When making a claim for the wages of furloughed employees through the Coronavirus Job Retention Scheme, it’s very important to understand what HMRC means by ‘usual working hours’.
The calculator on the HMRC’s guidance for making a claim requires the user to enter the total usual hours and the actual working hours, with the furloughed hours being the difference between the two. The key is to determine what is meant by ‘total usual hours’. A worked example by the Tax Faculty of the Institute of chartered Accountants in England & Wales (ICAEW) reveals that there are at least three possible outcomes and that the usual working hours are, in fact, an estimate.
One issue that the ICAEW identified is that HMRC's guidance to employers is different to their guidance to software providers (such as Sage or Xero). Employers are advised to round up to the nearest whole number, while the software specification suggests rounding down, which results in a different number.
The ICAEW advises to ‘not simply rely on your calendar when making claims under the second iteration of the Coronavirus Job Retention Scheme from 1 July.’
Martin Johnson, partner with Torgersens said; ‘The claim differential could be £150 per person per month if they're paid £15/hour! Employers could be very disappointed, so we hope that HMRC provides updated guidance on this at the earliest opportunity.’
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