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Posts archive for April, 2020


3rd April 2020

Important legislation changes to consider for 2020/2021 Tax Year (06 April 2020)

Filed Under: Coronavirus / COVID-19 updates, Tax


  • There will be no tax code points uplift this year with the personal allowance remaining £12,500 per annum
  • The Employment Allowance will increase to £4,000 from £3,000 (subject to relevant criteria)
  • Holiday pay for casual workers, including zero-hour contracts, will now be calculated based on average weekly earnings over 52 weeks, instead of 12
  • The introduction of Statutory Bereavement Pay (SPBD) following the death of a child (subject to relevant criteria)
  • Increase in National Minimum & Living Wage:

 

  • Increase in Statutory Sick Pay (SSP) – £95.85
  • Increase in Statutory Maternity/Paternity/Adoption & Shared Parental Leave(SMP/SPP/SAP/ShPP) – £151.20
  • The earnings trigger of £10,000 and contribution percentages of 3% employer & 5% employee will remain the same for the purposes of Auto Enrolment, but the lower and upper levels have changed.

In light of Covid-19 virus, HM Revenue & Customs have advised that workers will receive Statutory Sick Pay (SSP) from their first day off, not the fourth. It was also announced in the budget, that companies with less then 250 employees would be able to reclaim Statutory Sick Payments made as a result of the Covid-19 outbreak; we await further information on this.

 

 

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1st April 2020

Coronavirus Job Retention Scheme FAQ

Filed Under: Coronavirus / COVID-19 updates


  •  When can employers expect to receive the reimbursement from HMRC?

The government have not given a specific date or timeline of when employers will receive the repayment once a claim has been made as of yet. We are awaiting further details to clarify this. One thing we do know is not to expect the payment till at least May 2020.

  • Will the payment to furloughed employees be taxable?

Yes, payments you make to furloughed employees will be subject to PAYE and National Insurance contributions.

  • How do we put someone in the furlough scheme?

You need the employee to agree to be put on furlough and then you will need to designate them as furloughed. The guidance says that, to be eligible for the grant, employers should write to their employee confirming that they have been furloughed and keep a record of this communication.

  • Does someone need to have been on the payroll on 28 February 2020 to be put on furlough?

Yes, you cannot use the scheme to furlough all new joiners. Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme. Note that the key date is 28 February, even though 2020 is a leap year and there was a 29 February this year.

  • Can we only put people in the furlough scheme if redundancy was the alternative?

The government previously indicated that the furlough scheme was an alternative to redundancy, lay-off or unemployment. The guidance for employees refers to furlough as applying when the employer is unable to operate or has no work for the employee to do, but there is no explicit requirement in the latest guidance for employers to show that redundancy was the alternative.

Importantly, note that the government has indicated that it will retain the right to retrospectively audit employers, with scope to claw back fraudulent or erroneous claims. Ultimately, it seems that employers may be allowed some discretion, but they should not be abusing the scheme.

  • Can we rotate employees on furlough?

Possibly yes. Some employers have work for some staff, but not enough work for all. The employer guidance is unclear on this point, but the employee guidance seems to answer the question, by saying that employees can be placed on furlough more than once.

This suggests that employers can rotate employees on furlough, so long as each employee spends a minimum of three weeks on furlough.

  • Can employees do the odd bit of work for us while furloughed?

Definitely not. Employees cannot undertake work for or on behalf of an employer that has furloughed them. The guidance says that this includes “providing services or generating revenue”. If they do any work for you then you may have to repay the grant.

Directors and owner-managers can be furloughed if on PAYE and will still be allowed to do statutory duties in these roles – this will not count as work.

  •  Can we ask employees to do training while furloughed?

Yes. A furloughed employee can do training if this does not involve providing services or generating revenue. The guidance points out that if workers are required to, for example, complete online training courses while they are furloughed, they must be paid at least the National Living Wage/National Minimum Wage for the time spent training, even if this is more than the subsidy.

  • Can furloughed employees do volunteer work?

Yes, this is allowed according to the guidance.

  • Do employees have to agree to being furloughed?

Yes generally they do, but this does not necessarily need to entail a protracted procedure.

  • Can employees put themselves on furlough?

No. You, as the employer, need to designate them as furloughed.

  • When can we start claiming?

The subsidy applies from when an employee is placed on furlough. The scope for backdating is unclear. The backdating to 1 March 2020 seems to be designed to cover those who have already been laid off or made redundant as a result of coronavirus, so if employers re-employ people who were made redundant after 1 March they can furlough those employees and claim the grant.

  • What if we’ve already made redundancies?

If you have made employees redundant since 28 February, it is possible to give those former employees the option of being rehired and then put straight on the scheme.

  • How should we select which employees should be furloughed?

Workers who cannot work from home and who currently have no work to do will be obvious candidates for furloughing.

  • Can we do a partial furlough to put somebody on reduced hours?

No. An individual cannot work for you at all if they are furloughed.

  • What is the process for claiming the payment?

You will need to submit information to HMRC about workers who have been furloughed and their earnings, via a new HMRC online portal, which will hopefully be open by the end of April. If you need short-term cash flow support in the meantime, the government has said you may be eligible for a Coronavirus Business Interruption Loan.

  • What about casual workers and workers on zero-hours contracts?

The scheme will cover workers on the PAYE system, including any casual or zero-hours worker who are paid in that way. For workers whose pay varies, you can claim for the higher of either:

  • The same month’s earning from the previous year
  • Average monthly earnings from the 2019-20 year

If the worker has been employed for less than a year, you can claim for an average of their monthly earnings since they started work. If the worker only started in February 2020, you should use a pro-rata approach.

  • Can workers be in the furlough scheme if they are off sick?

The guidance says that “employees on sick leave or self-isolating should get Statutory Sick Pay but can be furloughed after this”.

  • Will workers continue to accrue holiday allowance while they are furloughed?

Yes, because they remain employed. You could agree that no contractual holiday (beyond the statutory minimum of 5.6 weeks per year) will accrue during furlough, but employees will retain their right to accrue annual leave under the Working Time Regulations.

  • Can people take their holiday allowance while furloughed?

This is not entirely clear. You could refuse requests for holiday during furlough if you want to do so, but you might prefer employees to use up their holiday allowance rather than storing it up.

  • What should we pay staff who take holiday during furlough?

It is expected that you will be able to claim for holiday pay through the grant, in the same way as wages or salary, although the guidance is not as clear as it should be on this point.

  • What happens at the end of the furlough?

The idea is that employees will be able to come back to work. The scheme is designed so that employers don’t need to make redundancies and then recruit a new workforce once the crisis is over – their existing workforce will be ready and waiting in the wings to resume work.

However, if trading conditions have not improved sufficiently for you to take all the furloughed employees back when the scheme ends then you will be able to make them redundant, subject to the usual rules on redundancy.

  • Are self-employed individuals eligible for the furlough scheme?

No, the government has announced a separate package of support for self-employed individuals affected by Coronavirus.

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1st April 2020

Coronavirus Job Retention Scheme Details (as at 26th March 2020)

Filed Under: Coronavirus / COVID-19 updates


Scheme Summary

  • The Job Retention Scheme is a temporary scheme open to all UK employers from 01 March 2020 to 30 May 2020.
  • Employers are able to reclaim 80% of ‘Furloughed’ employee wages to prevent redundancy during the outbreak of the Coronavirus.
  • Furloughed employees are workers who have been asked to stop working due to the employer not being able to cover the staff costs due to the Coronavirus. This is to retain staff who otherwise would have been made redundant during the outbreak.

 

Rules of the Scheme

  • Applicable to all UK businesses, charities, recruitment agencies and public authorities.
  • The scheme is available for employees on the payroll at 28 February 2020. Any employee who is NOT on the February payroll will not be eligible.
  • The employer must hold a UK bank account.
  • The scheme pays a grant, not a loan, to the employer.
  • If a company appoints an administrator, the administrator will be able to access the scheme.
  • Furloughed staff must NOT complete any work during the period of furlough.
  • While on furlough, the employee’s wage will be subject to the usual income tax, national insurance and other deductions.
  • Commission and bonus payments are NOT The scheme is only available on the basic wage.
  • Employers must pay their employee the lower of 80% of their regular wage or £2,500 per month.
  • Employers can choose to top-up the remaining 20% if they wish. This will NOT be covered by the grant.
  • Employees can be furloughed for a minimum of 3 weeks.

 

Employees Eligible

  • Full time and part-time employees.
  • Employees on agency, flexible and zero-hour contracts.
  • Employees who were made redundant since 28 February 2020.
  • If an employee is working on reduced hours or pay, they will NOT be eligible for the scheme.
  • Furloughed employees have the same rights as they did previously. 

     

 

What Employers need to do?

  • Discuss with their employees the furloughed status and make any changes to the employment contract. If a letter of Furloughed Status is required, please contact THL.
  • Advise their employees they will receive 80% of their monthly salary. (If on hourly pay this will be an average over a period at the employers’ discretion).
  • Arrange payment to the furloughed employees the 80% (frequency is at the employers’ discretion).
  • Employers will need to calculate the amount to pay their employees. (An example calculation has been included below). This will be completed by THL if we are engaged to complete the company payroll.
  • Employers will need to make a claim for the wage costs through a new HMRC Online Service. This is expected to be available by the end of April 2020.
  • You will only be allowed to submit one claim every 3 weeks.
  • To claim employers will need the following;
  1.                   ePAYE reference number
  2.                   Number of employees being furloughed
  3.                   The claim period (start and end date)
  4.                   Amount claimed (per minimum length of furloughing of 3 weeks)
  5.                   Bank account number and sort code
  6.                   Your contact name
  7.                   Your phone number

Please note – HMRC will retain the right to audit all aspect of your claim.

  • Once HMRC receive the claim and check you are eligible for the grant, payment will be made via BACS to your chosen UK bank account.
  • Once the scheme has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme.
  • Employees will be able to opt out of their Auto-Enrolment pension scheme to increase the net salary received. This will need to be completed by the employee themselves. They should notify their pension provider if they wish to do this.

Example Calculation 1

X Ltd employs Mr A at an annual salary of £24,000, so £2,000 per month. Mr A has opted out of auto enrolment.

Each month, Mr A currently receives net pay of £1,655 which is after deducting PAYE of £191 and employees NIC of £154. On this salary, the employer pays employers’ NIC of £177.

The available grant for the employer is the lower of;

(a) 80% of £2,000, and

(b) £2,500

Plus employers’ NIC on this amount

So X Ltd claims a grant of £1,600 plus £122 = £1,722.

The net amount of cash required by X Ltd to furlough Mr A based on maintaining the existing salary is £1,600 (80% paid by grant) + £400 (20% paid by employer) = £2,000 + £177 – £1,722 = £455 per month.

It is a matter for employment law whether the employer is actually required to pay this top up. Employees and employers can agree to a different arrangement during the furlough.

 

Example Calculation 2

X Ltd employs Mr B at an annual salary of £42,000, so £3,500 per month. Mr B has opted out of auto enrolment.

Each month, Mr B currently receives net pay of £2,675 which is after deducting PAYE of £492 and employees NIC of £333. On this salary, the employer pays employers’ NIC of £383.

The available grant for the employer is the lower of

(c) 80% of £3,500 = £2,800, and

(d) £2,500

Plus employers NIC, £245, on this amount

So X Ltd claims a grant of £2,500 plus £245 = £2,745.

The net amount of cash required by X Ltd to furlough Mr A based on maintaining the existing salary is £3,500 + £383 – £2,745 = £1,138 per month.

It is again a matter for employment law whether the employer is actually required to pay this top up. Employees and employers can agreed to a different arrangement during their furlough.

 

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