Surprise furlough scheme extension fails to lift limited company contractors

A surprise government extension of the Coronavirus Job Retention Scheme is causing contractors to consider whether furlough might be for them between now and December.

Included in a package of measures to shut England down for four weeks to help reduce covid-19 infections, the extension is only for “a further month”, the chancellor said on Saturday.

But there is growing distrust of Rishi Sunak’s claims, even though it now looks certain that his Job Support Scheme has been moved from November 1st to early December.

'U-turn'

“[Mr] Sunak informed us repeatedly that the furlough scheme would come to a close at the end of October. However, as virus cases have risen we've seen a revised [plan],” says Wellers Accountants.

“While this is somewhat of a U-turn, it's good news for those businesses that continue to be hard hit by closures and restrictions.”

Initially, it looked like bad news for new PSCs who were hoping that the showpiece of Mr Sunak’s Winter Economy Plan, the JSS, would finally offer them some state-funded income support from coronavirus.

“First thoughts [were] that if JSS is deferred,” said take-home pay adviser Stuart Clark, “it might be worse for some as those that have started employment since March won’t qualify for furlough but would have qualified for the JSS.”  

'Unattractive'

Yet even those PSCs who do now qualify for the extended CJRS still might not be elated, says Hannah Morrison, associate at Brabners LLP.

“Limited company contractors are likely to be able to benefit in the same way as on the CJRS previously,” she said.

“But as with CJRS [phase one, it is] unlikely that dividends can be taken into account so [this extension] may be unattractive for many.”

'Scheme will run as it did before'

“[The extended furlough scheme will] operate as it did previously,” confirms contractor accountancy firm DNS Accountants.

“Employers will receive support from the government, covering 80% of the wages  -- up to a maximum of £2,500 per month, and will be required to pay Employers NI and pension costs.”

The firm’s tax manager Siddharth Agarwal says that to make a claim under the December CJRS, an employee must have been on the PAYE payroll on or before October 30th 2020.  

The current small print of the scheme announcements confirms the October date, but it adds that the government is yet to confirm when claims can first be made in respect of employee wage costs during November.

“But there will be no gap in eligibility for support between the previously announced end-date of CJRS and this extension,” the small print adds.

'Limited companies let down again'

Limited company directors appear far from reassured, however. Asking how its online followers feel, lobbyist Forgotten Ltd was told:

“No different from the current position. No work and no support, so just feeling the same as before.”

Another personal service company director answered: “Let down again.”

'Chancellor's inconsistencies'

Former Revenue inspector Bill Stevenson, a specialist in tax enquiries reflected: “Perhaps the chancellor might conjure up tax breaks after COVID-19 for the directors and self-employed [who] didn’t get any of his exceptional gifts when they have no alternative means of putting food on the table.

“But I personally wouldn’t hold my breath. [There are] many inconsistencies in his approach, none of which will be forgotten by the many when they come to the ballot box next time.”