Posted by James Pearson on 14 May 2020
Coronavirus Job Retention Scheme
Further details have been announced about the new Coronavirus Job Retention Scheme, but the online service through which claims will be made is not yet available.
The Coronavirus Job Retention Scheme is one of the key measures to support employers during the COVID-19 pandemic. The scheme is open to all UK employers who had created and started a PAYE scheme by 28 February 2020 and will run until October 2020.
The scheme allows employers to claim for 80% of furloughed employees’ usual monthly wage costs up to £2,500 a month. In addition, the government will cover the associated Employers National Insurance contributions and the associated minimum automatic enrolment employer pension contribution.
Eligibility
Employers can claim for employees who were on their PAYE payroll on or before 19 March 2020 and who were notified to HMRC on an RTI submission on or before 19 March 2020, including:
- Full-time employees
- Part-time employees
- Agency contract employees
- Flexible or zero-hour contract employees
- Directors and office holders
While the scheme is targeted at furloughed employees, it can also cover employees who were made redundant after 28 February 2020 but before 19 March 2020, and have since been rehired by their employer (and subsequently furloughed), as long as they were on payroll prior to 28 February 2020.
If an employee has more than one employer, each job is treated separately, with the cap applying to each employer individually.
Furloughed Employees
To be eligible a furloughed employee can not undertake work on behalf of the employer (defined as generating revenue or providing services) although they can undertake training. This means that employees who are working but on reduced hours or for reduced pay cannot be claimed for.
Employers should discuss furloughing with employees and changes to employment contracts should be by agreement and with due consideration to normal employment law, including equality and discrimination laws. Employers should confirm to employees in writing that they have been furloughed and keep a record of this communications.
Where Directors or office holders are furloughed, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director or office holder concerned. Furloughed directors should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company, but they may carry out particular duties to fulfil the statutory obligations they owe to their company, provided they do no more than would reasonably be judged necessary for that purpose.
Employees on unpaid leave cannot be furloughed, unless placed on unpaid leave after 28 February, nor can employees on statutory sick pay, although they can be furloughed once they have returned to work.
HMRC have concerns about abuse and so have set up a hotline through which employees can report employers who are making them work during their furlough period. If there is any evidence that furloughing rules are not being followed, no payments will be made.
National Living Wage (NLW) /National Minimum Wage (NMW)
Care should be taken over entitlement to the NLW and NMW. The government has advised that furloughed workers who are not working may receive less than the NLW and NMW if the lower of 80% of their salary or £2,500 falls below this level. However, if employees are required to undertake tasks (such as training) while furloughed, the employer must ensure that they receive at least the NLW/NMW even if this requires a top-up payment.
Amount of Claim
Employers can claim the lower of 80% of an employee’s regular salary or £2,500 per month, plus the Employers NI contributions and minimum automatic enrolment employer pension contributions on that amount.
An employer can top up the employee’s salary beyond the amount claimed but there is no obligation to do so. Employers NI contributions and employer pension contributions in relation to the top-up will not be covered by the government.
The size of the claim should be calculated as follows:
- For salaried employees, use their actual gross salary as of 28 February 2020. Fees, commission and bonus payments should not be factored into the calculations.
- For employees with variable pay:
- If they have employed for a full 12 months prior to the claim, use the higher of the same month’s earnings from the previous year, of their average monthly earnings from the 2019-20 tax year.
- If they have been employed for less than a year, use their average monthly earnings since they started work.
- If the employee only started in February 2020, use a pro-rate of their earnings so far.
Making a Claim
To make a claim you will need:
- Your PAYE scheme reference number
- The number of furloughed employees
- The period of claim
- The amount claimed
- Your bank account number and sort code
- Your contact name and phone number.
You will self-assess your claim, but HMRC retains the right to audit claims retrospectively, and have a 5-year window to do so. Fraudulent claims could result in criminal proceedings.
The claim will be made through an online portal (which HMRC have indicated will be open from 20 April 2020, with the first payments being made on 30 April). Claims can be backdated to 1 March if applicable. Once the initial backlog has been dealt with, HMRC anticipates that it will take 4-6 days from claim submission for payments to be made.
Claims can be submitted monthly or weekly depending on the frequency of your payroll runs and can be made 14 days in advance of the date of payment.
Once your claim has been processed, HMRC will pay the grant to your UK bank account via BACS payment. The grant you receive will be taxable income for corporation tax purposes, but this will be offset by the tax deduction for the salary payment and associated costs.
Calculate 80% of your employee’s wages and claim online via HMRC here.
If you would like any advice regarding The Coronavirus Job Retention Scheme or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or customerservice@taxinnovations.com
See also…
Directors and the Coronavirus Job Retention Scheme
UK Tax Residence – Impact Of Coronavirus
COVID-19 Summary of Available Assistance
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