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Coronavirus, the Employed and the Self Employed (“the Furloughed”)

Article Date: 24 March 2020

Coronavirus, the Employed and the Self Employed (“the Furloughed”)


The concept of supporting employee earnings is now beginning to register such that businesses are “furloughing” employees albeit the detail remains unclear.

The latest from HMRC gives HM Treasury the power to direct HMRC to pay grants to businesses to deliver the Coronavirus Job Retention Scheme.


Employers will be able to contact HMRC for a grant to cover most of the wages of people who are not working but are furloughed and kept on payroll. The Scheme will cover 80% of the salary of workers retained, up to a total of £2,500 per month. It will cover the cost of wages, where appropriate, backdated to 1st March 2020 and will be open initially for at least three months.

I suspect that where employers access these funds to pay their furloughed employees, this will be administered via their payroll.

Accordingly, I think it is probable that the funds will cover gross earnings, from which the employer will make the usual deductions – tax, national Insurance, pension contributions.

The key question is how this work in relation the fact that the £2,500 is a maximum per person;

  1. Is it a gross payment and if so how does PAYE and NIC interact?
  2. Does an employer need to pay the balance of an employee’s wages to obtain the support or is the payment of £2,500 a maximum sum whether or not the employer can or chooses to pay the balance of any wages due?

These questions are not answered yet.

Remember – 6 April is a new tax year and tax codes may not be correct based on £2,500 gross salary. This may mean new tax codes should be used (for example it might be prudent to put employees be put on a week 1 month 1 tax code) for otherwise individuals will end up paying too much tax based on £2,500 salary.


Self Employed

Simply allowing self-employed people to access benefits was never a fair or credible solution to meet their needs when compared to employees.

Accordingly, Parliament have proposed a £2,917 maximum payment to self-employed or 80% of earnings averaged over the last three years, whichever is the lower.

This looks to be a system to be operated by HMRC who will have detailed access to the records of the self-employed who claim payment.

However, the simplicity of this belies many hidden issues;

  1. Earnings are not the same as drawings as any self-employed person who has applied for a mortgage will know only too readily, and
  2. Start-ups will be particularly badly served by this rule


Finally, to those who complain, “I pay my taxes”, you will find some comfort in the fact that support can be directed to you precisely because you do submit your earnings to HMRC and pay your taxes accordingly. Others may have quite a struggle on their hands in due course.

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