In response to the global COVID19 pandemic the UK government has introduced a number of support measures for businesses. In a lot of cases these support measures will be vital for businesses to survive and as they say at the moment “cash is king”!
Once the dust has settled and the various support measures have been received and utilised, there will need to be clear consideration of how these are accounted for.
Coronavirus Job Retention Scheme (Furlough Scheme)
Essentially this scheme has allowed businesses to reclaim a proportion of employee wage costs and associated National Insurance (NI) and pension contributions. The scheme has been operational for a number of weeks now and many businesses have already received their first funds from the UK government as a result.
Whilst it might at first appear tempting to offset the furlough monies received against associated wages and salaries costs, companies applying UK GAAP are not permitted to offset income and expenditure. In addition there are also provisions within UK GAAP for accounting for government grants.
As a result, wages and salary expenses, including associated NI and pension, should be accounted for as normal expenditure through profit and loss.
The monies received through the furlough claim process should be considered to be a government grant receivable and accounted for as other/grant income on an accruals basis alongside the associated costs.
Monies due from the furlough scheme should be accounted for on an accruals basis; i.e. matching with the expense incurred, as opposed to accounting for these based on the date of receipt of the funds.
If you have any questions about this or any other of the government support measures, and wish to seek assistance and support, please get in touch with your usual contact at Rickard Luckin or contact us at [email protected] for further information.