Freelancers and the Coronavirus Job Retention Scheme

PAYE freelancer

If you have been receiving income through payroll systems, under PAYE, the new Job Retention Scheme might help you.

But there are a number of restrictions which means freelancers could miss out.

The scheme is supposed to work in the following way:

The Treasury/HMRC are trying to use employers’ payroll systems as a conduit for welfare.

An employer can keep staff on the books, supposedly at no extra cost as the government will reimburse the employer for:

  • 80% of the monthly employee wage costs for up to five months, up to a maximum of £2500 per month [UPDATE 13 May: The furlough ‘window’ is now for up to five months to the end of July 2020]
  • the employer’s associated national insurance contributions
  • the employer’s associated minimum auto-enrol pension contributions

Making it cost-neutral in this way is a deliberate attempt to encourage employers to keep people on the books, ready for when things get back to normal.

To be eligible, the employer has to ensure that the staff member does not work at all for the period they are putting the employer through the scheme. They are ‘furloughed’ – paid but not working.

Update 12 May 2020: Furloughing has to be for a minimum of three weeks. The maximum is now extended to end of July, which is a total of 5 months from 1 March.

Side note: This is causing problems for employers that want to have staff on one- or two-week furloughing rotas.

Update 9 June 2020: Flexible furloughing will be available to employers from July 2020. E.g. work 2 days a week, furloughed 3 days a week.
BUT – employees can only be on flexible furlough if they’ve already been furloughed for a minimum of 3 weeks BEFORE the end of June.
This makes a furloughing deadline of 10 June.
Anyone not furloughed before that date will not be eligible for flexible furloughing.

On 12 May the Chancellor announced that there will be changes to the scheme from August, but that the scheme will run until at least October 2020.

There are some significant downsides to this scheme for employees:

  • employers don’t have to use the scheme – it’s voluntary
  • staff members have no right to force their employer to use the scheme
  • to be furloughed, an employee has to have been on payroll AND their pay information would have to have been submitted to HMRC by 19 March 2020

Taken together, these criteria are a disaster for many PAYE freelancers, who work regularly for production companies, but who happened not to be on anyone’s payroll in February or the first half of March.

Also, some employers are not willing to put staff on the scheme, particularly freelance staff whom the company might consider not ‘proper’ staff members.

Update 13 May 2020: Current guidance says that you cannot work for the furloughing organisation or any associated or linked organisation. This is particularly cruel for freelancers who are both PAYE and self-employed for the same or linked organisations (eg BBC), performing multiple roles across productions.

They might be being furloughed on very low salary from one part of the BBC but are now prevented from supplying services as a sole trader to another part.

Some officially sanctioned tweaks

Freelancers who have come off a payroll after 28 February can be rehired by the employer retrospectively.

Freelancers who work for multiple people on multiple payrolls in February can be furloughed by each.

Being furloughed does NOT stop you looking for work from another source. Furloughing only stops you working for the company that’s furloughed you.

If you have variable pay, the normal pro-rata average in February and other recent months can be used by the employer to calculate the wage through the scheme.

Worth knowing

If you are a freelancer with PAYE income, but are also a sole trader, you may be eligible for both this scheme and the Self-employed Income Support Scheme, but only if your sole trader profits are higher than your annual income from PAYE work in recent years.

Read about the Coronavirus Job Retention Scheme on gov.uk >

What HMRC needs from employers

HMRC opened the portal for employers to apply on 20 April 2020.

Employers need to provide:

  • The employer’s bank account number and sort code to use when paying the claim.
  • The name and phone number of the person in the business for HMRC to call with any questions.
  • Employer’s Self-Assessment UTR (Unique Tax Reference), Company UTR or CRN (Company Registration Number).
  • The name, employee number and National Insurance number for each of the furloughed employees.
  • The total amount being claimed for all employees and the total furlough period.

There’s now a video for employers about the scheme on the HMRC YouTube channel:

Coronavirus Job Retention Scheme (YouTube) >

Image credit: Peggy und Marco Lachmann-Anke from Pixabay

Please note:

Although every effort has been made to provide accurate tips and information, David Thomas Media Ltd accepts no responsibility for any errors, omissions or out-of-date facts. Trainees are advised to seek up-to-date professional advice on all financial and tax matters before making decisions relating to these subjects. Nothing in our notes, courses, webinars, downloads or social media should be considered as financial advice.
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Posted on 13 April 2020

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