What Happens If I Do Not Get Refunded For Putting My Staff On Furlough?

With the government pledging to help businesses overcome the challenges presented by Covid-19; A comprehensive support package has been announced including measures to help business owners, sole traders, and employees alike.

What is the Coronavirus Job Retention Scheme:

The Coronavirus Job Retention Scheme funds 80% of an employee’s wage – up to £2,500 a month – if they happen to be furloughed. The intention behind this was to avoid mass redundancies when businesses were forced to close amid coronavirus lockdown measures. It was announced on 12 May 2020 that this scheme will run until the end of October.

A main point for businesses, is that some were required to make payments to their staff prior to claiming back this money through the government’s Coronavirus Job Retention Scheme. Therefore, this required businesses to not only have this money available in the first place for the payments, but also to have confidence that the money will be reimbursed.

The demand for the Coronavirus Job Retention Scheme has been huge, over 140,000 businesses applied within the first seven hours of the scheme opening on 20 April as businesses across the country temporarily laid off staff in order to save money and put their business in the best position possible to survive this unprecedented crisis.

How fast will the furlough reimbursement scheme be:

It is expected that the majority of businesses that have applied will have a valid claim to reimburse the wages of furloughed staff, however, as this is a new scheme there are questions regarding how efficient this process will be and whether HMRC will have the facilities to cope with the demand that has exceeded initial estimations.

The government expects that employers will receive this money within six business days following application. The employers will be hoping that this money is received in time for the payroll at the end of the month.The big test for this scheme will be whether the money gets to employers as promised. Any delays with payments could cause huge problems for companies who are already struggling to meet their outgoings with zero incomings.

Who may not be eligible for the furlough scheme?

Another potential problem, aside from possible delays, is whether all furloughed employees will meet the requirements for this scheme. Initially the scheme stated that only employees who were on the company’s payroll as of 28 February would be eligible. However, this left many employees falling through the gaps, therefore the date was extended to employees who had began their new job by 19 March.

There are still issues as some employees still do not qualify for the scheme. For employees who began their employment by 19 March to be eligible, it seems that their employer must have made a ‘Real Time Information’ submission to HMRC by that date. The issue with this is that employers typically submit this information to HMRC the days prior to payroll bring run. Therefore, for businesses whose payday is at the end of the month, this could disqualify some employees from the scheme once again. For any employers who were unaware of this and furloughed such an employee, the application may be unsuccessful.

What can I do if I do not get the furlough reimbursement or if it is delayed?

In the scenario where the furlough reimbursement is delayed or doesn’t materialise at all, or even if your business is simply in need of additional funds to help you during this unprecedented crisis, there are options available to you.

You may consider introducing a form of emergency finance into the company. This could be in the form of a traditional loan or more specialised funding, such as invoice or asset-based lending.

Alternative options to help your business

Alternatively, you could potentially free up some cash by negotiating with existing creditors to lower your monthly outgoings.

Depending on the level of debt and the relationships with your creditors, this could be done through informal discussions; however, if the situation is more serious a formal process known as a Company Voluntary Arrangement (CVA) may be a more appropriate route.

A CVA is a legally-binding arrangement which provides you the opportunity to pay off your debts over a set period of time, this is typically 3-5 years. A portion of your debt could also be written off as part of the process, however this is depending on what you can afford to pay back. 

If the main creditor is HMRC, you may be able to arrange a Time to Pay (TTP) agreement. This allows you to pay your tax arrears through a number of affordable monthly instalments. You may also want to consider placing the company into administration, particularly if you are being threatened with legal action from creditors.

Call to find your best debt solution
0330 900 2000
Cookies are used to help us improve our website. By using this website, you agree to use our cookies.