Expert view: Furlough scheme revisions vital for businesses

With several Covid-19 business relief initiatives due to begin winding down this week (from July 1), including the furlough scheme, Adam Parton, Corporate and Payroll Partner at MHA, calls for greater support from the UK government to ensure small businesses remain financially stable and bridge the gap to lockdown restriction easing on July 19.

He said: “With key government support schemes, such as the Coronavirus Job Retention Scheme (better known as the furlough scheme), due to begin winding down from July 1, UK businesses need a comprehensive support package that covers all sectors, especially as we all eagerly await for the anticipated planned full easing of restrictions on July 19.

“First of all, this support should include keeping the critical furlough scheme in place for a longer period as well as revaluating the time frame for settlement of deferred VAT payments, and extending the ‘holiday’ period from making repayments on bounce back loans.

“If nothing changes, from July 1 UK businesses will have to contribute towards the cost of their furloughed employees’ wages, starting from 10%. This means that the Job Retention Scheme claims that can be made by businesses will reduce to 70% (in addition to the current cost of employers NI/ pension) from the current 80%. In light of the delay of ‘Freedom Day’ to July 19, the government should postpone these changes to at least July 31 and stick with paying 80% of furlough employee’s salary, without asking for employer contributions.

"Granting an extension will give businesses an encouraging sign that the government understands the challenges they face and is continuing to support them. Failing to do so would be another hard hit for businesses, especially for those whose opening has been impeded by the government’s delay of abolishing restrictions as they have been the most disadvantaged.

“While the furlough scheme in particular should be extended, concerns remain over potentially fraudulent use of the initiative, with HMRC yesterday (June 28) confirming over 13,000 cases are currently being investigated. There’s no easy way to prevent possible miss-use of the scheme, aside from having a more rigorous policing of the businesses that are taking this support.

"Extra checks could include looking at whether businesses are amassing debt that could never be repaid, whether staff that should have returned to work are remaining on furlough or whether their roles are already redundant. In the coming years business owners and managers should be conscious that their decisions could come under scrutiny, and be aware that bad ones may have consequences.”