Coronavirus Financial Support
The UK Government is moving fast to try and support the UK economy and UK citizens from the financial and economic impact of Coronavirus, Covid-19.
Our T4 Coronavirus (Covid-19) pages aims to bring some useful links to some of the links and useful information about the guidance and support on offer from HMRC and the Government.
Page Updated: 27 March 2020 2:30 am
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Coronavirus Financial Support for Employers
Our T4 Page “Coronavirus” pages are aimed at helping clients through the fast developing relief, support and rules with regards to the financial support the UK Government is putting in place to help protect employment in the UK during the 2020 Coronavirus Pandemic.
Coronavirus Job Retention Scheme (CJRS)
On Friday 20 March 2020 the UK government announced a new scheme will be set up to help pay people’s wages.
Employers will be able to contact HMRC for a grant to cover most of the wages of their workforce who remain on payroll but are temporarily NOT WORKING during the coronavirus outbreak.
Any employer in the country- small or large, charitable or non-profit will be eligible for the scheme.
Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.
CJRS: KEY FEATURES
- Any employer in UK will qualify: Any employer in the country- small or large, charitable or non-profit will be eligible for the scheme.
- 80% of “Furloughed” Employees wages: The scheme provides the employer with a grant to re-imburse 80% of a workers wages. UK workers of any employer who is placed on the Coronavirus Job Retention Scheme can keep their job, with the government paying up to 80% of a worker’s wages, up to a total of £2,500 per worker each month. These will be backdated to 1st March and will be initially open for 3 months, to be extended if necessary.
CJRS: HOW TO ACCESS THE SCHEME
You will need to:
- Designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
- Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required).
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month, per employee. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
Date Effective From: CJRS can be backdated to 1 March 2020
If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan (see below).
CJRS Further Details Published & Announced on 26 March 2020
During the Coronavirus daily update given at 5pm on Thursday 26 March 2020 UK Chancellor Rishi Sunak he announced grants for the self-employed but also announced the launch of the new Government Business Support website at: https://www.businesssupport.gov.uk
The new website includes further details on a range of the Coronavirus financial support packages Government is rolling out to help Business, Employers and Employees get through the Covid-19 Pandemic.
Further details are now available about the CJRS (Coronavirus Job Retention Scheme) available to employers.
A summary of the additional information now published is:
SEE LINKS AT FOOT OF SUMMARY TO GOV.UK LATEST UPDATED GUIDANCE
SUMMARY OF CJRS:
Applies to all UK Employers,
Who have a UK bank account, and
with an active PAYE scheme created on or before 28 February 2020.
Support for employers to continue paying,
80% of the employees “usual wages costs” (see below), but excluding, fees, commissions and bonuses.
for employees hired on or before 28 February 2020,
who were not on unpaid leave on or before that date,
that would otherwise have been laid off during the crisis.
CJRS is for employees who have been asked to stop working, and don’t carry out work while “furloughed”, but,
are being kept on the payroll,
Applies to employees who the employer has designated as “furloughed workers” for a minimum of three weeks, and,
notified employees in writing of this change, and retained the evidence of this notification.
CJRS is to stop workers from being made redundant.
Backdated to 1 March 2020 if applicable,
and initially open for 3 months,
but will be extended if necessary.
NB: Changing the status of an employee to “furloughed remains subject to employment law, and depending on the employment contract, may be subject to negotiation.
NATURE OF HMRC CJRS GRANT:
Where the criteria are met HMRC will pay employers a grant worth:
80% of the each “furloughed” employees,
“usual wages costs“,
up to £2,500 a month,
PLUS the associated Employers National Insurance
PLUS minimum Automatic Enrolment employer pension contributions,
on the subsidised wages.
Grants are subject to subsequent possible HMRC checks to check for false, incorrect claims or fraudulent claims.
HMRC, “will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live“.
HOW & WHEN CAN CLAIM FOR GRANT BE MADE:
HMRC are currently (as at 26/3/20) working on a new online portal to submit the claim and a system to pay the grants.
Aim is for for system to go live before end of April 2020.
When system is live employers will:
Submit information to HMRC about:
1. The “furloughed” employees, and
2. their earnings.
Government expect the first grants to be paid with weeks.
CALCULATING THE 80% CLAIM – “USUAL WAGES”:
A) FULL OR PART-TIME EMPLOYEES
For full time and part time SALARIED EMPLOYEES,
the employee’s actual salary before tax,
as of 28 February 2020,
should be used to calculate the 80%.
EXCLUDING: Fees, commission and bonuses which should not be included.
B) EMPLOYEES WITH VARIABLE PAY
1) Employee has been employed for a full twelve months prior to the claim,
you can claim for the higher of either:
a) the same month’s earning from the previous year, or
b) average monthly earnings from the 2019-20 tax year
2) Employees (with variable pay) employed for less than a year
You can average their monthly earnings since they started work.
3) Employees who only started in February 2020,
use a pro-rata for their earnings so far to claim.
Calculate the amount of:
a) Employers National Insurance
b) Minimum Automatic Enrolment (AE) employer pension
based on the 80% wages you can claim for, but
you cannot claim for any additional top up wages in excess of the 80% or any employer NI or Employer AE pension contributions on excess wages paid.
What you’ll need to make a claim
Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.
To claim, you will need:
your ePAYE 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.
You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.
What to do after you’ve claimed
Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.
You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted. You can choose to top up the employee’s salary, but you do not have to.
When the government ends the scheme
When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
Employees that have been furloughed
Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
Once the scheme has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme.
Income tax and Employee National Insurance
Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
Employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.
Tax Treatment of the Coronavirus Job Retention Grant (Taxable)
Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.
Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
Chancellor Rishi Sunak announces on Thursday 26 March 2020 new website BusinessSupport.gov.uk (link above) for more details on the reliefs, grants and other Coronavirus support for employers and businesses.
Coronavirus Business Interruption Loan Scheme (CBILS)
The British Bank which is Government owned, is underwriting a scheme whereby lenders can lend up to £5 million to SMEs (Small Medium Enterprises).
To apply for a CBILS loan first check if your proposed lender is on the accredited lenders list, then contact your lender about applying for the loan.
CBILS: KEY FEATURES
- Up to £5m facility: The maximum value of a facility provided under the scheme will be £5m, available on repayment terms of up to six years.
- 80% guarantee: The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, subject to an overall cap per lender.
- No guarantee fee for SMEs to access the scheme: No fee for smaller businesses. Lenders will pay a fee to access the scheme.
- Interest and fees paid by Government for first 12 months: The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
- Finance period terms: Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
- Security: At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. For facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using CBILS. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
- The borrower always remains 100% liable for the debt.
Smaller businesses from all sectors can apply for the full amount of the facility. To be eligible for a facility under CBILS, an SME must:
- Be UK-based in its business activity, with annual turnover of no more than £45m
- Have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.
Please note: If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
COVID-19: Government Support for businesses (announced 20 March 2020)
The Chancellor has set out a package of temporary, timely and targeted measures to support public services, people and businesses through this period of disruption caused by COVID-19.
This includes a package of measures to support businesses including:
- a Coronavirus Job Retention Scheme
- deferring VAT and Income Tax payments
- a Statutory Sick Pay relief package for SMEs
- a 12-month business rates holiday for all retail, hospitality and leisure businesses in England
- small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
- grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
- the Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank
- a new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans
- the HMRC Time To Pay Scheme