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Extension to Job Retention Scheme – Future of Furloughing

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With the Nation being placed into a second lockdown until December, the original furlough scheme, paying 80% of employee wages is back. Joshua Ruthven, from our Tax department, goes over the latest updates to the Job Retention Scheme.

In response to the announcement of the latest lockdown measures which were revealed on 31st October, the UK Government has made the decision to extend the old Job Retention Scheme (Furlough scheme) and to delay the implementation of the Job Support Scheme which was due to replace it. From 5th November 2020 the original Furlough scheme has been extended until 31 March 2021 (with a review anticipated in January 2021) and the implementation of the Job Support Scheme which was due to replace it has been suspended.

This means that the Furlough scheme will once again see the Government paying 80% of furloughed employees' wages for hours not worked, with employers only being expected to cover the attached NI and Pension contributions. The same cap of £2,500 per month per employee still applies to these claims, however employers will be able to top-up the employees' wages to above that level at their own expense should they wish to do so. Employees will be allowed to be flexibly furloughed through the period as they have been in recent months, with the hours worked being paid by the employer and a claim being made for the hours not worked. It should be noted that the eligibility dates have been updated since the original Furlough scheme, in that employees will be eligible for this scheme provided that they were reported to HMRC within a payroll submission prior to 31 October 2020. Additionally, for employees who have since been made redundant, they can be rehired and placed on the scheme as long as they where reported to HMRC within a payroll submission prior to 23 September 2020.

There has been no official confirmation of the method of calculation yet, however HMRC has suggested that the claims will be made in a manner similar to how the previous claims were calculated. This was; taking the higher of the employee's average earnings over the 2019/20 tax year or their earnings in the same period of the 2019/20 tax year as the reference earnings, and scaling this earnings amount to the appropriate number of furloughed days and calculating 80% of this figure to be claimed.

The Government has said that it will be releasing more information shortly, including the exact method of calculation and the way in which the claims will be submitted, but our anticipation is that the process will broadly be the same as it was under the old Furlough scheme as outlined above.

If you would like any advice or further information on how this scheme can be implemented for you and your employees, please contact a member of our team on 0115 955 5500 or email enquiries@pagekirk.co.uk.

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