Freelancers and the Coronavirus Job Retention Scheme

PAYE freelancer

Last Updated on 17 December 2020

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

This is the scheme that’s often referred to as ‘furloughing’.

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
  • the employer pays associated national insurance contributions
  • the employer pays any associated minimum auto-enrol pension contributions

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.

On 5 November 2020 the Chancellor announced that the flexible furlough scheme will run until at least the end of March 2021. Then on 17 December he extended the scheme again until at least the end of April 2021.

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 employed and on payroll by certain dates.
    On 5 November 2020 the Chancellor announced that the employee should have been working by 23 September and on payroll by 30 October 2020.

PAYE freelancers on dailies or weeklies are particularly disadvantaged by the date restrictions.

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 different 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 or made redundant can be rehired by the employer retrospectively.

Freelancers who work for multiple employers on multiple payrolls 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.

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 >

What HMRC needs from employers

When using the Job Retention Scheme 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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