Contractors’ Questions: Who furloughs me if I resigned and joined an umbrella but am a limited company?

Contractor’s Question: I resigned from my job on March 26th 2020 to go into contracting. My resignation letter was submitted 4 weeks prior to that date.

Initially my role was determined to be inside IR35 so I joined an umbrella company.
But when the IR35 rules were postponed, I was then told I could work through my limited company. Now however, as we have been on lockdown due to coronavirus, my prospective client has said my start date has to be pushed further down by a couple of weeks.

As I don't have any PAYE salary records from the limited company, and given I left my previous employment on March 26th, it looks like I can't furlough myself as an employee of the limited company -- or be furloughed by my previous employer as I resigned. What then are my options?

Expert’s Answer: Your options here are limited and there are a few different reasons as to why this is so.

In the first instance, you state that your assignment has been delayed by a couple of weeks. The minimum period for which an employee can be placed into furlough is three weeks, so it is possible that a furlough might not be appropriate in your situation because it would need to extend beyond the revised start date of your new assignment.

The more pertinent question, however, is whether you can be placed into furlough at all. As you explain it, you are not on the PAYE of your own limited company, so that would appear to rule out furlough via your own PSC entity.

In addition, it’s also unlikely that you will be able to claim furlough via the umbrella company that you registered with. There are currently several practical problems as to how the Coronavirus Job Retention Scheme can be applied to umbrella company employees, and these are currently being worked through with government.

But in addition to this, you do not make clear the date on which you registered with the umbrella company. If this registration took place after February 28th, then you will not be eligible to be placed into furlough by the umbrella company, even if they are able to offer access to the scheme for other employees.

In my opinion, the only option that may be open to you is for you to approach your previous employer and ask them to re-employ you so that you can be placed into furlough by them. But please bear in mind that the furlough must last a minimum of three weeks so this may cause problems with your new start date, as previously mentioned.

The expert was Stuart Marquis, a manager of umbrella company Liberty Bishop.