The article below was written before the latest government update: The government announced on 31 October 2020 that the furlough scheme has been extended for a further month to 30 November and the Job Support Scheme has been postponed until the furlough scheme ends. We expect the extended scheme to operate in a similar way to the furlough scheme with grants of 80% of wages being available to employers, greater than the 60% available in October. Once further details are announced this article will then be updated in full. The latest government announcement can be found at this link: https://www.gov.uk/government/news/furlough-scheme-extended-and-further-economic-support-announced
Over the last few months the original furlough scheme introduced in April 2020 has been winding down.
Coming up we have the new job support scheme – two versions of it and in February employers may be able to claim the job retention bonus.
Different schemes with different rules which makes it hard for employers and payroll teams to keep up with it all. It is key that employers obtain all the support they are entitled to and so without apology, we have outlined what we know about all of the current help available.
The furlough scheme
So let us recap on the rules for furlough grants. There are some basic requirements for a furlough claim to be valid. The employee must have been both employed by the business on 19 March 2020 and also present on the related Real Time information (RTI) report to HMRC on or before 19 March 2020. The RTI requirement in practice means it is likely a monthly paid employee had to be employed by 28 February but this point should be checked.
The next hurdle was that the employee was furloughed, by agreement and in writing, for a minimum period of 3 weeks. The 3 week period must have be completed by 30 June, i.e. it must have started on or before 10 June. It is key that this paperwork is retained for review for a period of 5 years.
The quantum of the claims are made by reference to the level of pay an individual was receiving in the last pay period before 19 March 2020, so generally this is the February 2020 amount; different rules applied to variably paid employees. Payments were made in relation to 80% x wages up to a monthly maximum of £2,500 plus the related employers NIC and minimum (3%) auto enrolment pension cost.
From 1 July you have been able to furlough employees on a flexible basis and claim for only the time they are not working. This enabled an employer to bring people back on a part-time basis as the business gradually increased. Claims for flexible furlough grants were only available in relation to employees who had previously been successfully furloughed and calculations were made on a slightly different basis.
Payments under the scheme reduced from August onwards with claims from 1 August no longer being able to include NIC and pension contributions (but with salaries still being based on 80% x salary up the maximum cap of £2,500 per month). From 1 September the percentage of salary covered reduced to 70%, reducing to 60% for claims for grants relating to periods from 1 October. The scheme closes in relation to furlough completely from 31 October 2020.
Where an employer has overclaimed under the scheme and continues to make claims, the overclaim can be processed with the next claim and offset. Where the overclaim is higher than the future claims to be made or there will be no further claims it will be necessary to contact HMRC and advise them of the position, and this can now be done online. They will then provide a payment reference to repay the excess amount. HMRC reserve the right to audit the claim and penalties for incorrect claims can be up to 100% of the error.
Job retention bonus
The rules relating to claiming the job retention bonus of £1,000 per employee are relatively straight forward. Claims will be possible from 15 February 2021 once all RTI submissions up to 5 February are complete and the bonus can still be claimed where a claim is made through the job support scheme. Conditions for the claim are:
- A one-off taxable sum of £1,000 can be claimed for each eligible employee that has been furloughed and kept continuously employed until 31 January 2021. There is no minimum furlough period provided that an eligible furlough claim has been submitted for that employee previously;
- The employee must have been continuously employed from the end of the last furlough claim period until 31 January 2021 and must not be serving a contractual or statutory notice period as at 31 January 2021;
- The employee must have been paid at least £1,560 (of gross taxable pay) in total between 6 November 2020 and 5 February 2021, with at least one taxable payment made in each monthly period between these dates.
Job Support Scheme (JSS)
An ever moving target at the moment; there will be two versions of this with almost the same name available from 1 November. One is for businesses facing decreased demand (JSS Open) with the second scheme being for employers of those businesses who are legally required to close due to lock down rules meaning their employees cannot work at all (JSS Closed). Details of the first version of the scheme changed before full details had been announced, however, this is of benefit to employers and employees.
JSS Open will be available from 1 November 2020 for employees who work a minimum of 20% of their usual hours. Alongside normal pay for the hours worked the employee will receive 66.67% of their normal pay for the hours not worked made up of 5% of reference salary from the employer and 61.67% from the government. The reference salary will be capped at £3,125 which equates to maximum employer contribution of £125 and HMRC contribution of £1,541.75 per month where the employee is working the minimum 20% of their usual hours. The employer can top up if they wish to and NIC and pension contributions cannot be claimed. Under JSS Open employees will receive at least 73% of their pay unless capped.
Where employers are legally required to close their business for a minimum period of 7 days as a direct result of coronavirus restrictions set by one or more of the four governments of the UK they can claim through the JSS Closed scheme which is slightly different. Employees with receive two thirds of their normal pay, paid by their employer and fully funded by the government up to a maximum of £2,083.33 per month although again, discretionary top up from the employer is permitted.
The schemes will be available to both employers and employees who have not previously used the furlough scheme but employees must have been on the payroll with an RTI submission at some point from 6 April 2019 to 23 September 2020. Employees must still be in employment on 23 September although claims may still be made for employees who ceased after that date but were subsequently re-employed.
Under both schemes claims cannot be made if an employee is on notice of redundancy. Employers will be reimbursed in arrears from 8 December 2020 for the government contribution. The schemes will run for six months from 1 November 2020 and as with the current furlough scheme is open to all employers with a UK bank account and a UK PAYE scheme.
All Small and Medium-Sized Enterprises (SMEs) will be eligible (250 or less employees on 23 September 2020) whereas large businesses will be required to demonstrate that their business has been adversely affected by COVID-19.
Large employers claiming JSS Open, need to complete a Financial Impact Test to evidence that their income has been impacted due to coronavirus. If the employer’s turnover has remained equal or has decreased compared to the previous year, then they will qualify. This test only needs to be taken once before the employers first claim for the Job Support Scheme.
Large employers who are VAT registered and submit quarterly VAT returns, should compare the total sales figure on their VAT return, which is due to be filed and paid between 31 August 2020 and 7 November 2020, with the total sales figure from the same quarter in 2019. This is the figure recorded in box 6 of their VAT return, which captures the total value of sales and all other outputs excluding any VAT. This box captures all sales, whether subject to VAT or not.
Large employers who submit monthly VAT returns should compare the three consecutive months which are due to be filed and paid by 7 November 2020 with the same period in 2019. The guidance provides various examples of how the calculations should be made.
In addition the government expects that large employers and their corporate groups using the scheme will not make capital distributions whilst claiming the Job Support Scheme grant. This includes:
- free or other distribution
- any equivalent payment that a partnership may make to its partners
Whilst this is not a legal condition of the scheme the HMRC guidance states that it ‘encourages business to reflect on their responsibilities and that taxpayers should be able to rely on public money only being claimed where it is clearly needed.’
As with the furlough scheme employers will need to agree working arrangements under the JSS with employees in writing and make all necessary contractual changes required. The changes must cover at least 7 consecutive days. HMRC have advised that these must be made available to HMRC upon request and employees will be able to check if their employer has made a claim relating to them via their Personal Tax Account. As with the original furlough scheme, the definitions of ‘usual hours’ and ‘reference hours’ are complex depending on whether or not the employees are variably paid or on a fixed salary. Details can be found on the HMRC website under the job support scheme and there are examples to help explain how the calculations work.