Author: Warren Francis

New Job Support Schemes: Get the details right

Warren Francis

HMRC finally released guidance on the operation of the twin job support schemes that both start on 1 November 2020. Please read below for the essential details.

There are now two job support schemes (JSS). The original one designed for businesses that are legally required to close is now called JSS Closed, and the other one introduced by the Chancellor on 22 October for businesses that remain open but with employees working reduced hours is now called JSS Open.

The schemes may be used by the same business concurrently for different employees if it has premises in different areas, some of which are completely closed. A business could also move between the two schemes as the restrictions for the area it operates in change.

Businesses that qualify

The more generous JSS Closed can only be used by businesses which are required to close by the coronavirus regulations, such as under the tier 3 restrictions in England, or the similarly regulations in Wales, Scotland or Northern Ireland. However, where premises are restricted to delivery or collection services, or to serving food outdoors, they count as “closed” if located in a restricted area.

All other small and medium sized businesses can use JSS Open if some or all of their employees are working reduced hours.

Large employers (with 250 or more employees on 23 September 2020) wanting to use JSS Open must also show that their trade has been affected by coronavirus. The VAT returns filed between 31 August and 7 November 2020 must show level or reduced sales (looking at box 6 totals) compared with the VAT returns for the same period in 2019. Group VAT returns should be used, not those for individual companies.

There are also common conditions for both JSS Open and JSS Closed (see below).

JSS Open

The JSS initially proposed in September has been transformed into something closely resembling the CJRS which closes on 31 October. A new factsheet sets out a number of examples, but further legislation and more guidance is expected very soon.

Under JSS Open the employee must work at least 20% of their usual working hours (defined as per the CJRS), which would amount to one day of a normal five-day working week. This reduction in hours must be agreed in writing with the employee.

The employer must pay for all of the worked hours at the employee’s agreed reference salary, plus up to 5% of the value of the hours not worked, up to £125 per month, but the employer may top-up this figure if they wish to. The reference salary will be capped at £3,125 per month, and defined in a similar way to CJRS.

The JSS grant will cover up to two thirds of the hours not worked, capped at £1541.75 per month.

The employer must pay all of the employer’s national insurance (NIC) on all of the wages the employee receives plus any employer’s minimum contribution to a workplace pension.

An employee who works for 20% of their contracted hours will receive:

  • 20% of pay for worked time
  • 4% (5% x 80%) of pay for non-worked time, capped at £125 per month
  • 49.33 of pay (61.66% x 80%) for non-worked time, capped at £1541.75 per month

In total the employee receives 73.33% of their pay and foregoes 26.67% of their normal pay.

Example 1: Joe the campaigner and JSS Open

Joe is a campaigner employed by Biden Ltd on an annual salary of £36,000, or £3,000 per month. In a normal month he would work 225 hours, which is £13.33 per hour.Joe has agreed to work 45 hours per month for £600. To qualify for the JSS Open, Biden must pay Joe for 5% of his remaining normal hours: £120 (9 x £13.33). The JSS grant should cover the cost of 61.67% of the total 180 non-working hours: £1,479.63 (111 x £13.33).Joe receives pay of £2,199.63 (600 + 120 + 1,479.63), which is 73.33% of his normal pay.Biden Ltd must bear the cost of £720 (600 + 120), plus the employer’s NIC on the full amount paid of £2,199.63 and any relevant workplace pension contributions for Joe.

JSS Closed

Under this scheme the grant will cover for two thirds of the normal pay of furloughed employees, who cannot work at all, up to a maximum of £2,083.33 per month. The employee must give up one third of their wages, and will have to agree to that change in their employment contract in writing if they are not already on a zero hours contract.

Example 2: Donny the chef and JSS Closed

Donny is a chef employed by Trump, on a salary of £32,000 or £2,666.67 per month. Trump’s burger bar is closed as it is located in a tier 3 zone.Trump can claim for two thirds of Donny’s monthly salary (£1777.78) under the JSS Closed. Trump will also have to pay the employer’s NIC on that salary plus the minimum employer’s contribution the workplace pension, if Donny has not opted out of that scheme.Donny will receive £1777.78 before tax and NIC deductions, which is two thirds of his normal salary.

JSS common conditions

The twin JSS grants schemes will run from 1 November 2020 to 30 April 2021, with the conditions to be reviewed in January 2021. The employer need not have claimed under the CJRS to use either JSS. Publicly funded bodies are not expected to use either JSS.

The other conditions for both JSS are as follows:

  • The employer must have a UK, Isle of Man or Channel Island bank account
  • The employer must use PAYE online
  • Only payments to eligible employees qualify for the grants (see below)
  • Large businesses are strongly discouraged from paying dividends or returning capital to shareholders while using the scheme.

Which employees are eligible?

There is some difference between the advice on the JSS Open factsheet and the gov.uk guidance on this point.

The factsheet says employees must be on the payroll of the employer between 6 April 2019 and 23 September 2020, and included on at least one RTI return in that period that was submitted before midnight on 23 September 2020. This implies the employee does not have to be employed for that entire period, and employment at some point in the period would qualify.

The gov.uk guidance says the employee must be employed on 23 September 2020. But if the employee has been made redundant since that point and rehired (implied by the same employer), they are an eligible employee.

Any person who is taxed as an employee is an eligible employee for JSS, which would include contractors subject to IR35 and agency workers.

Claims

Employers will be able to claim under either JSS from 8 December 2020, although the first claim period can’t start before 1 November 2020. Where the pay period straddles 1 November 2020, separate claims will have to be submitted under CJRS and JSS.

The claims must be made for minimum seven-day periods, but employees can cycle in and out of the JSS Open and do not have to work the same pattern each month.

A claim can’t be submitted for a particular employee until that employee’s wages have been paid and reported under RTI. This is to reduce fraud, but means the employer has to fund the entire payment to the employee in advance.

Further detailed guidance on how to make claims under either JSS will be published shortly.

Transparency

HMRC will publish the names of the employers which use either JSS Open or JSS Closed.

Employees will be able to check if their employer has made a JSS claim relating to them via their personal tax account. This feature is designed to prevent employers from claiming JSS while also asking employees to work.

Who can claim costs of working at home

Warren Francis

HMRC has clarified its practice for employees to claim a £6 per week homeworking tax deduction, but this may be a temporary concession for 2020/21.

In May 2020 HMRC changed its approach for employees who wished to claim a tax deduction for the costs they incur when working at home.

Until that point, there was a mismatch between employees who had agreed a homeworking arrangement with their employer who paid them a home working allowance (up to £6 per week), and employees who worked at home but didn’t receive the allowance.

Those who didn’t get the allowance could claim a deduction for the additional expenses incurred by using their home as their workplace, such as energy and telephone calls, but those extra costs were difficult to quantify so most people didn’t bother to claim.

How much?

HMRC’s change in practice has permitted employees, who are required to work at home, to claim £6 per week (£26 per month) as a deductible expense against their employment income, if they don’t receive the full homeworking allowance from their employer.

There is still a mismatch of-course, as the employee who receives the homeworking allowance has an additional £312 per year of tax-free (and NIC-free) money in their pocket. Whereas the employee who claims a tax deduction of £312 for the year will receive a tax refund of £62.40 (20% taxpayer), £124.80 (40% taxpayer) or £140.40 (45% taxpayer). These figures will vary slightly for Scottish residents. Those claimants won’t receive a refund of Class 1 NIC paid on their earnings.

Full-time or part-time?

In his blog, Martin Lewis raised a valid question over the required element of the homeworking deduction.

Where employees are given the choice of continuing to work at home or returning to the office, could the homeworking deduction still be claimed for the part of the working time spent at home?

HMRC has bowed to the pressure from Lewis, and the professional bodies, to clarify this point and has agreed that employees can claim the full £6 per week deduction even if they now split their time between their home and the office. The deduction does not need to be pro-rated if part of the employee’s working time is spent in the office and part at home.

The HMRC guidance says the employee must work at home on a regular basis to claim the deduction, so two weeks spent working at home while self-isolating won’t allow the employee to claim the homeworking deduction for the full tax year. Although ICAEW is reporting that if an employee has told HMRC they are working from home, and then later in the tax year they return to the office full time, there is no requirement for the employee to tell HMRC about this change in working location.

How to claim? 

HMRC is now actively encouraging employees to make claims for their homeworking costs through a new online portal that opened on 1 October. It says that over 54,800 people have already made such a claim.

Where an online claim is submitted now the employee’s PAYE code will be altered so the tax relief is given at source for the rest of this tax year.

Alternatively, the employee can claim in their self-assessment tax return after the end of the tax year, or submit a form P87, online or by post.

What about future years?

The claim for homeworking costs does not automatically roll-over to the next tax year, so the new claim will be needed for 2021/22 if the employee is still working at home in that period.

However, the ICAEW understands that HMRC will withdraw the concession for a flat rate amount to be claimed when the coronavirus pandemic is over. In that case, the employee who does not receive the allowance from their employer would have to prove they are incurring additional costs by working at home.

Deductions for the self-employed 

Self-employed individuals can claim a similar simplified deduction of up to £26 per month in their accounts, but the amount that can be claimed depends on the use of the property as follows:

Hours home used for business per month Deduction per month
25 to 50 £10
51 to 100 £18
101 or more £26

On this basis, the employee is better off as there is no minimum time set for the employee to work at home per week or month to claim the homeworking deduction.

A self-employed person can alternatively claim the business proportion of the actual costs of running the home, which may result in a higher deduction, especially where a large proportion of the home is used.

 

Job Support Scheme expanded for businesses required to close due to Covid-19

Warren Francis

It is expected that many hospitality businesses in areas of the UK experiencing high COVID infection rates will be asked to close in order to slow down hospital admissions.

Last week, the Chancellor, Rishi Sunak, announced additional financial support for affected businesses. Support announced comes in two forms:

  1. A UK wide extension of the Job Support Scheme and
  2. In England, a monthly grant of up to £3,000 to cover fixed costs.

The features of each are outlined below. 

Extension of the Job Support Scheme (JSS)

This extended support will be available to businesses across the UK that are required to close their premises due to coronavirus restrictions.

Businesses required to close as a result of specific workplace outbreaks by local public health authorities are not eligible to claim under this extended JSS scheme.

To make a claim, employers must have a UK bank account and be registered with a UK PAYE scheme on or before 23 September 2020.

Employers will only be able to use the scheme for employees who cannot work (paid or unpaid) for that employer.

Any payments received from government will be taxable.

What are the additional benefits offered?

  • Government will pay two-thirds of employees’ monthly salaries up to a maximum £2,100 per month, per employee.
  • Employers will not be required to contribute to wages and will only have to pay any National Insurance and pension costs.
  • This expanded JSS will be available for six months from 1 November 2020.
  • The scheme will only apply to businesses required to close due to coronavirus restrictions. It will include premises restricted to delivery or collection only services from their premises.
  • To claim, employees must be off work for a minimum seven consecutive days.

When will the additional JSS payment be made?

As with the wider JSS scheme, claims for November will be processed in December via an online portal. Subsequent months’ claims will thus be paid one month in arrears.

HMRC will require to see evidence to check your claims

As with other government grants, HMRC will check claims and demand repayments of any claims made incorrectly or fraudulently. In particular, employers should agree and notify claims in writing with affected employees.

HMRC may ask to see these written agreements.

HMRC have also indicated that they will be publishing the names of employers that have claimed under the scheme.

Cash Grants for business required to close in England

Cash grants to businesses required to close in England are also being increased. These cash grants are to support business owners with fixed costs; those costs payable even if the business is closed.

Grants will be linked to rateable values of business premises and will paid every two weeks. This should provide extra financial support to businesses across the hospitality sector that are required to close due to COVID restrictions.

  • Smaller businesses with rateable values at or below £15,000 will be able to claim £1,300 per month.
  • Medium-sized businesses with a rateable value between £15,000 and £51,000 will be able to claim £2,000 per month and
  • Larger businesses will be able to claim £3,000 per month.

The devolved administrations in Scotland, Wales and Northern Ireland will be receiving additional financial support to offer similar measures in the devolved areas, should they choose to do so.

Self Assessment Customers to Benefit from Enhanced Payment Plans

Warren Francis

As announced by the Chancellor last week, Self Assessment customers can now apply online to spread the cost of their tax bill into monthly payments without the need to call HMRC.

The online self-serve ‘Time to Pay’ service, has been increased to £30,000 for Self Assessment customers, to help ease any potential financial burden they may be experiencing due to the coronavirus pandemic.

Once you’ve completed your tax return for the 2019-20 tax year, you can use the online self-serve ‘Time to Pay’ service through GOV.UK to set up a direct debit and pay any tax that is owed in monthly instalments, up to a 12-month period.

If you wish to set up your own self-serve ‘Time to Pay’, you must meet the following requirements:

  • no outstanding tax returns
  • no other tax debts
  • no other HMRC payments set up
  • your Self Assessment tax bill is between £32 and £30,000
  • it is no more than 60 days since the tax was due for payment.

If you do not meet these requirements, you might still qualify for Time to Pay, but you will need to call HMRC to set this up.

If you set up a ‘Time to Pay’ arrangement, you will have to pay interest on the tax paid late. Interest will be applied to any outstanding balance from 1 February 2021.

Sunak’s Summer Statement 2020

Warren Francis

Sunak’s Summer Statement 2020 budgetbox1180x450-1024x391-1-300x115

The Chancellor, Rishi Sunak, announced further measures to support jobs and business sectors severely affected by the COVID outbreak.

Grants and reliefs offered included support for: employment, the beleaguered hospitality and tourism industry and included green initiatives as well as a novel scheme to get us to eat out in August.

The expected reduction in VAT was confirmed but was restricted to the hospitality and tourism sector. An across the board decrease was rejected.

To boost the flagging property market Stamp Duty is being reduced in England and Northern Ireland. Separate announcements on this topic are awaited for Scotland and Wales who have their own stamp duty regimes.

A brief summary of the changes announced yesterday – 8 July 2020 – are listed below.

Job Retention Bonus

In an attempt to encourage employers to bring back furloughed employees and provide them with gainful employment, employers that bring back an employee, who was furloughed, and that continuously employs them through to January 2021, then a new Job Retention Bonus will be paid amounting to £1,000 per employee retained. Employees must be seen to be gainfully employed during this period and be paid a monthly average wage of at least £520 a month (November 2020 to January 2021).

Kickstart scheme

The new scheme will benefit employers that are prepared to create new jobs for young people (16 to 24-year-olds) who are at risk of long-term unemployment. The scheme will cover the wages (plus associated overheads) for six months. To qualify, these must be new jobs that offer at least 25 hours a week for youngsters paid the National Minimum Wage or above. Employers will need to provide training and support to find a permanent job. Employers can apply to benefit from this scheme from next month – August 2020. Government has made an initial £2bn available, but there is no cap on the number of jobs that can be created.

Apprenticeships

Employers that create new apprenticeships for the next six-months will be eligible to claim a new grant. The amount claimed will depend on the age of the apprentice.

  • Apprentices up to age 25 – employers will receive £2,000 for each apprentice.
  • Apprentices aged 25 and over – employers will receive £1,500 for each apprentice.

Green jobs initiatives

From September 2020, home owners and landlords will be able to apply for a grant to make their home more energy efficient. The grant will cover at least two-thirds of the cost up to £5,000 per household. For low income households these grants will cover all costs up to £10,000.

Boost for the housing market

In an attempt to encourage homeowners and prospective buyers to step into the housing market, government is offering a temporary reduction in Stamp Duty Land Tax (SDLT) in England and Northern Ireland (regional variations may apply when announced). At present, no SDLT is payable on residential property purchases below £125,000. From today – for a temporary period to 31 March 2021 – this threshold is increased to £500,000. Accordingly, if you buy a home after today and before 31 March 2021, and you spend less than £500,000, you will have no SDLT to pay. It is projected that this will reduce the average stamp duty bill by £4,500. Please note, regional variations may apply and if you buy a second residential property in the same period you will still have to pay the 3% Stamp Duty Land Tax additional rate for property purchases up to £500,000.

VAT reduction for hospitality and tourism

In a much speculated change, for the next six months VAT charged on food, accommodation, attractions, and other services in restaurants cafes and pubs, cinemas, theme parks, zoos and more will see VAT reduced from 20% to 5%. This will apply from 15th July 2020 and will end 12th January 2021. From the later date rates will resume at 20%.

Eat Out to Help Out discount

Next month, it would appear that the Chancellor wants to encourage us to eat out. In a novel approach to boost the hospitality and tourism sector, meals eaten at any participating business Monday, Tuesday or Wednesday, during August, will attract a discount of 50% up to a maximum discount of £10 per head including children. To participate in this scheme eligible businesses will need to register and can do so through a website to be opened next Monday.

The above update summarises the main points announced yesterday (8 July 2020).

Flexible Furlough available from 1 July 2020 – Rough guide

Warren Francis

On Friday the Chancellor outlined a new flexible coronavirus job retention scheme (CJRS) to apply from 1 July, and tapered government support for employers from August onwards.

It was no surprise that financial support for employers will start to taper off, but it was a surprise that flexible furloughing will be introduced a month earlier than expected from 1 July.

Flexible furlough periods

This amounts to a new CJRS from 1 July, which requires no minimum furlough period. However, no new employees can be furloughed for the first time from July.

A furlough period for any employee who has not previously been furloughed will have to begin by 10 June in order for 21 days of furlough to be completed by the end of the old scheme on 30 June. It will not be acceptable for furlough to begin after that and extend into July to make a three-week furlough period, as the rules change on 1 July.

No minimum furlough

The financial support does not change for July, as the government continues to pay:

  • 80% wage support up to a £2,500 cap; plus
  • Employers’ NIC and 3% pension costs on furloughed hours.

Once the new rules are in place, employees can be furloughed for any length of time, even down to a few hours, and work the rest of the pay period, subject to the employer gaining their agreement in writing.

The challenge here is that the government is trying to develop rules and guidance that cover all types of contract. I predict problems in particular for workers on zero hours. How do you work out what the “normal hours” are for zero-hours workers?

Guidance under wraps

We won’t get the answers to such questions until 12 June, when the government promised to release more guidance. Presumably this delay is based on a concern that any guidance provided before 10 June might allow people to game the system. In my view, however, the vast majority of reputable businesses need that guidance now, not in a fortnight’s time.

We do know that the £2,500 cap will be pro-rated to the furloughed hours. For example, if the employee is working 40% of the month, the furlough cap is 60% of the monthly cap, so £1,500.

Claims deadline

Some employers have put off making any CJRS claims, particularly those with close to 100 employees on furlough. They may have done so in the hope that HMRC would allow spreadsheet uploads of employee details for smaller businesses, but there seems no prospect of that now.

Those reluctant employers need to make their CJRS claims now because no new employers (as well as employees) will be admitted to the new CJRS scheme from 1 July. The CJRS claim needs to be made in June and backdated to mid-March, given that was realistically the earliest furloughing date. An employer who has made already made a claim will be able to make their final claim for any period up to 30 June 2020 by 31 July, but it looks as if there would need to be two claims then, one for furlough periods up to 30 June and one for July.

It’s important to see 30 June as the end of the CJRS under the rules as provided for in the current legislation with a new scheme beginning from 1 July.

Numbers game

Under the “new” scheme from 1 July no CJRS claim can contain more employees than in any claim up to and including 30 June 2020.

This will be interesting given the outstanding technical problems payroll professionals are still having. Certain claims can’t be made without HMRC intervention because the validation to the February 2020 FPS doesn’t work where employees have been:

  • Transferred from another employer under TUPE into the PAYE scheme
  • Reinstated
  • Moved into the PAYE scheme after a restructure.

All of these situations are permissible, but the CJRS mechanism blocks the claim.

Hours and minimum wage

Another stumbling point in the new flexible CJRS is that any hours worked will need to be paid at or above the national minimum wage (NMW) rates, which increased by the highest ever amount from 1 April 2020. Given there have been lots of issues with employers misunderstanding the operation of salary sacrifice, and the fact that claims should have been based on post-sacrifice pay, it’s likely that salary sacrifice and the interaction with the NMW wage will cause trouble after 1 July.

Reporting hours?

Under the new CJRS employers will need to report “hours worked” and “usual hours”. Is the choice of the word “report” crucial?  This implies that a report needs to be done through RTI as otherwise I would have expected the guidance to say “hours will need to be included in the claim details”.

Winding down

Financial support will change from 1 August as follows:

  • August – 80% wage support up to £2,500, but no employer NIC or pension costs covered
  • September – 70% wage support up to £2,187.50, but no employer NIC or pension costs covered
  • October – 60% wage support up to £1,875, but no employer NIC or pension costs covered

It is important to note that the reduction in wage support doesn’t allow employers to change the employees’ terms and conditions to reduce pay to these new levels. Employees must still receive 80% of normal pay, so the employer will have to make up the difference.

New guidance for businesses and employees announced

Warren Francis

Yesterday the Chancellor announced various measures to help both businesses and employees. The following links give a lot of detail into what has been put in place so far to help:

Guidance for businesses: 

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

Guidance for employees:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-guidance-for-employees

More information will follow in the next few days and we will update you when we know more.

We are here to help so please get in touch if you have any queries on 01242 370278 or email office@wfrancisandco.co.uk

Budget 2020: Coronavirus sick pay to be covered for SMEs

Warren Francis

On Wednesday 11 March 2020, the Chancellor of the Exchequer announced in his budget £7 billion of extraordinary measures to help support businesses and individuals who will be affected by the COVID-19 Coronavirus outbreak.

A brief summary of the Budget in respect of the Coronavirus is as follows:

  • The cost of statutory sick pay (SSP) for Coronavirus-related absence will be covered for businesses with fewer than 250 employees. SSP will be available to all those advised to self-isolate even if they haven’t yet presented with symptoms, people will soon be able to obtain a sick note by contacting 111 rather than having to go to the doctors.
  • For businesses with fewer than 250 employees, the cost of providing statutory sick pay to any employee of work due to Coronavirus will, for up to 14 days, be refunded by the government in full.
  • Those on contributory Employment and Support Allowance (ESA) will be able to claim from day one instead of day eight.
  • HM Revenue & Customs will “scale up” the Time To Pay service, which enables tax owed to be paid in instalments, allowing businesses and the self-employed to defer tax payments over an agreed period of time. A dedicated helpline with 2,000 staff has now launched.
  • Business rates will be abolished for shops, cinemas, restaurants and music venues with a rateable value of less than £51,000.
  • Extending this, 100% retail discount to others in the leisure and hospitality sector: museums, art galleries and theatres, caravan parks and gyms, small hotels and B&Bs, sports clubs, nightclubs, clubhouses and guest houses.
  • For small businesses currently eligible for the small business rate relief, there will be a £3,000 cash grant per business, representing a £2 billion cash injection to 700,000 small businesses.

Information correct as at 11 March 2020.

If you have any questions please get in touch by emailing office@wfrancisandco.co.uk or call 01242 370298.