28th April 2020Guidance for SMEs: your key questions answered

The government has issued, and in some cases subsequently revised, measures to support SMEs during this time.

Here, Simon Michaels and Jonathan Bourne answer some key questions associated with the schemes in place to help SMEs.

If you have any questions or need guidance for your business, please get in touch directly.

Which employers are eligible to apply for the furlough scheme?

The scheme is open to all UK employers (small, large, charitable) who were operating a PAYE payroll scheme on or before 19 March 2020. This is an extension from the original date of 28 February 2020, to allow more individuals to benefit from the scheme.

In principle, all employers are eligible to claim under the scheme.

How can businesses prove that cash-flow requirements are due to Coronavirus?

Businesses need to demonstrate that the business was viable before Coronavirus. Businesses must show that working capital needs have been affected by the sudden fall in revenue due to the inability to sell a product or provide a service. The key supporting factor is the 12-month cash flow, which will highlight the ongoing cash needs after all other measures available have been taken.

Can employees on furlough be taken off for a week then put back on furlough?

Employees can be taken off furlough and then put back on, but the minimum length is three weeks.

Can you defer corporation tax?

There is no formal arrangement in place to defer corporation tax like VAT, but HMRC should be contacted for ‘time-to-pay’ arrangements at the earliest opportunity.

Can employees still take pre booked holidays while on furlough?

If furloughed workers do not book any holiday time their statutory minimum holiday entitlement of 5.6 weeks per year will accrue while they are furloughed.

Employers can ask for employees to agree to any contractual (as opposed to statutory) holiday not to accrue during furlough.

Unless stated otherwise in a contract, holidays need to be paid at the pre-furlough level of remuneration. This would be treated as a top-up above the furlough contribution.

What happens to unused holiday?

If company policy is to not carry forward more than five days holiday can that still be enforced.

When do redundancy notice periods start if an employee is on furlough?

Employers can reverse the furlough decision and begin redundancy procedures – these would need to follow the usual processes and timescales.