- Update to the Job Retention Scheme28/03/20
The Government released updated guidance yesterday evening (26th March) in relation to the Job Retention Scheme and “furloughing” employees. Here we explain how this will impact you and your employees in more detail together with detail on those unanswered questions which we have all been asking about.
If you wish to see our previous FAQs on this matter, please click the link below:
FAQ’s on Job Retention Scheme
Has there been further guidance on who can claim under the scheme?
We previously mentioned that any employer in the UK can claim:
- UK Businesses (any size)
- recruitment agents (agency workers paid through PAYE) and
- public authorities
However, those claiming must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Has there been any additional guidance around which employees will qualify?
- Furloughed employees must have been on your PAYE payroll on 28th February 2020
- Any contract type qualifies, including full time, part time, agency contracts and those on flexible or zero contract hours
What can you claim back?
Employers can only claim for employees on the payroll as at 28 February 2020 and claim back the lower of:
- 80% of usual monthly wage costs or
- £2,500 per employee
- Associated employer NIC costs and
- Minimum auto enrolment employer pension contributions
- Employers must pay the employee at least the amount of the HMRC grant but can choose to top up salaries if they wish
- Fees, commission and bonuses cannot be included in the calculation
Is the reimbursement from HMRC a grant or a loan from the Government?
- The amount received will be a grant and does not need to be paid back to HMRC
- The amount received will be treated as income in your annual accounts
On what basis is the 80% salary calculated for those on a fixed salary?
The 80% calculation is based on the employee’s gross salary as at 28 February 2020
How is the 80% calculated for those with irregular earnings?
- If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, the employer can claim for the higher of either:
- The same month’s earning from the previous year
- Average monthly earnings from the 2019-20 tax year
- If the employee has been employed for less than a year, the employer can claim for an average of their monthly earnings since they started work
- If the employee started employment in February 2020, their earnings so far should be pro-rated
I am an owner managed business, drawing NIC minimum salary plus dividends, can I claim through the scheme?
- Yes, but your salary will be based on the amount paid under PAYE on 28 February 2020 and
- You will need to meet the criteria to be able to join the scheme (i.e. you must not do any work in relation to servicing the business or generating revenue)
What happens if I have already made redundancies?
- Any employees made redundant since 28 February 2020 can qualify as long as they are re-engaged by their former employer
If I have placed employees on unpaid leave can these qualify?
- No, employees on unpaid leave cannot be furloughed unless that unpaid leave started after 28 February
My employee has more than one job, how do I treat these?
Each employment will be treated separately for these purposes and so the grant will apply to each employer individually
Can employees on reduced hours qualify?
- The employer cannot access the scheme for any employees still working
- It will be necessary to furlough these employees and for them to not work in order to obtain access to the scheme
Is it possible to reduce the employee’s salary without notification?
- No, as an employer you will need to agree with the employee the reduced amount
- We would recommend that you seek legal or HR specialist advice in relation to this
When my employees are furloughed is there a need to put this in writing?
- Yes absolutely, you must confirm the employee’s new status in writing
- This is an eligibility requirement for accessing the scheme and has been stated specifically in HMRC guidance
- A record must be kept of this correspondence
Can I rotate furlough leave between my staff?
- The guidance states that employees must be furloughed for a minimum of three weeks
- It would appear that it is possible to rotate furlough leave between staff subject to the minimum three week period
How does an employer make a claim to HMRC for reimbursement?
To claim, the employer will need to submit:
- The employer’s ePAYE reference number
- The number of employees being furloughed
- The claim period (start and end date)
- The amount claimed
- The employer’s bank account number and sort code (UK bank account)
- A contact phone number
- Employers can only submit one claim at least every three weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated to 1 March 2020 if applicable
- Reimbursement is made via BACS payment
My business is in administration who makes the claim?
- It will be the administrator that will be able to access the Job Retention Scheme
How can LB Group assist me with the Job Retention Scheme?
- We can provide generic advice to your business and staff
- We are not employment law specialists so anything in relation to contract law or employment law will need to be discussed with a specialist. We can recommend lawyers and HR specialists in this area
- We can assist you with any calculations needed
- Once the portal is up and running we can assist you with your applications to secure the grants for your business and agree a fee quote for doing this based on the level of support you need
- Self Employment Income Support Scheme27/03/20
Amidst continual requests from the self employed sector, the government have tonight announced how they plan to support this vast sector of our UK work force.
A Guide to the Coronavirus Self Employment Income Support Scheme
- The Self Employed will receive a taxable grant worth 80% of that persons average monthly profit, for the last three years. This therefore levels the playing field with the Job Retention Scheme for employees
- It is a maximum of £2,500 per month, initially it will be available for a three month period but it may be extended, if the government feel it is required
- It will be paid directly to your bank account, in one instalment
- You CANNOT apply for this scheme yet, and notably, you will be contacted by HMRC if you are eligible
- The phrase the Chancellor used to describe this support, was that it is a “taxable grant”. We believe this means it will form part of the self employed individuals taxable income for 2020-21, but will clarify when the full details become clear
- HMRC will use the average trading profits from tax returns in 2016-17, 2017-18 and 2018-19 to determine the size of the grant
- Access to funds expected by June, although no promises made
- This scheme also applies to members of partnerships
- Further information and details of the scheme will be shared shortly by HMRC
Who can apply?
Either one of these statements will be correct:
- You have trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
- You have average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period
- You have submitted your Income Tax Self Assessment tax return for the tax year 2018-19 and traded in the tax year 2019-20
- You are still trading when you apply (or would be except for COVID-19)
- You intend to continue to trade in the tax year 2020-21
- You have lost trading/partnership trading profits due to COVID-19
Who does not qualify?
Those who pay themselves a salary and dividends through their own limited company are not covered by the scheme but will be covered for their PAYE salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.
If you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, you MUST do this by 23 April 2020 (please note that HMRC will use data on 2018-19 returns already submitted to identify those eligible and will risk assess any late returns filed before the 23 April 2020 deadline in the usual way).
If you claim tax credits you’ll need to include the grant in your claim as income.
- Job Retention Scheme25/03/20
The Chancellor, Rishi Sunak MP announced the Coronavirus Job Retention Scheme on 20 March. Under the scheme, any employer can obtain a grant to cover 80% of the salary of employees who would otherwise have been laid off, up to a cap of £2,500 a month.
The scheme will be backdated to 1 March 2020 and open initially for three months unless extended.
Here is a detailed list of frequently asked questions and answers to help guide you through what this means for your business. At present there are a lot of unanswered questions, so we eagerly await further information as to how this works.
A Guide to the Coronavirus Job Retention Scheme
How does my business qualify for the scheme?
Any employer in the Country will qualify for the scheme, whether small, large, charitable or non-profit.
What type of employees are covered under the scheme?
The scheme will apply to all those on PAYE including zero contract staff.
What do I need to do as an employer?
To obtain the grants, you as the employer will need to:
- Designate affected employees as “furloughed” and notify them of the change.
- Consider whether you need to consult with representatives or trade unions.
- Agree the changes with your employees
- Confirm the employee’s new status in writing.
- Submit information to HMRC about your furloughed employees and their earnings through a new online portal, which is yet to be established.
What does “Furlough” (pronounced FUR-LOH) or “Furloughed” mean?
The employee must remain on the payroll rather than dismissed for redundancy. It is not clear whether anything can be done for those already dismissed as redundant or given notice of redundancy. We are awaiting further guidance on this.
Can my furloughed employee continue to work?
- No. The furloughed individual remains as an employee but is provided with no work and must not work.
What happens if my employees are on Statutory Sick Pay (SSP) who we have designated to Furlough?
- SSP comes first and then furlough follows subject to the conditions and processes mentioned above.
Does it apply to employees who are taking leave due to school closures?
- Probably not, if work is available for them to do. We will check this as further details of the scheme are released.
Can my employees request that they are placed on furlough leave?
- Yes, but you, as the employer, do not have to agree.
- It is the employer’s decision whether to place employees on furlough leave or make them redundant.
How much will I need to pay my furloughed employees?
- You can pay 80% of salary, subject to agreement with your employee, with a reimbursement from HMRC up to the cap and
- You can choose to top up their salary to 100%, if you wish.
Do I need to be aware of any issues in making an employee furloughed?
- Care is needed over existing employment law, and you will need to take legal advice.
- If an employee is on a fixed salary you will not be able to simply inform the employee that they are now furloughed and only entitled to 80% of their salary.
- As an employer you will need to either top up their salary or negotiate a reduction with them. It is expected that most employees will accept a reduction on the basis that the alternative is possible redundancy.
What about employees without a fixed salary?
- There is no guidance on how this will work at present. Likewise, for staff who have no guaranteed earnings (casual and zero contract hours) or those that have no contractual right to pay in the event of a downturn. We await further guidance on this.
What does the £2,500 cover?
- The guidance states the employers will be reimbursed 80% of furloughed workers wage costs up to a cap of £2,500. It is unclear whether the reimbursement covers anything other than basic salary. However, “all employment costs” would suggest additional costs such as pension contributions or other benefits.
- It is unclear at this stage whether the £2,500 is gross or net of tax and NIC. We wait for further confirmation on this point from HMRC.
How will my employees receive their money?
- They will receive wages through your normal payroll arrangements, subject to the usual deductions. You, as their employer, will then be reimbursed via HMRC.
How quickly will grants be available?
- Grants should be available “within weeks” and the scheme will be up and running by the end of April. HMRC has to design the portal.
How can we afford to pay our people in the meantime?
- The government has made clear that the intention of the scheme is to save jobs and ensure employees retain an income.
- Zero interest loans are available through the Business Interruption Loan Scheme. VAT has also been deferred and grants are available for certain sectors, which should help with cashflow.
How can LB Group assist me with the Job Retention Scheme?
- We can provide generic advice on the information we know so far but until the detail of the scheme is released there are still so many unanswered questions.
- We are not employment law specialists so anything in relation to contract law or employment law will need to be discussed with a specialist. We can recommend lawyers and HR specialists in this area.
- Once the portal is up and running we can assist you with your applications to secure the grants for your business and agree a fee quote for doing this based on the level of support you need.
- Commercial Tenant Protection23/03/20
The government has announced that commercial tenants who cannot pay their rent because of coronavirus will be protected from eviction.
Measures, included in the emergency Coronavirus Bill currently going through Parliament, will mean no business will be forced out of their premises if they miss a payment in the next three months.
Further information can be found on the government’s website.
- Business Interruption Loan Scheme23/03/20
The link to the British Business Bank website below provides full details of the Business INterruption Loan Scheme and we have highlighted here the key features.
We should not forget the existing sources of funding that remain available to us and the strong relationships we have with the providers, including invoice finance in its many forms, asset finance/ re-finance, unsecured (PG backed) business loans.
Click here to see further details.
CBILS: Key Features
- Support for Workers20/03/20
To protect jobs
The key points to observe from the announcements today are:
- The Coronavirus Job Retention Scheme, in place by 01/03/2020
- All employers will be eligible
- Employers are able to contact HMRC directly for a grant
- Grants are available at 80% of employees salary for a retained worker up to a limit of £2,500 per month
- The grant will be back dated to 01/03/2020
- Covers anyone under PAYE scheme
- In place for at least 3 months initially, although this may be extended
- The aim is to have it operating by April, further clarification is however required.
- Strengthening the Safety Network20/03/20
- Increase of Universal Credit for next 12 months by £1k per annum
- Working tax credits increased by £1k per annum
- Self employed able to access in full Universal Credit
- Next Self Assessment payment deferred until January ‘21
- 3 month mortgage deferral
- Housing credits and allowances to cover 30% of commercial rent
- VAT Payments17/03/20
- Deferring of next quarters VAT payment to the end of June – to be repaid by the end of the financial year
- Grants and reliefs for SMEs17/03/20
Following an update today with further pledges of funds to support businesses of all sizes, as well as some more sector specific support, we wanted to highlight a few of todays announcements that may provide an additional buffer for your business. Rishi Sunak has promised to:
- Increase the grant to £10k from £3k for businesses who qualify for Small Business Rates Relief (businesses trading from properties with rateable value £15k)
- Provide additional support to leisure and retail businesses. They will not be required to pay rates for 20/21 regardless of rateable value of the property
- Give cash grants for retail and leisure businesses of up to £25k where the business has a rateable value below £51k
A further notable positive, was the 3 month mortgage holiday which has been promised, which will hopefully relieve some of your concerns regarding your staffs situation as well as your own.
- IR35 postponement17/03/20
IR35 is being postponed for a year as part of a broad package of measures the Treasury has announced to protect the economy from the coronavirus outbreak.
- Time to pay service16/03/20
TTP – Time to pay service to allow businesses and the self employed to defer tax payments The helpline allows any business or self-employed individual who is concerned about paying their tax due to coronavirus to get practical help and advice. Up to 2,000 experienced HMRC call handlers have been assigned to support businesses and individuals when needed.