The job retention scheme (also referred to as furlough) was brought in by the British government during the COVID 19 crisis to support those who were not able to work because of the lockdown, or the restriction put into place by the government.

The scheme promised to pay employers 80% of their employees salary, as long as they stayed home and did not work.

The amount was paid gross to employers, inclusive of Employers National Insurance & Pension Contributions, but was taxable when redistributed to employees. The employer was by law required to pay out the full amount of the furlough claim to the relevant employees.

As the furlough payment is paid to employees in the same way that they would receive their salary, tax, national insurance & pension contributions will be deducted and shown on the employees payslip - therefore the employee should not have to show furlough payments on a tax return.

From August 2020 employees were able to go back to work on “flexi-furlough” with employers being able to claim furlough for any employee who had previously been furloughed, for the days that they were not able to work - i.e on a part time basis.  If the employee was not a part of the furlough scheme before August, they could not be a part of the flexi-furlough scheme.

Also from August employers were required to pay the employees and employers national insurance and pension contributions as a contribution towards the furlough payments.  Employers MUST pay for the time that the employee is in work.

From September 2020 employers were required to make a 10% contribution towards the furlough scheme

From October 2020 employers were required to make a 20% contribution towards furlough.

Although the furlough was originally due to end on the 31st October 2020, the announcement of a second lockdown on the 5th November 2020,  and then again from January 2021 meant that the furlough scheme was extended until at least April 2021.

The extension of the furlough scheme would be for the same amount as the initial rollout - 80% of the employees salary, up to a cap of £2500 p/m, however the employers would still have to pay the employers national insurance and pension contributions.

For employers who have claimed furlough payments, when entering into your chosen record keeping method it can be posted as income into net wages. 

Furlough income is not currently applicable for MTD.

The government had promised that for every employee furloughed, that you continue to employ the 31st Jan 2021, you will be able to claim a £1000 cash bonus, however following the extension of the furlough scheme, this was withdrawn.