To ask a question about the 80% furlough

[lastqueenofscotland]

Our work have called us to advise as of Monday they are furloughing the whole company.

However we are on a small basic and generous commission structure.

I’m struggling to find out if it will be 80% of my basic or 80% of an average of what we’ve earned over the past tax year?
Does anyone know

I believe if you’re employed it’s 80% of your basic no overtime / bonus etc

It won't include commission, just your set salary.

Just Salary I’m afraid:

www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

I wonder if all of these companies taking advantage realise that this is effectively a revenue replacement scheme, and these payments from the government are treated as profits and will be taxed accordingly (corporation tax)

Sorry, OP. Guidance seems to say "You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included."

@Ethelfleda - yes! I do believe hardly anyone realises that this will be taxed as income!

If it makes any difference, OP, could you look at then direct your companies' HR to -

If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:

the same month’s earning from the previous year
average monthly earnings from the 2019-20 tax year

Literally in the same situation. Our employer will be using the commissions to keep topping up the 20% so at least its full basic pay

I'd suspected it would be RedDiamond but it was only confirmed today I think.

@Ethelfleda - yes! I do believe hardly anyone realises that this will be taxed as income!

Is that right? I assumed that is an in and out income as salaries are deducted before corporation tax- which is on profit not income.

So lets say that typically our income is £10,000 a month , we have expenses including salaries of £4,000 a month or £48k a year and so pay corporation tax at 19% on £72,000 (this ignores vat but a rough example)

Say this lasts for 4 months (who knows). Income for the remaining 8 would be £80,000 with expenses of £32,000 (so tax due on £48K)

Corporation taxable income for these 4 months will be £6400 (80% furlough payments) however expenses will be £8,000 (including full salaries with less than £50 a month expenses if not operating). Corporation taxable income during that period would be - £1600.

Overall for the year so corporation tax of 19% on £46,400

So not taxable at all for corporation tax?

Same situation as you OP, it's a kick in the teeth when you take into account that I've paid the same amount of taxes on the commission as I would've if it had been part of my basic.

Sorry- just realise you were retackling as an employee and I as an employer. Ignore my post ( I need gin)

It will be effectively added to turnover. So it won't be profit as such, as it will simply be absorbed by the expenses.

But I think some were expecting it to be non-taxable

It's not taxable in the hands of the company as the money paid out to the employee is offset against it.

It’s in and out so nil effect isn’t it.

Yes, nil effect - but I'd seen discussion with people thinking it would not be classed as income i.e. they thought the wages would be deductable as expense but the grant wouldn't be income

Grants have always been taxable income though. It’s nothing new. Unless it’s a grant to a non trading company which is unlikely as most companies will be trading to be eligible for the grant.

They can't furlough you without getting your agreement in writing first.

@faffette that's not true, it's up to the employer what they do no need to check with the employee.

It's 80% of your basic salary.

I work in a similar wage and because my wage varies monthly due to commision etc we are getting 80% of our average 'which is calculated by daily commision average over a year'
So there must be a way to do it as we presumed we would just get 80% salary but our salary is really low and its more of a guarantee.

From the Gvt website: "Employers should discuss with their staff and make any changes to the employment contract by agreement."

I don't think it needs to be written agreement, unless I missed it

Furlough definitely needs to be agreed between employer and employee. If there is no work and the employee doesn’t agree to furlough then they are likely to be made redundant. Furlough is supposed to prevent redundancies.

Furloughing staff is a much better solution for a company that wants to bounce back quickly as well. Retaining skilled staff within the company is obviously better than having to locate and train up new people at a later date.

Furloughing doesn't change the terms of your employment contract but if you don't agree to the terms of the furlough you could end up being made redundant so its likely to be in your best interests to agree to it.