Notes on measures announced on 20 March 2020, 26 March 2020, 4 April 2020, 9 April 2020, 14 April 2020 and 15 April 2020 based on available information taken from HMRC website, Institute of Taxation website and Government advice
Updated changes from our main document sent out on 2 April 2020
Coronavirus Job Retention Scheme
- HMRC have announced that they intend to launch the online portal on 20 April 2020. Agents formally authorised to act on behalf of their client’s will be able to make the claims on the employer’s behalf. File only agents will not be able to make claims on behalf of their client’s.
- The employer must have created or started a PAYE scheme on or before 19 March 2020.
- The employer must have enrolled for PAYE online.
- You can only claim under the scheme for furloughed employees that were on your PAYE payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before 19 March 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must be made on or before 19 March 2020.
- The payment per employee (before the 20% deduction) is based on the employee’s salary/wage (where broadly they receive the same standard salary/wage per month) as in their last pay period prior to 19 March 2020. Where the employee’s pay varies for example because of regular overtime pay for example, then the payment (before the 20% deduction) is based on the higher of the amount earned in the same month last year (April 2019 if the pay relates to April 2020 for example) or an average of their monthly earnings based on the tax year 2019/2020. The maximum claim is (3,125 x 80%) therefore £2,500 (gross) plus related employers national insurance cost and the minimum auto enrolment employers contributions per employee.
- If the employer has based the last calculation on the previous guidance i.e. the pay as at 28 February 2020, then this can be used for the first claim if preferred (where the pay is different). This will be useful where the payments have already been made for March 2020 and April 2020 (up to now).
- Employees continuously employed can be furloughed from the date that they stopped work, not on the date that the decision to furlough them was made or the date that they agreed to be furloughed.
- If employee(s) were on the payroll as at 28 February 2020 (RTI submission made before 1 March 2020) and between 28 February 2020 and 19 March 2020 were laid off/made redundant then they can be re-employed and put back on the payroll and be furloughed. You can also re- employ such employees after 19 March 2020 and put them on furlough, so long as they were on an RTI submission before 1 March 2020. It appears that the furlough will then commence from the date of rehiring.
- Where the employer put the employees on unpaid leave after 28 February 2020 and are therefore still employed by them, then they can furlough them as from 1 March 2020, if the unpaid leave started then, where they were on the payroll as at 28 February 2020 (and an RTI submission was made before 1 March 2020).
- If an employee is off sick but for business reasons only the employer wishes to furlough these employees then they can do so with the employee’s agreement. If enhanced sick pay is contractual within the employee’s contract of employment then you will need to ensure that the employee formally agrees to the furlough and the amount of furlough payment (if the contractual sick pay is reduced as a result of the furlough). The employee will then be classed as a furloughed employee and the employer must cease paying statutory sick pay. The furloughed employee must be paid at least the statutory sick pay rate whilst sick and furloughed, which may be more than their furloughed pay.
- The furloughed employees can work for another employer whilst on furlough if their contract of employment does not prohibit this. This would include restrictive covenant clauses. The employee must be able to return to work if their current employer decides to bring them back into the workforce or to undertake necessary training.
- If you are furloughing 20 or more members of staff then legal advice is highly recommended to ensure that all furloughs are made fairly and within the employment law rules.
- If staff are shielding under government guidance or have caring responsibilities (e.g. childcare issues caused by the lockdown) then they can be furloughed.
- If the contract of employment requires staff to take off statutory bank holidays for example Easter whilst they are on furlough, then the 80% furlough payment must be topped up to their “regular wage” for those bank holiday day(s). It is not yet clear whether an employee can be furloughed and take off their other holiday entitlement whilst on furlough. I.e non statutory holidays and still remain furloughed under the government scheme. We await further guidance regarding this.
- Non-monetary items and benefits in kind are not included within the definition of “regular wage” e.g. car benefit, private health insurance. Salary sacrifices are not included as part of the regular wage, however, HMRC have confirmed that Covid 19 will be accepted as a life event change for the purposes of altering the salary sacrifice. If altering a salary sacrifice because of Covid 19 please call our office for advice.
- Directors of companies can be furloughed, including sole directors provided that they carry out only statutory duties for example filing annual returns and accounts. Any furloughing (including for sole directors) must be done by means of a formal board resolution and recorded as such with a written notification sent to the director.
- The furlough wages to employees must be paid in monetary form only.
- All furloughing records should be kept for five years.
- HMRC ask that employers and employees do not contact them regarding the above scheme unless absolutely necessary.
ii) Details for employers of the scheme
- The employer needs to submit to HMRC – their PAYE reference number, the number of employees who have been furloughed, the national Insurance numbers of the employees furloughed, the names of the employees furloughed, payroll/works number of the employees furloughed (optional), the self assessment unique tax reference number of the business/corporation tax unique tax reference or company registration number, the claim period (start and end date), the amount claimed (min length of furlough 3 weeks), bank account number and sort code, contact name and telephone number. These details we understand will be audited by HMRC. If the employer has fewer than 100 furloughed staff then when using the online portal you will be asked to input individually each employees name, national insurance number, claim period and claim amount and payroll/employee number (optional). If the employer has 100 or more furloughed employees then they will be asked to upload the file. File types .xls, .xlsx, .csv and .ods will be accepted by HMRC.
- All claims will be made online.
- These details will be checked by HMRC and if the employer is eligible the grant payments will be made directly into the company’s bank account.
- The online portal is expected to open on 20 April 2020 with the first payments expected by the end of the month of April 2020.
- Please be aware of Fraudsters in this period and beyond. You can only access this scheme via GOV.UK.
New Measures announced on 26 March 2020 for the self employed
- Each self employed individual will receive a taxable grant based on 80% of the averaged monthly profits for 2016/2017, 2017/2018 and 2018/2019 if all tax returns have been filed, or if they started trading between 06/04/2017 and 05/04/2018 or have not filed the returns for all three years for any reason, the average will be based on the tax year 2017/2018 and 2018/2019 average or 2018/2019 on its own. The maximum grant will be £2,500 per month, for three months from 01/03/2020 to 31/05/2020, but will be extended if necessary.
- For the purposes of the “more than ½ of the self employed income rule”, if more than half of the individual’s income is derived from self-employment for either 2018/2019 or the average of the tax years 2016/2017, 2017/2018 and 2018/2019, then they will qualify subject to the £50,000 rule.
- HMRC have stated in their guidance that a member of a partnership can make a claim under the above scheme and that it is their trading profits and their total income which should be looked at in working out if they meet the eligibility criteria (for the test for the £50,000). This in my opinion allows individual partners to make a claim based on their share of the partnership profits (including any other trading profits from different trades that they may have) if they are in total below £50,001.
- Please refer to the attached schedule 1 of examples of how much grant that you may receive under the scheme.
- HMRC will identify all relevant eligible self employed persons and aim to contact all relevant individuals by mid May 2020 and invite them to apply online for the scheme. The three month payment will be made in one instalment. The date of payment is expected to be sometime in early June 2020. As and when further announcements are made we will update you.
- Any income received in relation to the above scheme will be treated as income for the purposes of trading income, universal credit and tax credits.
- We understand that any universal credit received before the grant is received will not be affected, but any claim made/continuing claims after receipt of the grant could affect the amount of universal credit the individual will/ is receive/ing. We suggest that they contact the universal credit department as soon as they receive the grant if they are claiming Universal Credit. We will confirm the above when we receive confirmation from HMRC.
- Any 2018/2019 Self Assessment Tax Returns amended after 26 March 2020 will be disregarded for the purposes of the grant.
HMRC Support of businesses through VAT and Income Tax Deferral etc.
- The default position regarding the government grants for the small business grant funding and the retail discount scheme/expanded discount scheme (essentially where you pay non domestic rates and the rateable value of the property is between £0 and £50,000) is that they will be taxable.
- The expanded retail discount scheme includes more businesses including second hand car lots and letting agents.
- The Coronavirus Business Interruption Loan is now available for companies whose turnover is no more than £500M per annum. The banks cannot request personal guarantees for borrowings below £250,000.