The government has introduced a number of measures to help businesses through the pandemic, with the most popular being the Coronavirus Job Retention scheme (CJRS) that enabled employers to furlough members of their team that they would have otherwise needed to let go. The CJRS ensured that furloughed staff received a minimum of 80% of their usual wages (capped at £2500 per month) whilst their labour wasn’t required. As many of these measures draw to a close in the coming months, it is vitally important that any financial support received is properly accounted for.
Coronavirus Job Retention Scheme
More than 8.9 million employees were placed on furlough leave during the lockdown months, making up more than a quarter of the UK workforce. Now in the recovery phase, this number has reached 9.6million jobs and the total amount claimed somewhere in the region of £35billion. CJRS payments also helped employers recoup some of the National Insurance and pension contribution costs that they would usually be responsible for.
How To Account For CJRS Grants In Your Bookkeeping
When it comes to entering furlough receipts into the books, usual UK GAAP (Generally Accepted Accounting Practices in the UK) rules and provisions apply, meaning it needs to be present in the profit and loss for the same period as the costs were incurred under other amounts received. Wage expenses for the company need to be accounted for in the normal way with the furlough money being entered as a government grant.
The regulations surrounding the reporting of grants are covered in:
- Section 24 of FRS 102, the Financial Reporting Standard for the United Kingdom and Republic of Ireland for entities reporting under UK GAAP, or
- IAS 20, Government Grants for entities reporting under IFRS.
Under IAS 20 it is also permissible to net the income off against other related expenses, although this is not possible following UK GAAP requirements. If you need further assistance understanding how to properly account for these grants, the experts at Neil Smith Accountancy can help; get in touch for a free consultation.
Other Coronavirus-Related Government Grants
Employers that have paid out Statutory Sick Pay in relation to Coronavirus may be able to take advantage of the Coronavirus Statutory Sick Pay Rebate Scheme. Payments made under this scheme are also government grants and so need to be accounted for in the same way as CJRS.
The Chancellor Rishi Sunak has also unveiled an incentive intended to encourage employers to retain their team members into the next year. The government’s Job Retention Bonus, announced during the Summer Economic Update, enables employers to apply for a bonus of £1000 per eligible worker; this will also fall under the same rules as the other government grants.
Whilst businesses are undoubtedly preoccupied with becoming Covid-secure and finding ways to manage the new limitations and regulations that are now in place, ensuring paperwork is present and correct will save time and money down the line. Understanding the requirements now will make sure covid-19 furlough scheme accounting is as straightforward and stress-free as possible.
Neil Smith Accountancy has been helping small businesses in Essex towards success for over ten years; contact the team today for a free consultation, and find out how your business can benefit.