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.

 ——–

  THEN:

 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.

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.