6,570.
There are a number of anomalies, for example if the trade commenced 6 October 2017 the profits for 2017/18 and 2018/19 are divided by 2 to establish an annual profit figure rather than divided by 18 months.
Like the CJRS furlough payments, the amounts received are included in your trading profits and thus subject to income tax and national insurance.
If you need any support when making furlough claims or advice about the updated guidance, please don’t hesitate to get in touch.