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Coronavirus Job Retention Scheme – Guide for Employers

Posted by Jake Smith on May 12th, 2020 | Get paid

Coronavirus Job Retention Scheme - Guide For Employers | Crunch - image of closed sign

HMRC launched its online claim service and portal for the Coronavirus Job Retention Scheme on 20‌‌th April 2020.

At launch, it was planned to run for four months from 1st March to 30th June 2020. On 12th May the Chancellor Rishi Sunak announced a four-month extension to the 31st October 2020.

Details around the extension and the proposed increased flexibility that would allow furloughed employers to return to work part-time from August 2020 onwards, whilst seeing their employers share the costs of the scheme will be announced before the end of May. We will update this guide as soon as further detail is available.

To make a claim you must be registered with HMRC for PAYE online. If you aren’t registered yet, you can do so now online, or by going to GOV.UK and searching for ‘PAYE Online for employers’.  Full instructions on how to register for PAYE online are at the end of this article.

Please note, the only way to make a claim is online using HMRC’s portal. To avoid delays we strongly recommend you submit claims yourself.

If you’re pushed for time, you can download the PDF version of this article to read later and keep for reference.

The application needs to be completed in one session, there is no save and return functionality and the application will time out after 30 minutes of inactivity.

We recommend you refer to HMRC’s guidance on how to work out 80% of your employees’ wages to claim and its online calculator to help calculate your claim amount.

We recommend you make a claim every month the scheme is operational. The minimum furlough period is three consecutive weeks and you can only make one claim every three weeks.

You cannot make more than one claim during a claim period – HMRC recommend that you make your claim shortly before or during running payroll. You must claim for all employees in each period at one time as you cannot make changes to your claim.

HMRC has published a step by step guide we have used as part of this guide. We have also gone through the process of submitting a claim and have screenshots from the process available in our CJRS Walkthrough guide (pdf download).

The service is simple to use and any support you need is available on GOV.UK – this includes help with calculating the amount you can claim (see the links  above).

The service is designed to be ‘self-serve’ and HMRC has said claims will be paid within six working days. If you need Crunch to submit your claim, we won’t be able to submit a claim as quickly as you can yourself.

If you would like to Crunch to make a submission on your behalf, we will be able to do this from early May. While you will need to pay for the service, we can assure you our fees will be among the lowest across UK accountancy Practices. We will publish more details about this in due course.

To avoid delays, we strongly recommend you submit your claims yourself.

When you submit a claim, HMRC will not acknowledge this by email. You must make a note of the claim reference number provided on screen or print the confirmation screen.

HMRC cannot answer any queries from your employees – they will need to raise these with you, as their employer, directly.

This guide provides all the information you will need and instructions on how to make a claim.

Please note the guide will be updated as more information is published by HMRC.

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The Coronavirus Job Retention Scheme (CJRS) allows UK employers to furlough employees and apply for a grant from the government covering 80% of the affected employees’ usual monthly wage costs up to a maximum of £2,500 (per month). In addition, the scheme will cover the employers National Insurance costs and the cost of the minimum pension auto-enrolment contributions that the employer usually makes to their employee’s pension.

To be eligible for CJRS an employer must agree with the employee that they are a ‘furloughed worker’. In addition:

  • Employees must be notified that they have been furloughed
  • Employees must be furloughed for a minimum of three consecutive weeks
  • The employee cannot do any work for the employer that has furloughed them.

The scheme is due to run for four months to the end of June 2020 and has been backdated to start from 1st March 2020. On 12th May the Chancellor Rishi Sunak announced a four-month extension to the scheme so it will run until the 31st October 2020.

Most Crunch clients file their Real Time Information (RTI) with HMRC through their Crunch account each month, and will need to follow the instructions in this guide to apply for the grant available from the government.

We recommend you make a claim every month the scheme is operational.

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Any UK employer can claim, but they must have:

  • created and started a PAYE payroll scheme on or before 19th March 2020
  • enrolled for PAYE online
  • a UK bank account.

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You can claim for employees employed by your company as of 19th March 2020, and who were on your company’s PAYE payroll on or before that date. You must have made an RTI submission notifying HMRC of payments to those employees on or before 19th March 2020.

You can also claim for employees employed between 28th February 2020 and 19th March 2020 who were on your company payroll (i.e. notified to HMRC on an RTI submission on or before 28th February) if you:

  • made them redundant or they stopped working for your company between 28th February and 19th March 2020
  • re-employ them and put them on furlough.

Every business in the UK will have employees in different circumstances, from employees being made redundant to others returning from maternity leave or those self-isolating because of coronavirus. The government has published guidance to help employers review the situations affecting individual employees to see if they can claim for them.

We recommend you read HMRC’s guidance carefully before making a claim for an employee.

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If you are a director of a limited company, even if you are the sole director of the company (ie. a personal service company) you can claim your PAYE salary costs up to the maximum of 80% of your average monthly wages (capped at £2,500 per month) plus the other costs highlighted above.

You cannot claim for any income from your company taken by way of dividends.

Your company will need to record its decision to place a director on furlough leave and the affected director cannot generate any income for the company while on furlough leave. The director may take on another job or alternative work (as a sole trader) unrelated to your business.

We have a template letter (Word doc 8Kb)that can be used to send to all employees who are being furloughed along with a template that can be used for a Board meeting minutes (Word doc 8Kb) confirming the decision to furlough directors and/or employees.

You should process your Directors salary and submit your RTI via your Crunch App for your April 2020 salary in the usual way. Our guidance on the tax-efficient salary for a Director in the 2020/21 tax year is up to the National Insurance secondary threshold of £732.33 per month (£8,788 per annum). Please see below (Accounting for the reduced payroll expenses in your Crunch account if you are a sole director/sole employee) on how to update your Crunch account if you decide to reduce your salary amount.

You must calculate your CJRS claim based on the last salary amount you filed with HMRC before 19th March 2020. For a director taking a tax-efficient salary in the 2019/20 tax year, this would usually mean £719 per month. You will not be able to claim based on the higher tax-efficient salary amount for the 2020/21 tax year (£732 per month) you may have chosen to pay yourself after 6th April 2020. See our calculation for limited company directors for further detail.

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Before placing an employee on furlough, employers should discuss the reasons for the decision with the individuals involved and make any changes needed to employment contracts with their agreement. Employers may need to seek legal advice on this.

As mentioned above, make sure that you have sent a letter to any furloughed directors or employees (we have a template letter – Word doc 8kB) and that the decision by the board of the company to furlough is recorded (again we have a template that can be used for a Board meeting minutes – Word doc 8Kb).

You can only submit one claim at least every three weeks, which is the minimum length of time (consecutive weeks) an employee can be furloughed for. Claims can be backdated until 1st March 2020 if applicable.

To claim, you will need the following information to hand – we recommend you assemble this information before starting a claim.

 

Information needed to submit a claim Where Crunch clients will find this information
You must have a Government Gateway (GG) ID and password for your company. Please do not confuse this with your personal government gateway ID.

If you don’t already have a GG account for your company, you can apply for one online, or by going to GOV.UK and searching for ‘HMRC services: sign in or register’

Your Government Gateway (GG) user ID will have been provided to you when you set up your GG account. Crunch doesn’t hold this information, so if you don’t have it follow the links underproblems signing in on Gov.uk to access your account.
You must be enrolled for PAYE online.

If you aren’t registered yet, you can do so now, or by going to GOV.UK and searching for ‘PAYE Online for employers’

Your company’s employer PAYE reference number can be found in your Crunch Account: Go to Your Account (top right corner) > Company Profile > PAYE.

If you are not registered for the PAYE online service, you must register as quickly as possible. The most efficient way to do this is to submit the information needed online yourself. Crunch cannot register your company on your behalf

full instructions are provided at the end of this guide to activate this service in your company GG account. Go to the section entitled ‘Activating “PAYE for employers” online’.

You must ensure your company GG account has the address set to your home address in order to receive the necessary activation code.

For each furloughed employee you will be claiming for you must provide the employee:

1. Name

2. National Insurance number

3. Claim period (note 1) and claim amount (see worked examples at the end of this guide)

4. PAYE/employee number (optional)

Employee personal details number 1, 2 and 4 can be found in Your Account (top right corner) > Company Profile > Employees. 
Note 1: The earliest date your claim period can commence is 1st March 2020. The minimum period of furlough is three consecutive weeks. You can stop the furlough period for an employee and furlough again at a later date if necessary, subject to the 3-week minimum period.
Your Self Assessment Unique Taxpayer Reference; or Personal to company director and provided by HMRC – Your Limited Company to provide
Your company’s Corporation Tax Unique Taxpayer Reference; or Go to Your Account (top right corner) > Company Profile > Corporation Tax
Company Registration Number Go to Your Account (top right corner) > Company Profile. Your Company Registration Number is stated underneath your company name
Business bank account number and sort code and the company name the bank account is held in Your Limited Company to provide.

If you do not have a business bank account you will need to provide a personal bank account and retain this information to complete your company bank reconciliation.

When completing the application you will also need to confirm the address registered for the bank account you choose to receive payment. This should be your company’s bank account.

Contact name Your Limited Company to provide
Contact phone number Your Limited Company to provide

We strongly recommend you retain all records and calculations in respect of your claims in case HMRC has any questions about your claim.

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The online claim service was launched on GOV.UK on 20‌‌th April 2020.

The only way to make a claim is online using HMRC’s portal.

We recommend you use HMRC’s online calculator to calculate your claim amount.

We recommend you make a claim every month the scheme is operational. The minimum claim period is three consecutive weeks.

The service should be simple to use and any support you need is available on GOV.UK; this includes help with calculating the amount you can claim.

We recommend you make the claim yourself  – the service is designed to be ‘self-serve’ and claims will be paid within six working days. If you ask an Agent like Crunch to submit your claim, they won’t be able to submit a claim as quickly as you can yourself.

HMRC cannot answer any queries from employees – they will need to raise these with you, as their employer, directly.

If you would like Crunch to make a submission on your behalf, we will be able to do this from early May. While you will need to pay for the service, we can assure you our fees will be among the lowest across UK accountancy Practices. We will publish more details about this in due course.


You can view step-by-step screenshots of an actual claim in our step-by-step CJRS walkthrough

Download the CJRS walkthrough (pdf 1.2Mb) →


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The maximum wage amount you can claim is £2,500 a month, or £576.92 a week, plus any National Insurance and pension contributions you can claim for.

If the length of time you’re claiming for is not a full week or one month, you’ll need to use the daily maximum wage amounts to work out the maximum amount you can claim for each employee.

To work out the maximum amount you can claim, multiply the daily maximum wage amount by the number of days your employee is furloughed for in your claim. The daily maximum wage amount for the four-month period of the CJRS is:

  • March 2020 £80.65 per day
  • April 2020 £83.34 per day
  • May 2020 £80.65 per day
  • June 2020 £83.34 per day

If your employee is furloughed over two calendar months, you’ll need to calculate the maximum amount for each calendar month and add them together.

If you’re claiming for multiple pay periods in one claim, you can calculate the total maximum using a mixture of:

  • the daily maximum wage amount
  • the weekly maximum wage amount
  • the monthly maximum wage amount

HMRC has an online calculator you can use to help you submit a claim. We recommend you use the calculator when you have assembled all the information you need to make a claim, as highlighted in the previous section.

HMRC has provided step by step guidance using the following example on how to calculate the amount of your claim. You need to calculate the amount of grant you can claim for:

  • Gross salary
  • Employer National Insurance contributions
  • Minimum Pension Contributions.

Calculating the grant for gross salary 

The employee is paid a regular, fixed monthly salary on the last day of each month. They are also auto-enrolled into the workplace pension. The employee agreed to be placed on furlough from 21st March 2020, at 80% of their salary.

The employee was paid £2,400 in gross salary for the month of February 2020. This was the last full monthly pay period before 19th March 2020.

The relevant information for the purposes of the claim for salary is:

  • Furlough start date of 21st March 2020
  • Gross salary of £2,400.

The period of the claim in March is 21st to 31st March – this is 11 days.
The daily salary in March is £2,400 / 31 days = £77.42
The period of the claim in March is 11 days – multiply by the daily rate:

  • 11 x £77.42 = £851.62.

Your limited company, as the employer, can claim 80% of this amount.

  • 80% of £851.62 = £681.30.

You need to compare this to the maximum amount available under the scheme which is £2,500 per month.
The daily rate in March at the maximum amount is £2,500 / 31 days which is £80.65. The period of furlough is 11 days

  • 11 x £80.65 = £887.15

Your limited company must claim the lower amount – so £681.30 is the value of your claim for salary in March 2020.

Calculating the grant for employer National Insurance contributions (NIC)

Please note that if no employer NIC is due because your company is covered by the Employment Allowance, you cannot claim a grant for Employer NIC and you do not need to complete a calculation.

The employee’s gross pay for March 2020 after adjusting for the receipt of government grant is £2,229.70, calculated as follows.

 

Period Number of days Daily rate Funded by Percentage Calculation £
1st to 20th March 20 £77.42 Employer 100% 20 days x £77.42 1,548.40
21st to 31st March 11 £77.42 Government Grant 80% 11 days x £77.42 x 80% 681.30
Total 31 £2,229.70

The employer NICs due on the total gross pay of £2,229.70 is £208.48. This is calculated as follows. There are some minor roundings.

 

£
Gross Pay 2,229.70
Less Employer monthly NI threshold for 2019/20 tax year (719.00)
Relevant amount for calculation 1510.70
Employer NI is 13.8% of relevant amount 208.48
Amount of NI to be paid 208.48
Daily amount in March (divide £208.48 by 31 days) 6.73
Amount paid by limited company (20 days x £6.73) 134.50
Amount to be claimed as government grant for March 2020 (11 days x £6.73) £74.03

Calculating the grant for employer pension contributions

If the employee is part of a workplace pension, the employer can claim the minimum contribution of 3%. The entitlement to grant is calculated as follows.

The monthly lower level of qualifying earnings is £512 (for March 2020) and it is apportioned based on the number of days in the month and the number of qualifying furlough days:

  • £512 / 31 days (in month)  = £16.52 x 11 days (qualifying furlough)  = £181.72.

The amount of furlough pay is £681.30 – deduct the lower qualifying earnings of £181.72 and multiply by the minimum contribution of 3%:

  • Furloughed gross pay of £681.30 – £181.72 = £499.58
  • Pay subject to pension contributions: £499.58 x 3% = £14.99.

The limited company can claim £14.99 as grant for employer pension contributions.

Total amount of grant to be claimed

Total amount of grant to be claimed for this employee is £770.32.

£
Gross salary 681.30
Employer National Insurance contribution 74.03
Minimum Pension Contribution 14.99
Total £770.32

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The employee is paid a regular, fixed monthly salary of £2,400 on the last day of each month. They are also auto-enrolled into the workplace pension. The employee agreed to be placed on furlough from 1st of April 2020, at 80% of their salary.

The employee was paid £2,400 in gross salary for the month of February 2020. This was the last full monthly pay period before 19th March 2020.

The relevant information for the purposes of the claim for salary is:

  • Furlough start date of 1st of April 2020
  • Gross salary of £2,400.

The period of the claim in April is 1st to 30th April = a full month

Your limited company, as the employer, can claim 80% of the employee’s monthly salary

  • 80% of £2,400 = £1,920

You need to compare this to the maximum amount available under the scheme which is £2,500 per month.

Your limited company must claim the lower amount: so £1,920 is the value of your claim for salary in April 2020.

Calculating the grant for employer National Insurance contributions (NIC)

Please note that if no employer NIC is due because your company is covered by the Employment Allowance, you cannot claim a grant for Employer NIC and you do not need to complete a calculation.

The employer NICs due on the total gross pay of £1,920 is £163.94. This is calculated as follows. There are some minor roundings.

£
Gross Pay 1,920
Less Employer monthly NI threshold for 2020/21 tax year (732.00)
Relevant amount for calculation 1,188
Employer NI is 13.8% of relevant amount 163.94
Amount to be claimed as government grant for April 2020 £163.94

Calculating the grant for employer pension contributions (if applicable)

If the employee is part of a workplace pension, the employer can claim the minimum contribution of 3%. The entitlement to grant is calculated as follows.

The monthly lower level of qualifying earnings is £520 (for April 2020).

  • Furloughed gross pay of £1,920 minus £520 = £1,400
  • Pay subject to pension contributions: £1,400 x 3% = £42.00

The limited company can claim £42.00 as grant for employer pension contributions.

Total amount of grant to be claimed

Total amount of grant to be claimed for this employee is £2,125.94.

 

£
Gross salary 1,920
Employer National Insurance contribution 163.94
Minimum Pension Contribution 42.00
Total £2,125.94

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The sole director of a personal service company has a PAYE salary set at £8,632 for the 2019/20 tax year and £8,788 for the 2020/21 tax year. Salary is paid monthly on the last day of the month. The director decided the furlough period should commence on 1st March 2020 at 80% of their salary. The furlough decision is recorded by the limited company in a special board motion.

The employee was paid £719 in gross salary for the month of February 2020. This was the last full monthly pay period before 19th March 2020.

The relevant information for the purposes of the claim for salary is:

  • Furlough start date of 1st March 2020
  • Gross salary of £719.

The period of the claim in March is 1st to 31st March – this is 31 days. The full monthly salary is used and the limited company, as the employer, can claim 80% of this amount.

  • 80% of £719 = £575.46

You need to compare this to the maximum amount available under the scheme which is £2,500 per month.

The limited company must claim the lower amount – so £575.46 is the value of the claim for salary in March 2020.

Calculating the grant for employer National Insurance contributions (NIC)

The director salary is paid below the secondary threshold for NI so no amount is payable. The amount of claim is nil.

Calculating the grant for employer pension contributions

If the employee is part of a workplace pension, the employer can claim the minimum contribution of 3%. The entitlement to grant is calculated as follows.

The monthly lower level of qualifying earnings is £512 (for March 2020). The claim is for the full month of March.

The amount of furlough pay is £575.46 – deduct the lower qualifying amount of £181.72 and multiply by the minimum contribution of 3%:

(£575.46 – £512) x 3% = £1.89.

The limited company can claim £1.89 as grant for employer pension contributions.

Total amount of grant to be claimed for this employee is £577.35.

£
Gross salary 575.46
Employer National Insurance contribution 0
Minimum Pension Contribution 1.89
Total £577.35

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Using the methodology highlighted above, we have calculated the amount of grant a limited company may claim based on different salary amounts paid in February 2020. The table also shows the amounts to be included for Employers National Insurance and the minimum employer pension contribution when you make your online claim.

Salary paid in February 2020
£8,632 £12,500 £20,000 £30,000
£ £ £ £
Gross monthly salary 719.33 1,041.67 1,667 2,500
80% of monthly salary £575.46 £833.33 £1,333.33 £2,000
Employer NI 0 £15.78 £84.78 £176.78
Employers pension at 3% £1.89 £9.64 £24.64 £44.64
Total £577.35 £858.75 £1,442.75 £2,221.42

Employees whose pay varies and were employed from 6th April 2019

If the employee has been employed continuously from the start of the 2019/20 tax year (ie. from 6th April 2019 to 5th April 2020) you can claim the highest of either:

  • 80% of the same month’s wages from the previous year (up to a maximum of £2,500 a month)
  • 80% of the average monthly wages for the 2019 to 2020 tax year (up to a maximum of £2,500 a month).

Simply repeat the calculations provided above but start with the amount they earned in the same period last year.

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The income your company receives under the scheme is a grant from the government and must be used to offset the costs of placing employees on furlough leave. The amount of grant income received must be included in the company’s accounts for Income Tax and Corporation Tax purposes. Crunch accountants will check this when we prepare your company’s annual accounts.

For this amount to be included as part of the profit calculations on your Crunch account you will need to record this income as interest received from the banking tab. This will ensure you can accurately calculate the amount of dividends available for your company to distribute. Crunch accountants will then reassign the income to an appropriate income ledger when we prepare your company’s annual accounts.

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If you are the only person employed by your company (usually a sole director) and have set up a recurring payroll in your Crunch account, and you decide to keep paying yourself the same salary, you do not need to adjust the recurring payroll in your Crunch account.

If you decide to reduce your salary to the amount of grant paid by HMRC, you should take the following action to amend your recurring payroll:

Go to tab Pay Yourself > Payroll Runs > Scheduled payroll runs: Click on Options > Edit.

Here you will need to update the Basic salary to the figure calculated based on either 80% of your monthly salary as of 29th February 2020 if you took a fixed amount each month during the 2019/20 tax year. Or, if you paid yourself variable amounts during the 2019/20 tax year you need to update with 80% of the average monthly salary during the 2019/20 tax year.

If you have not set up a recurring payroll in your Crunch account, and update your payroll monthly, simply include the actual amount you pay yourself.

If your company has employees, you will be a Crunch payroll customer and will need to contact the payroll team on support@crunch.co.uk to make the necessary changes to your Crunch account.

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You must log in to your HMRC company government gateway account.

You must ensure your company government gateway account has the address set to your home address in order to receive the necessary activation code:

  1. Scroll down to “Get another tax, duty or scheme” and click on “Find a tax, duty or scheme”
  2. What do you want to add? Choose “Employers or intermediaries, for example PAYE for employers or CIS” and click Continue.
  3. Which employer tax do you want to add? Select “PAYE for Employers” and continue through the prompts to trigger the activation code from HMRC.
  4. “Do you have an employer PAYE reference?” If you have an existing scheme and just need to activate the online account for this, select “Yes.”
  5. Once ‘’Yes’’ is selected, you’ll be asked for your company’s PAYE details –  ‘HMRC office number’ (this is the first three digits of your PAYE reference before the slash), ‘Employer PAYE reference’ (the digits after the slash), and ‘Accounts office reference’. Once these are filled in, click “Request access.”Please note, we have had reports that HMRC may not be sending the “Authorisation Codes” that are usually required to access this service. In this instance, you may not need to complete steps 6 and 7.
  6. You’ll be redirected to a page indicating successful submission. HMRC will send an activation code to your address and you should receive this within 10 working days, providing HMRC have the correct PAYE address for you. Ensure the address is your home address.
  7. Once you receive the code, you must log into gateway account and click on the “activate” box next to “PAYE for Employers”, enter the code and click “activate

You can find out about the other support available to businesses on our COVID-19 content Hub.

Remember, if you’d like to refer to this article later, you can download the PDF version by clicking the banner below.

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