Coronavirus Questions Answered by Shrewsbury Acoountant
During COVID 19 crisis, I am publishing bi-weekly Blogs focused on Small business. When there is some genuine changes or news that help businesses and individuals, you will be the first to know.
Sometimes after a Government announcement, and it can be several days later, the small print starts to emerge, which can often put a somewhat different spin on things.
So today, I have selected seven of the emailed questions, which I hope you will find either thought-provoking or personally relevant. The topics today:
- Can my employer withhold wages for furloughed staff?
- Does home insurance cover you for working at home?
- Pay below the national living wage (NLW)
- Redundancy during furlough
- What can I claim as a small company director?
- Does my income protection insurance cover the coronavirus lockdown?
- My van’s MOT has expired, can I still work?
1. Can my employer withhold wages for furloughed staff?
I work for a small business with 14 employees and receive pay weekly. Now our employer is refusing to make any wage payments until the company receives Government funding for Furlough staff. I understand that he has submitted the weekly payroll report to HMRC, but he hasn’t yet paid the staff. Also, he has informed staff that they will not accrue any holidays during the Furlough period, can he do these things?
Answer
The Treasury rules are clear; employers should not withhold pay under the Furlough Scheme; they should pay staff as usual and wait for the government to reimburse. If your employer is having a cashflow problem, which would not surprise me, he should seek a loan to cover the cost. Loans are great in theory, but in practice, if he simply doesn’t have the money and can’t obtain it, there’s not much that can be done.
As to your second question, your employer is definitely wrong; staff are still entitled to their usual holidays, including bank holidays, but only if they usually get paid for them.
2. Does home insurance cover you for working at home?
I started with my new employers on 1st March 2020, so I don’t qualify for furlough leave. Luckily, they have allowed me to work from home on full pay, but will this be a problem with my local council, and will my home insurance be invalid?
Answer
On your first point, as you are not running your own business from home, this will not be an issue for your local council. However, home insurance is a little trickier.
Providing that you do not have regular business visitors to your home, virtually all insurers are taking a relaxed approach. Still, they won’t cover your tools of the trade or stock. So, if you’ve brought expensive kit or stock home, it’s worth informing your insurance company, and they’ll probably temporarily extend the cover, but may make an additional charge.
3. Pay below the national living wage (NLW)
I am a restaurant worker and was furloughed on 23rd March. My boss is paying staff 80% of the basic pay with no top-up, through the furlough scheme (we’re paid £6.57ph, which is 80% of the 2019/20 national living wage). My question is, as the 80% paid is below the national living wage, which went up to £8.72ph on 1st April, is what my employer is doing, legal?
Answer
Unfortunately for you, what your employer is paying is perfectly legal, as the furlough scheme is effectively a grant, which does not come under the NLW rules. The only exception is if your employer makes you do some training whilst on furlough, then the current national minimum wage of £8.20ph is payable.
4. Redundancy during furlough
I run a small business providing support services for pubs, bars and cafés from two sites. Even before the virus shut down, I was considering closing one of the sites and have now decided to do this immediately. Closing means that I will have to make 3 of my twelve staff redundant. Can I do this if the employees are on furlough?
Answer
I can’t see that you have anything to gain by making the three employees redundant now, whilst the three employees have a massive amount to lose. They could see their income cut off completely, whereas delaying the redundancy would see 80% of their income continue at no cost to you. Also making staff redundant while furlough is in progress, is a bad message to send to the remaining employees. Remember, redundancy payments/holiday pay will need to be paid now (which cannot be deferred and will not be subsidised by HMRC).
5. What can I claim as a small company director?
I am the sole director of my own small limited company. I have always taken my income by way of periodic dividends. I’ve looked on HMRC’s website and can’t see that I fit into any of the schemes so, what can I do?
Answer
Bad news I’m afraid, there’s very little state support available, as dividend payments aren’t covered under the furlough scheme (CJRS), only wages.
6. Does my income protection insurance cover coronavirus?
As a builder, I decided to take out a combined policy which includes, income protection, life insurance and critical illness cover, to protect my family in the event of me having an accident. Do you know if I am still covered as I’ve tried and failed to get an answer from my insurance broker as he’s self-isolating?
Answer
As long as you didn’t take out the policy whilst having coronavirus, your income protection policy should be fine, as is life insurance. However, if you have a critical illness policy, it won’t define coronavirus as a critical illness unless having survived the illness you’re left with an underlying condition, such as pulmonary fibrosis.
7. My van’s MOT has expired, can I still work?
David Jones Tax Accountant
I am a sole trader plumber, and my van’s MOT runs out on 4th May, and I’ve just found out that my local MOT testing centre is closed. I’m still doing emergency calls so is there anything I can do?
Answer
Do not worry, as your vehicle’s MOT expiry date was after 30th March. Your vehicle is still allowed on the road as you’ve been given an automatic six-month extension to your current MOT.
If you would like more detailed information on some aspect of UK Tax, send me an e-mail and I’ll be pleased to advise further.
David Jones is the Senior Partner and Founder of Morgan Jones & Company. Born in Liverpool and an Accountancy graduate of the University of Wolverhampton, David spent twenty years working for the Customs & Excise in London then Shrewsbury before starting his own business. David's depth of knowledge of the UK tax system and his ability to communicate this learning has seen Morgan Jones & Company grow into Shropshire's most respected Accountancy Practice.