Expenses, tax returns, Allowable expenses for small businesses
Changes to the furlough and self employed income support schemes from 1st July 2020 
 

Changes to Furlough – what it means and how it works:  

What has changed? 
From 1st July 2020 employers can use 'Flexible Furloughing'. This means employees can return to work part time and be furloughed for the time they are not working.  
Employees must have been furloughed before 10th June 2020 to be eligible for Flexible Furlough.  
 
How is the financial support changing? 
The government are gradually decreasing the support they offer for furloughed employees. Employees are still entitled to 80% of their pay, some of which will need to be paid by the employer. 
 
For June and July the government will continue to pay 80% of wages (plus employers National Insurance and Pension Contributions) up to £2500 a month. 
For August employers will have to pay the National Insurance and Employer Pension Contributions (these were previously included in the furlough claims) 
For September the government contribution decreases to 70% capped at £2190 a month, employers will have to pay 10% plus employers National Insurance and Pension Contributions. 
For October government contributions decrease to 60% capped ar £1875 a month. Employers will need to pay 20% plus National Insurance and Pension Contributions. 
 
The scheme will end on 31st October 2020. 
 
Flexible Furlough - What does it mean? 
Flexible Furlough means companies can bring back staff for any amount of time and any working pattern while still claiming furlough for the contracted hours they are not working. The employer will pay 100% of the wages for the hours they work whilst claiming the furlough amount for the unworked hours.  
An example: an employee contracted for 40 hours a week could return to work for 10 hours a week. The employer would pay 100% of their normal wages for the 10 hours and claim furlough for the remaining 30 hours.  
 
This needs to be done through a written agreement confirming the new arrangements. Records of how many hours have been worked and how many have been claimed through furlough need to be kept for 5 years. The agreement must be for at least 7 days before it can be changed again.  
 
Whilst employees are on Furloughed hours they cannot be asked to do any work which generates revenue or provides a service. They can undergo training or volunteer or work for another employee or organisation.  
 
All normal employee rights to Statutory Sick Pay, annual leave, parential rights, redundancy payments and rights against unfair dismissal will remain.  
Grants cannot be used to pay redundancy payments.  
 
How do I claim the Furloughed wages from HMRC? 
This will continue to be claimed though the HMRC Job Retention scheme portal.  
 
Do I have to include the grant as income on future tax returns? 
Yes, they will be treated as part of taxable profits so should be included on a self-assessment or corporation tax return which ever is relevant for the employer. 
 
What can a furloughed employee do? 
Employees cannot do any work which makes money or provides services for their employer whilst they are furloughed, but they can do training. They can however, work for a different company in a second job. 
 
What if I am a director? Can I be furloughed? 
Yes, a director has two roles within a company: director duties and employee duties. A director can continue to ‘run’ the business (and complete their director duties) providing they are not making revenue or providing a service over the period where they are furloughed. 
 
Are employees who are shielding eligible? 
Yes, employees who have been advised to stay away from others or who need to stay at home with someone who is shielding can be furloughed. People who are carers (including parents of children not in school) can also be furloughed. 
 
What if someone has more than one job? 
Employees can be furloughed from each job.They can also continue to work for one employer whilst being furloughed for another.  

Changes to the Self Employed Income Support Scheme (SEISS)  What are the changes? The Self Employed Income Support Scheme will pay out a second grant in August. in line with the changes to Furlough this will be worth 70% of average monthly trading profits. This time it is capped at £6570. The grant will be paid in a single payment covering 3 months as before.  The first grant needs to be claimed by 13th July.   Who can claim? As before the tax return for 2018-19 must have been submitted and you must have traded in 2019-20 as a sole trader. You must have lost profits as a result of coronavirus and would have been trading in Tax Year 20-21 if it wasn't for the restrictions. A declaration will have to be made (as with the first grant) to say that profits have been adversely affected by coronavirus.   You do not need to have claimed the first grant to be eligible for the second one.  Is the Grant Taxable? Yes, the grant will need to be included on 20-21 tax return as income so records will need to be kept of how much you received for when your tax return is completed.  

Further Help and Advice 

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