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Parfitt Cresswell Weekly Employment Law Bulletin 6

Furlough Bonus Scheme and claiming back home working expenses

Furlough Job Retention Bonus

In the Chancellor’s summer statement on 8 July he announced that the furlough scheme would not be extended beyond 31 October 2020, with a view to encouraging people to return to work. 

Although opposition parties have been calling for an extension to the scheme to help avoid any ‘cliff edge’ that forces employers to make redundancies from November onwards, the new Governor of the Bank of England has recently put on record his support for the scheme ending as planned in October.

To soften the blow and to further support employers who bring employees back to work, the Chancellor also announced a new scheme that would pay employers £1,000 for each employee they bring back from furlough.  This is a scheme intended to support employers and incentivise them for retaining employees once the scheme ends (rather than this being any type of ‘bonus’ for employees).

The detail behind this scheme was initially scant, as has been the case for the majority of the ‘support scheme’ announcements made during the pandemic, with further details promised later.

On 31 July, more detail was published in a policy paper, with an expectation that the full detail will be published in September, including the practicalities of how to make a claim.

What we know so far

The bonus will only be payable for employees who were eligible for the furlough scheme, and any fraudulent applications will be investigated, and suspect claims withheld. 

The employee must have been continuously employed from the date of the most recent claim until at least 31 January 2021.

Employers will be able to claim this ‘bonus’ from February 2021.

To qualify, employees need to have been earning an average of £520 per month between 1 November 2020 and 31 January 2021.  The employee does not need to earn £520 each month, but must have received some earnings each month and these must be recorded through HMRC Real Time Information (RTI)

If notice has been served (contractual or statutory), the bonus will not be paid even if the employee is still employed on 31 January 2021.  Likewise, employees who submit their resignation prior to this date may prevent their employer from claiming the £1,000 bonus.

This payment will be taxable as the employer must include the full amount as income when calculating their taxable profits for either corporation tax or self-assessment.

This scheme is more likely to be attractive to employers with employees on lower salaries, but even then it is questionable how much of an incentive £1,000 will provide to bring employees back for three months, when the costs of doing so are likely to far outweigh this.  It may ultimately just end up rewarding employers who were already looking to bring their employees back anyway and provide little incentive for those who are not sure if it is financially viable to bring employees back.

Claiming expenses for working from home

As many employees continue to work from home, possibly for some time into the future, it is useful for employees to be aware of when and how they are able claim expenses for the additional household expenses incurred. 

Generally, where directors and employees are required to work from home, they can claim a tax deduction for household expenses incurred as a result of this.   The HMRC have confirmed that having to work from home as a result of Covid 19 is likely to qualify as ‘a requirement of the job’, with the employee therefore able to claim a tax deduction for any household expenses not already being reimbursed by their employer.

Distinguishing between the additional household expenses incurred because of work and any non-work household costs can in reality be quite difficult.  However, a simplified system exists where employees can claim a flat rate of £6 per week.  If any employees’ additional costs are likely to be significantly higher than this, it may be worth considering the more complex ‘apportionment’ system, but otherwise the £6 per week is a good alternative. 

This £6 per week can be paid either by the employer directly, or by the employee claiming tax relief of £6 per week, with this amount being deducted from the employee’s taxable income.  This simplified payment will not require receipts to be kept or proof to be provided, but if the employee wishes to claim an amount higher than this, then evidence of the additional household expenses as a result of working from home will be required. 

With many firms facing financial difficulties at present, the employee making the claim themselves may be the preferred option for many employers,

How to claim?

This can be claimed either through a self-assessment form (if required to complete one) or alternatively by using an P87 form either online via the government gateway or through the post.

Many employees will be unaware of this potential way of offsetting some of their additional expenses incurred through working from home, so even if employers are not willing or able to make the £6 per week contribution themselves, it may be worth sharing the details of how employees are able to benefit from this by making their own notification to the HMRC.

If you or someone you know is experiencing legal issues or has a question regarding employment law, take advantage of our complimentary initial consultation via telephone or video call now by contacting us today on 0800 999 4437 or emailing enquiries@parfittcresswell.com to arrange your complimentary appointment with a friendly member of our team of legal experts.  Places fill up quickly so be sure to reserve your spot now.

We look forward to helping you with your legal needs.