Furlough Regarded as Income
Discussion
Makes absolute sense.
The Furlough was to subsidise your wages costs in order to prevent you making staff redundant. Consequently, your wages bill is much lower than it otherwise would have been.
You will pay tax on the Furlough amount received - so roughly 20% of the furlough amount is being collected back through your tax bill. If your business is a limited company, then the extra tax will be at 19%
The Furlough was to subsidise your wages costs in order to prevent you making staff redundant. Consequently, your wages bill is much lower than it otherwise would have been.
You will pay tax on the Furlough amount received - so roughly 20% of the furlough amount is being collected back through your tax bill. If your business is a limited company, then the extra tax will be at 19%
Think about the logic.
No Covid - wages cost £100,000.
With Furlough, the government subsidises your wage bill to the tune of £80,000 (roughly) , so your actual wages bill is only £20,000.
Government claws back some of the subsidy by taxing the £80,000 at 19% i.e. £15,200. So, your total wages bill for the year was £35,200 (£20,000 actual wages cost plus the tax clawback of £15,200 ) rather than £100,000. I'd say you should be quite grateful for the help the government gave you..
No Covid - wages cost £100,000.
With Furlough, the government subsidises your wage bill to the tune of £80,000 (roughly) , so your actual wages bill is only £20,000.
Government claws back some of the subsidy by taxing the £80,000 at 19% i.e. £15,200. So, your total wages bill for the year was £35,200 (£20,000 actual wages cost plus the tax clawback of £15,200 ) rather than £100,000. I'd say you should be quite grateful for the help the government gave you..
hyphen said:
But was this told at point of agreement? As otherwise it's a change of terms after the contract was made.
As tax should be taken at source for PAYE, Was it not taken?
To ask the employee to pay back anything they were not aware of would be unacceptable.
The employee isnt being asked to pay anything As tax should be taken at source for PAYE, Was it not taken?
To ask the employee to pay back anything they were not aware of would be unacceptable.
This is Corp Tax for the employer. It is a bit rubbish to be fair.
hyphen said:
But was this told at point of agreement? As otherwise it's a change of terms after the contract was made.
As tax should be taken at source for PAYE, Was it not taken?
To ask the employee to pay back anything they were not aware of would be unacceptable.
Surely there is no tax to be paid as it's all gone out as wages?As tax should be taken at source for PAYE, Was it not taken?
To ask the employee to pay back anything they were not aware of would be unacceptable.
Having thought about this a little more I think you are possibly a small business who benefited from one of the grants rather than the furlough scheme for PAYE workers - examples here
https://www.gov.uk/guidance/reporting-coronavirus-...
These have always been a taxable income to business but I have come across many small businesses now faced with a tax bill as they were not aware tax would be due on the income. It is a bit a rubbish you were not made aware but you've still had some free money but it is probably a little late in the day to find out as I guess it has already been spent.
https://www.gov.uk/guidance/reporting-coronavirus-...
These have always been a taxable income to business but I have come across many small businesses now faced with a tax bill as they were not aware tax would be due on the income. It is a bit a rubbish you were not made aware but you've still had some free money but it is probably a little late in the day to find out as I guess it has already been spent.
I’m with the school of thought it should be no problem recording furlough income , as your costs should be higher than the furlough amount you were reimbursed for…
Therefore The furlough income isn’t what is making you have taxable profits. That is probably other income that happened in the same accounting year.
Therefore The furlough income isn’t what is making you have taxable profits. That is probably other income that happened in the same accounting year.
Ziplobb said:
_Mja_ said:
Are you talking about furlough pay for employees or the coronavirus recovery grants for small businesses?
I am struggling to understand how you are faced with a corporation tax bill for furlough income if you are operating a PAYE scheme.
likewiseI am struggling to understand how you are faced with a corporation tax bill for furlough income if you are operating a PAYE scheme.
This
please explain OP ?
As with most people our income had dropped as had our overheads. Just wasn't expecting furlough to be handled like this. Still pay up and shut up is our only option
_Mja_ said:
Having thought about this a little more I think you are possibly a small business who benefited from one of the grants rather than the furlough scheme for PAYE workers - examples here
https://www.gov.uk/guidance/reporting-coronavirus-...
These have always been a taxable income to business but I have come across many small businesses now faced with a tax bill as they were not aware tax would be due on the income. It is a bit a rubbish you were not made aware but you've still had some free money but it is probably a little late in the day to find out as I guess it has already been spent.
If they tax you on say a £20k Grant will they rebate the tax as it is paid back?https://www.gov.uk/guidance/reporting-coronavirus-...
These have always been a taxable income to business but I have come across many small businesses now faced with a tax bill as they were not aware tax would be due on the income. It is a bit a rubbish you were not made aware but you've still had some free money but it is probably a little late in the day to find out as I guess it has already been spent.
TX.
Phil Dicky said:
Quoting the accountant, 'furlough is shown as other income'.
As with most people our income had dropped as had our overheads. Just wasn't expecting furlough to be handled like this. Still pay up and shut up is our only option
It is shown as other income because that’s what it is, but you won’t actually pay any tax on it as you will have paid an an amount equal or more to your employees through payroll.As with most people our income had dropped as had our overheads. Just wasn't expecting furlough to be handled like this. Still pay up and shut up is our only option
The various other Grants will be taxable as per normal income.
hyphen said:
But was this told at point of agreement? As otherwise it's a change of terms after the contract was made.
As tax should be taken at source for PAYE, Was it not taken?
To ask the employee to pay back anything they were not aware of would be unacceptable.
The normal tax and NI was due in most cases on the full salary amounts. Employees largely received their normal net salaries except in the cases where employers chose to restrict the gross salaries to 80% of the normal salary, which they were allowed to do.As tax should be taken at source for PAYE, Was it not taken?
To ask the employee to pay back anything they were not aware of would be unacceptable.
Clarification was sought very early on regarding the accounting and tax treatment. All my clients were made aware within a week or so of the launch of the scheme.
Phil Dicky said:
Quoting the accountant, 'furlough is shown as other income'.
As with most people our income had dropped as had our overheads. Just wasn't expecting furlough to be handled like this. Still pay up and shut up is our only option
You don't pay corporation tax in income, you pay it on profit.As with most people our income had dropped as had our overheads. Just wasn't expecting furlough to be handled like this. Still pay up and shut up is our only option
As others have already explained the income will be offset by the expense (salary) so no corporation tax to pay.
Gassing Station | Business | Top of Page | What's New | My Stuff