Can someone please explain the 80 per cent salary cover

[noFlowers]

Sorry if I'm being stupid but what does this mean!

Does it mean businesses who may lay off staff get 80% of staff salaries to pay them so they can still work.

Or does it mean you lost your job due to all this and you're at home and you get 80% of your salary.

I am surprised there are so many people earning over £50k profit, why are you not taking salaries instead as you should really be limited companies. Your accountants should have been advising this (excl those who maybe had surprisingly amazing first years trading so you wouldn't have known perhaps)

Interesting point

This is such a crap situation all round but my husband and I have had many calls from people who have only declared minimal earnings and are now gutted they will get so little back and trying to figure out what to do. I have very little sympathy in these cases when most people pay more tax and NI in a month than these people are paying in a whole year (in spite of them earning loads in reality). Those who have been declaring their earnings correctly will at least get 80% of what they would have got I guess. Same as PAYE.

For a start many self employed don't have accountants.

On other threads those who have done the salary + dividend route that pretty much every accountant advises anyway have been crucified and told they deserve to get nothing.

It can be tricky to judge when is the right time to go from S/E to Ltd.

Some roles have to be self employed (childminders in Scotland at least are not allowed to be ltd, even if they are larger ones who employ assistants)

And actually I'd imagine there will be a fair number of limited companies at the moment who would probably be classified as trading whilst insolvent, which would invalidate the ltd co protection.

We're not in that situation, no dodgy accounting, but a growing business where we invested heavily for a few years resulting on profits which were relatively low (fairly normal). We're just seeing all that paying off in the last two years especially in 19/20 return but obviously it's excluded.

@statisticallychallenged Sorry not trying to offend, there will always be exceptions of course, I am more talking about the people trying to avoid tax etc. If you are earning as much as a £50k profit though then most people would have accountants. That's would be a pretty decent turnover.

It is a big mess to be fair. I am really sorry that there are people in your situation, you clearly aren't there for any dodgy reasons!!

and that is awful people are saying those who take dividends + PAYE deserve nothing. It's the correct way to do it.

The directors can claim 80% of their payrolled salary can't they?

DH was supposed to be going over to ltd in April 😂 funnily enough that just got bumped. In his case he had to be self employed for part of his income and trying to juggle the accounts for that, separate accounts for a ltd, paye dividends etc would have been a bloody nightmare. He's not over the 50k this year but would be next year.

We've also got an artificially low year in the mix due to switching from cash basis to accruals a couple of years ago. Again, not dodgy, but bad timing!

user, I think it will depend if the director is a PAYE employee. Some directors are non execs or not taking salary as just started out whilst doing other jobs too.

On why would a high earner be a sole trader loads are like barristers and others. Also dividend tax has been so high lately that lots of those who had a limited company went sole trader. The pros and cons of each go up and down over the years as laws chop and change.

Yes, I meant a PAYE director. Found this:

The grant is available for both full time and part time employees, as well as directors and casual workers, as previously announced by the Chancellor.
However, the concern for directors is that directors will often take a low or no salary from the business. Instead they will often utilise dividends to top up their income, as and when they have the profits to do so. As dividends are not subject to PAYE, the dividend amounts are unlikely to form part of the CJRS calculation for the director. Directors in this position are likely to find that should they qualify for a CJRS grant, the amount paid would likely be 80% of a low salary.
A further concern is that a director must be non-active to be furloughed, but given they will continue to need to manage the business in some way, they are unlikely to be completely in-active and therefore may fail the CJRS requirements.

In most situations a director isn't going to be able to meet the requirement of no work - if nothing else because in a small company they're going to need to do the payroll and make the HMRC furlough claim!

I think there is a lot the government have not thought through. All our clients are relatively small so we will do their claims for them as we do their payroll. I would like to think that directors submitting their furlough returns wont be counted as them still working. I took that to mean working as in generating income but it really isnt clear yet.

To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue.

I'd say that would probably technically include running payroll! Probably different if it's outsourced like your clients but if you do it in house it's obviously a bigger job. Won't affect us as DH self employed but sketchy for directors.

TBH this has many holes, and businesses could end up falling foul of the threatened audit through accidental error

I believe running payroll will come under legal obligations so will be fine. Just seen this

Just a guess as you have to file EPS/FPS/CIS as a result I think it could he ok

Sounds like it.

This has been issued by A comany I worked for in the ast , it should answer at least some questions

On Friday 20 March, Chancellor Rishi Sunak announced a Furlough Leave scheme to fund salaries for staff who would otherwise be laid off due to the COVID-19 outbreak in the UK.

First, Furlough is only for staff who are not working and who would otherwise be laid off. The purpose of Furlough Leave is to save jobs not subsidise working employees.

What is Furlough Leave?
Furlough Leave is initiated by employers. Employees cannot request Furlough Leave.
The law (ie process) hasn’t changed. Only the payments are new. Think of it as layoffs with partial pay (or full pay if you choose).
Employers identify employees to be placed on Furlough Leave and notify affected employees.
Furlough Leave can only be initiated when there is no work.
An employee on Furlough Leave cannot work for their employer.
Furlough Leave can be done with either (a) a relevant clause in the contract or (b) with employee agreement.
So, the first step is to get agreement from the employee or use a clause in the contract that allows the employee to be laid off.
Once the employee has agreed (or you have activated the relevant clause), you should formalise Furlough Leave in writing.
After Furlough Leave is formalised, the employer will notify the HMRC.
HMRC are in the process of setting up a portal for Furlough Leave notifications, which we believe will be available soon.
Furlough Leave provides 80% of an employee’s salary up to £2,500 per month.
We don’t yet know if this includes pension, commission or holiday etc
Payments will be made for the first three months and will be reviewed for extension if necessary
Employers can make up the additional 20% of salary if they choose.
In reality this may not be necessary as employees are likely to agree to be at home without working in return for 80% of their salary as opposed to being made redundant and terminated
The word Furlough doesn’t mean anything in prior law but is defined as a leave of absence. This could have easily been referred to as ‘home leave’ or ‘isolation leave’. Don’t get hung up on the term.

The purpose of Furlough Leave is to save jobs—but not to support work. Furlough Leave is a layoff with pay as opposed to a termination.

FREQUENTLY ASKED QUESTIONS
Can Furlough Leave be abused?
There is much debate about whether this is a secure scheme; ie how will Government know an employee is not working given that the employee might know a claim was made in their name?

There seems to be opportunity for abuse but hopefully this will be addressed when the legislation is finalised.

What issues are foreseen with Furlough leave?
The obvious issues are that when an employer needs skeleton staff it may choose its best staff to stay on and others to be laid off. This could lead to less successful staff working hard, arriving at the office and worrying about being effected. This is likely to lead to issues and potential discrimination / unrest with no obvious answers.

Can Furlough leave be backdated?
Payments can be backdated to those who were on payroll at end of February and can be claimed from 1st March (see below how to deal with those already laid off)

How do I deal with those already laid off?
Those who have been laid off should be contacted immediately to confirm that they are ‘reemployed’, their layoff is rescinded, and Furlough payments will be backdated.

This is just a brief update on what we know so far, and is subject to change but hopefully will help in the next few days.
***

Just to ask for others interpretation of the amount of time to furlough an employee for. If there is an employee who normally processes payroll, among other duties, but this is the only duty that is essential for this period, can they be furloughed for 29/30 days of the month, and work for one to process payroll before being furloughed again? The rules state a minimum furlough period of 3 weeks, and that it can be done multiple times, but not a minimum working period.

I've not seen anything which suggests a minimum period off furlough.

Me neither. It would help in a lot of directors situations I would assume too- 3 weeks off/ 1 week on to deal with urgent stuff

I think directors might be ok - you are allowed to deal with basic legal filings which I think would include payroll

But let's be honest, a lot of directors are going to end up claiming but working. When it's permissible for self employed (as it should be) then it should be allowed for directors too.