Claiming on the government’s furlough scheme looks easy at first glance, but requires you to crunch some complex numbers behind the scenes. In this guide, we’ll show you how to work out how much you can claim back for each employee of their wages, your employer national insurance contribution and pension contribution.
Before continuing, remember to consult with your accountant before filing your claim to ensure they agree with your figures.
First check eligibility
Before claiming, make sure the employees you have furloughed are entitled to be claimed for under the HMRC scheme. There’s two essential elements to do:
- The employee isn’t working during furlough.
- The employee was on an PAYE RTI filing with HRMC on or before 19th March 2020
Even part time, zero hours, flexitime, agency and any other worker on any form of employment contract is eligible as long as they are paid using the PAYE system. This is sad news for company directors who while able to claim for the PAYE portion of their income, often earn most of their income through dividends, which are not covered.
Make an Excel Spreadsheet
Yes, I’m sorry to say it but you’ll need to do some sums. HMRC’s furlough claim website wants you to do this and just give it the raw numbers. This was likely because of the need to get a system working quickly, and creating something too complex may have meant that payments would have been delayed and businesses go bust.
You’ll need the following columns:
- Employee Name
- Employee National Insurance Number
- Employee Payroll Number (optional)
- Days in Month
- Days in Month on Furlough
- Non-Furlough Pay in that Month
- Furlough Pay in that Month
- National Insurance Threshold for the Month
How much National Insurance can I claim on the Furlough Scheme
Make a row for each employee and each month they are furloughed, and fill in the details from your payroll software.
Next create a new column called Employer National Insurance Reclaim
In this column make a formula as follows:
= ((FURLOUGHPAY+NONFURLOUGHPAY) -NATIONALINSURANCETHRESHOLD)*0.138/DAYSINMONTH*DAYSFURLOUGHED
This will work out what percentage of your national insurance contribution can be reclaimed from the government.
Be careful to accurately change the National Insurance threshold for each month in the spreadsheet, as it changed from March to April due to the new financial year. In March 2020 this was £719 per month, while in April this was £732 per month. Also check you’ve got the days in the month correct – March has 31 while April has 30.
How to work out pension contribution furlough refund
You can also claim for the mandatory employer contribution towards your pension scheme in the government’s furlough scheme, although you can not claim any additional optional contributions you make above the legal minimum.
This thankfully is a bit simpler to work out than the National Insurance contribution. You simply take the furlough wage of the employee, deduct the pension threshold amount as a proportion of the month, and multiply by 0.03.
In March the pension threshold was £512, and from April onwards this is £520.
So say you employed Sandra in March and she worked normally up until the 19th, and on 20th onwards was furloughed. You’ve worked out that her furlough pay was £700.
Then work out what the pension threshold amount for this part of the month is, so in Sandra’s case 11 of the 31 days were furlughed so divide £520 by 31, then multiple by 11 to get £184.51.
Now take that amount away from Sandra’s furlough pay, in this example £700-£184.51= £515.49. The multiply this by 0.03 leaving you with £15.46 as the pension contribution you can claim back.
Making the furlough claim
Once you’ve used the spreadsheet to calculate these numbers, making the furlough claim is easy. HMRC will check the numbers briefly and ask for a phone number if they need to clarify things, so make sure you save your calculations somewhere you’ll remember them.
You’ll also be asked for your business UTR in the process. This is easy to find online using the same HMRC logins you’ll use for the furlough claim, by logging into your main HMRC portal where you make tax returns – it is displayed on the homepage.
The money should be paid within 8 days, however we all know how uncertain things are currently be prepared that it might potentially take longer. So far reports have been good on payment times however.
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