Frettens resident Chartered Tax Advisor, Lee Young, is one of a few solicitors in Dorset to be dual qualified as a Solicitor and Chartered Tax Advisor. In this article, he provides a summary of the budget tax implications.
UPDATE: The Chancellor announced changes to the furlough scheme on Thursday 17th December - the update can be read here.
At the end of last week, the government released further details of the coronavirus job retention scheme, including the areas below.
We have tried to summarise these details in this article, however the full government release can be viewed by clicking the link at the bottom.
Claiming wage costs on the coronavirus job retention scheme FAQs
For speed of access, each of the below headings link to the relevant section of this article.
- When the coronavirus job retention scheme will be open from?
- Who can claim on the coronavirus job retention scheme (CJRS)?
- Which employees you can claim for
- What you can claim on the CJRS?
- What you will need to make a claim on the CJRS?
- Guidance on National Insurance and pension contributions
- Guidance on maternity pay and the coronavirus job retention scheme
When will the coronavirus job retention scheme (CJRS) open?
The CJRS will start from 1st March 2020, however the government's website states that:
“The online service you’ll use to claim is not available yet. We expect it to be available by the end of April 2020.”
Minimum amount of time a worker can be furloughed
You will be able to submit one claim per employee every three weeks (the minimum amount of time a worker can be furloughed for), and claims will be able to be backdated to 1st March where (and if) applicable.
Who can claim wage costs on the CJRS?
Any organisation based in the UK can apply for the scheme, providing they had created or started a PAYE scheme on or before 28th February 2020.
They must also have a UK bank account. The types of organisations that can apply are as follows:
- businesses
- charities
- recruitment agencies (agency workers paid through PAYE)
- public authorities (see below)
Public authorities and claiming on the coronavirus job retention scheme
The government does not expect many public sector employers to use the CJRS as the majority will be providing essential services. The government has explicitly stated that those public sector employers, and indeed any applicable private sector ones, that receive public funding to pay staff should not use the CJRS.
Coronavirus Job Retention Scheme for businesses in administration
Administrators will be able to access the CJRS, where an organisation is being taken under their management
Look out for more information on this as it becomes available. Frettens have a specialist insolvency and restructuring team, headed by Malcolm Niekirk. Any specific queries about this can be directed to his team.
Click here for Frettens’ insolvency and restructuring team.
Employee eligibility for the furlough scheme
Employees must have been on your payroll and registered for PAYE on or before 28 February 2020. Employees can be on any type of contract, for example:
- full-time
- part-time
- flexible/zero hour contracts
The CJRS also covers any employees who were made redundant since 28 February 2020, as long as the employer has re-hired them.
Can I work while furloughed?
Employees must not carry out any work for their employer while they are furloughed.
This includes providing any services or generating any income for the employer. An employee can undertake training or voluntary work during the furlough period. However, if employees complete online training courses they must be paid at least the national minimum wage, even if this means they receive more than the 80% of wages that will be subsidised under the CJRS.
Employers' furlough process
Employers should write to any employees they wish to furlough and ask them to agree to it. The agreement should be obtained in writing and retained for future proof to HMRC.
Furlough or SSP in isolation?
Employees on sick leave or self-isolating should receive sick pay, but can be furloughed upon their return to work. Employee shielding for 12 weeks, as per the government guidance, because they are especially vulnerable, can be furloughed as well.
What can you claim on the CJRS?
Employers will need to make a claim for wage costs through the CJRS and will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month. Fees, commission and bonuses cannot be included in the amount claimed.
An employer can has the option to top up an employee’s salary to the full 100%, but is not obliged to do so.
How furlough pay is calculated for variable hours workers
For employees whose pay varies, if they have been employed for a full 12 months, you can claim the higher of:
- the same month’s earning from the previous year (for example, April 2019); or
- average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
Tax and national insurance will have to be deducted as normal from the grant provided by HMRC.
What will you need to make a claim?
To claim the grant for any employees you are furloughing under the CJRS, you will need the following:
- your PAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 weeks)
- your bank account number and sort code
- your contact name
- your phone number
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
NI and pension contributions for furloughed workers
All employers will remain liable for employer NI contributions and the minimum automatic enrolment employer pension contributions on behalf of furloughed employees.
However, the grant claimed from HMRC can include these contributions on top of the 80% wages. You cannot claim the contribution based on any topped-up amount above the 80%. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% be allowed to be claimed.
Maternity pay and furloughed workers
Employees on maternity leave will still be entitled to maternity pay and will not be classed as being furloughed. However, once they have completed the compulsory two weeks’ maternity leave, they can choose at any time, giving proper notice to the employer, to return early from maternity leave and become furloughed.
This will not make sense in the first six weeks while they receive 90% of their pay, but it may be beneficial to do so after that time when they go onto the statutory rate.
Government advice on coronavirus job retention scheme and furloughed workers
You can follow the link below for details:
Government coronavirus job retention scheme
Employment law updates during the coronavirus outbreak
We will post any announcements, along with advice for employers and HR professionals as soon as we are able. These will be shared on our website and on social media.
Our Employment and HR newsletter will continue to be sent out monthly, though as important information is announced by the government, we may send this to you more frequently.
Our quarterly employment seminars are postponed until further notice, though we are looking into ways of delivering these online.
We have a dedicated coronavirus page, where we will post links to all articles, fact sheets and downloads concerning the outbreak and implications for businesses.
