When is it time to go 'on furlough'?

This article is part of
Guide to advising the self-employed amid Covid-19

When is it time to go 'on furlough'?

The government’s Coronavirus Job Retention Scheme (CJRS allows self-employed business owners the opportunity to take temporary leave, paid by the government, because of the coronavirus outbreak.

Under the scheme, self-employed Ifa directors can declare there is insufficient work for them to remain working. 

Doing so allows them to qualify for 80 per cent of their regular wage to be paid through the government’s CJRS, up to a monthly cap of £2,500.

What to consider

However, those claiming cash under the CJRS are not permitted to work.

Doing so, could result in prosecution for fraud at a later date, according to the government guidelines.

Jazz Jhumat, a financial adviser at JJFS, says intermediaries will need to think very carefully before choosing this route, as doing so prevents you from working for the entire period for which you are furloughed. This, she says, may have dramatic consequences for your client book.

“The moment you furlough yourself you are effectively saying you are not working,” she says. “For advisers, that can present a massive danger. You cannot work at all. This includes submitting new cases or reviewing existing clients.”

Ms Jhumat highlights that there is another catch to the CJRS scheme for self-employed advisers who operate through a limited company structure, and receive the majority of their pay through a dividend, rather than a monthly salary. 

The JRS scheme only recognises the salaried element of your take home pay, which means 80 per cent of £1,041.66 per month, for those with a salary aligned with the annual personal tax allowance.

However, for those who are salaried at a level where the 80 per cent payment affords a manageable standard of living, it may be an option, she says.

“You have got to make a decision based on your current situation,” she says. “If you can’t continue to maintain your wage, furlough is absolutely the right thing to do.”

Making the call

Claire Woolf, a lawyer at Sparqa Legal, says that advisers unsure as to whether furloughing will make sense for them, should look at the UK government’s ‘support finder’ tool which outlines the pros and cons of a range of support packages.

However, she stresses that self-employed advisers with no employees are likely to be more drastically affected by furloughing than those who run small businesses.

“As a one man band, they will therefore almost certainly have to cease trading for a temporary period, which would include contacting clients/doing any business development work,” Ms Woolf notes. 

“They need to query whether it’s worth it based on what they are able to claim.”

Ms Jhumat adds that advisers should also consult their networks if they are unsure of the implications of opting for the furlough scheme.