Heather Self, a partner at the firm tax and advisory firm Blick Rothenberg, said: “HMRC are to be congratulated for getting a lot of things right in a very short time. But they need to be sympathetic and continue to provide support to employers who are doing their best to comply with a complex system”
She added: “The assumption that amounts have to be apportioned on a calendar basis leads to some bizarre results – for example, the maximum claim per week is £576.92 but the daily rate for March is £80.65 – that’s the monthly rate of £2500 divided by 31. But £576.92 divided by £80.65 is 7.15 – so are there more than 7 days a week in March, according to HMRC? Calculating the daily rate as one-fifth of £576.92, i.e. £115.38, makes much more sense”
Heather said: “Employers are likely to be caught out by holiday pay – having to pay employees extra because they take a day’s holiday during furlough will probably be a nasty surprise. But if employees don’t take holiday during furlough, they will have a lot of time rolled up to take when they get back to work – which may not suit employers either”
She added: “Many directors of owner-managed companies are already upset that the Job Retention Scheme only covers them for their salary, and not the dividends they receive. Many of them take that salary as an annual amount – they will be furious if the fact that they take their salary in March each year means they can’t claim at all”
Below Heather lists some of the issues:
- HMRC’s calculator only deals with simple situations. This doesn’t stop you submitting a claim but means you will have to do the hard work yourself to check your figures
- HMRC’s calculator and guidance assumes that any time apportionment needs to be done on a calendar basis. This is inconsistent with most payrolls, which work on the basis of 260 working days per year. Although the differences will usually be small (a few ££ per employee), cumulatively they could be large – and there is also the risk of accidentally overclaiming, which will worry employers a lot.
- Holiday pay is a tricky area. While it doesn’t affect the grant claim, many employers will find they may have to pay out extra amounts to employees – and this may come as a nasty surprise. The issue is that, legally, an employee continues to be entitled to holiday pay at their full salary rate, so even if they are being furloughed on 80% of their pay, they must receive 100% for any days taken on holiday.
Directors who are paid once a year may find they can’t use the system. The legislation requires there to have been a PAYE submission during the tax year 2019/20 – a director who receives his or her salary in March each year may well fail this test, so will not be able to claim a grant at all.
