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April 6th Job Retention Scheme FAQ’s

Posted by / April 7, 2020 -

Last week the government announced that it would be providing support for businesses through the ‘Coronavirus Job Retention Scheme’. Under this scheme, all UK employers will be able to access support to continue paying part of their employees’ salaries for those employees that would otherwise have been laid off due to the crisis.
 

As at the time of writing, guidance on the scheme remains limited – particularly in relation to its administration – but this briefing covers some questions you may have at this stage. We will update in due course as we know more.  Please stay safe. Stay in, Save Lives.

What Support is available ?

Under this scheme, all UK businesses will be able to claim back from the government up to 80% of the salary of each affected employee on the payroll at 28 February 2020, up to a cap of £2,500 per month (not including employer’s National Insurance contributions (NIC). While employers remain liable for employer’s NIC and auto-enrolment pension contributions, they can also claim for these amounts on top of the cap. The amount the employee receives will still be subject to income tax, National Insurance, and any other deductions.  

The scheme is open to all UK-based businesses, including charities, not-for-profits, and single director companies.  It will also be open to individuals who employ other individuals, such as domestic workers and gardeners, as long as they are paid through PAYE.

The current guidance states that employers must also be registered for PAYE Online. However, this will cause difficulties for employers who outsource their payroll, as agents cannot access PAYE Online on behalf of their clients. In addition, the registration process usually takes up to 10 days and requires a code to be received in the post, so even for those who administer their own payroll may find that this is a difficult process due to the current limitations of the postal system and the fact that they may not be working at their usual office address. We understand that representations are being made to HMRC on this point by numerous professional bodies, and we hope that this requirement will be relaxed to allow agents to make these claims on behalf of their clients.

The scheme is currently expected to run for at least 3 months from 1 March 2020, but the government have stated that this will be extended if necessary. 

Do employers have to pay the remaining 20% of salary? 

Employers can join the scheme without needing to pay the remaining salary, although they may choose to do so – or pay additional sums in excess of the remaining 20% – on a voluntary basis. Depending on the employment contracts in place, legal advice may be appropriate. 

If employers do decide to pay the remaining 20% of salary or more, they will not be able to claim for employer’s NIC and auto-enrolment pension contributions on this amount.

Which employees are affected?

The payments are only for affected employees, which will be ones who would have been laid off or made redundant because of the crisis. In order to claim, employers must designate these employees as ‘furloughed workers’. 

For the purposes of this scheme, office holders (including directors if they are salaried), salaried members of LLPs, agency workers, and limb (b) workers (also known as dependent contractors).

Employees who are unable to work because they are shielding in line with Government guidance, or those who are unable to work because of caring responsibilities, are able to be furloughed.

How can employees be furloughed?

Changing an employee’s status is still subject to existing employment law provisions. Employers will need to get the agreement of their staff before placing them on furlough, unless their contracts allow for them to be laid off. It is unclear at this stage whether the scheme will apply to employees where the employer has a contractual right to lay off employees.

While it is likely that employees will agree to be furloughed if the alternative is redundancy, their agreement must still be obtained. If employees refuse to be furloughed, then usual redundancy procedures must be followed.

Where the furloughed individual is a company director, the company will need to consider whether it is compatible with the statutory duties of that director to be furloughed. Where it is compatible and decided by the board, this must be formally adopted as a decision of the company, noted in the company records, and communicated in writing to the director concerned. 

Where the furloughed individual is a member of an LLP, the furlough arrangements will need to be adopted formally as a decision of the company LLP, to reflect that the member will be doing no work for the LLP in that period and to confirm the effect on their remuneration accordingly.

Can employees still work while on furlough?

Employees will not be able to undertake any work for or on behalf of their employer while they are furloughed, so this scheme  will not apply to any employees who have been put on part time or limited working. Employees can undertake volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of, the employer.

Furloughed directors may carry out duties to fulfil their statutory obligations owed to the company, but they must not do more than would be “reasonably be judged necessary for that purpose”. This would exclude any work carried out to generate commercial revenue or provide services to or on behalf of their company.

If employees are required to undertake training while they are furloughed, such as online courses, they must be paid at least the National Minimum Wage/National Living Wage for the time spent on the training courses, even if this exceeds the 80% of their subsidised wage.

If an employee has more than one employer, they can be furloughed by one and continue to work for the other, if this is permitted by their employment contract.

What about employees who have already been laid off?

The retention scheme payments will be backdated to 1 March 2020, so if you have laid off staff prior to the scheme being announced, employers will be able to claim for them if they withdraw their dismissal and reinstate them (on the basis that they agree to be treated as furloughed from the date they were dismissed). While usually it is unlawful for an employer to unilaterally withdraw a dismissal, it is unlikely that employees will object in these circumstances.

If employers have paid laid-off employees redundancy pay and notice pay, the repayment of these amounts to the employer should be made a condition of reinstatement.

Does the scheme apply in relation to directors who take income as dividends? 

It is common for director-shareholders of owner managed companies to pay a small salary and then take the balance of income as dividends. For the purposes of this scheme, only the salary paid is relevant. 

How are ‘monthly earnings’ calculated? 

For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate their monthly earnings for the scheme.

Where employee pay varies from month to month, the calculation is different:

  • For individuals who have been employed (or engaged by an employment business in the case of agency workers), employers can claim for the higher of the amount they earned in the same month last year, or an average of their monthly earnings from the last year, up to the £2,500 cap.
  • For employees who have been employed for less than a year, employers can claim for the average monthly earnings since work started. This is also the case if monthly pay varies due to the employee being on a zero-hour contract.
  • For employees who started in February 2020, earnings will be pro-rated for that month.

Discretionary bonuses, non-compulsory commission payments and non-cash payments are not included as part of monthly earnings. However, you can claim for any regular payments you are obliged to pay your employees which includes wages, past overtime, fees and compulsory commission payments.

For salaried members of an LLP, their reference salary for this scheme is their profit allocation, excluding any amounts determined by the performance of the member or the LLP.

How are Salary sacrifice and benefits paid to employees treated?

The amount of monthly earnings should not include the cost of non-monetary benefits or benefits provided through salary sacrifice schemes provided to the employee. If an employer continues to provide benefits to furloughed employees, this must be in addition to the wages paid under the terms of this scheme.

HMRC have agreed that coronavirus can be treated as an eligible ‘life event’ for making changes to salary sacrifice schemes, if an employee wishes to make changes to their benefit selection in this period. 

What if the calculated monthly earnings are below the minimum wage?

Employees are only entitled to the National Living Wage/National Minimum Wage for the hours they are working. Therefore, as furloughed employees will not be working, they must be paid the lower of 80% of their monthly earnings or £2,500 based on their usual working hours, even if this would be below NLW/NMW. 

What should employers do if they do not currently have the funds to pay?

As the reimbursement scheme is not yet active, employers may be struggling with cash flow and unable to pay. If employers need extra short term cash flow support, they have been advised that they may be eligible for a Coronavirus Business Interruption Loan.

March 31 Furlough Employees

Posted by / March 31, 2020 -

Furlough Leave Letter and Agreement documents

Two new documents are available to help you with the process of furloughing staff. The Coronavirus Job Retention Scheme Furlough Leave Letter should be used to explain an employer’s plan to furlough staff in response to the pandemic and pay them funds through the Coronavirus Job Retention Scheme. Following the use of the above, the Coronavirus Job Retention Scheme Furlough Leave Agreement should be used to seek employees’ agreement to the Company placing them on furlough leave. Placing an employee on furlough leave is a variation to the contract of employment. Therefore, a written agreement is require to make this change to employees’ terms of employment. Here is the letter download

http://www.park-lane-accountants.co.uk/wp-content/uploads/2020/03/Furlough-Letter.doc

Here is the agreement download http://www.park-lane-accountants.co.uk/wp-content/uploads/2020/03/Furlough-Agreement.doc

March 27 Further Update

Posted by / March 27, 2020 -

Self-employment Income Support Scheme

The Chancellor has now unveiled the package of support available for the self-employed. For those eligible, the government will pay a taxable cash grant of up to 80% of their average monthly earnings, based on previous earnings over the last three years, and capped at a maximum of £2,500 a month.
 

If less than three years of accounts are available, then the Treasury has said that they will look at what is available and make a judgement on that. And unlike the employment scheme, it appears the self employed can continue to work during the period in which the grant is available.

To be eligible, self-employed people must:

  • Have taxable profits of less than £50,000 in 2018-19, or average taxable profits of less than £50,000 in 2016-17, 2017-18, and 2018-19;
  • Have traded in the tax year 2019-20;
  • Be currently trading at the time of application, or would be but for the coronavirus;
  • Make more than half of their income from self employment; and
  • Already be self employed and have filed a tax return on this basis for the 2018-19 tax year. 

People who work through their company and pay themselves a dividend will not be eligible for support under this scheme. 

The self employed will need to apply directly for this support to HMRC using an online form (not yet available). HMRC will approach people who are eligible based on data they already hold to invite them to apply. 

The scheme is expected to be accessible no later than June, with the self employed receiving a lump sum payment of three months of backdated support directly from HMRC in that month. In the meantime, the self-employed can access Universal Credit, or apply for a Coronavirus Business Interruption Loan.  

Interestingly, the Chancellor also said in his speech that those who wished to be treated like the employed when it comes to state handouts would also be expected to pay in in the same way in the future. This suggests that, post-crisis, there may be amendments to the UK’s tax system to bring the taxation of the self employed more in line with the employed.

March 27 Update

Posted by / March 27, 2020 -

Self Employment help 80% up to £2500

We are working to examine the detail of this scheme as it was announced last night. Broadly, if you have profits of up to £50k per year you can get a taxable payment of 80% of £2500 per month. It looks like those who receive dividends are not helped by this and there are conditions to the scheme. I will do a full assessment later today and post and text out when done. We will have clients that will benefit but help is not anticipated to be there until June but will be backdated. Hang in there the devil as always in in the detail.

Coronavirus Scam e-mails – BEWARE

There have been reports of a surge in Coronavirus-related scams and we are warning everyone to take extra care given the volume of emails currently being received. If you are not able to verify the sender of an email do not click on any links or attachments and never respond to unsolicited messages. Take extra care when making online purchases and when you are purchasing online use a credit card rather than a debit card .

Support for individuals through deferring Income Tax payments

At the end of last week the Chancellor announced a deferral of the income tax payment on account from 31 July 2020 to 31 January 2021. Government guidance initially suggested that this was only going to be available for self-employed individuals, however it now states that all Self Assessment taxpayers will be eligible.  The deferral will be applied automatically and no interest or penalties will be charged, however should taxpayers wish to make the payment by the normal payment date of 31 July 2020 they can still do so.

Covid-19 Latest News

Posted by / March 25, 2020 -

Deferred Your VAT?

YOU MUST CANCEL YOUR DIRECT DEBIT IF YOU WANT TO DEFER YOUR VAT AND IF HMRC HOLDS AUTHORITY TO TAKE THE PAYMENT. HMRC SYSTEMS WILL TAKE THE PAYMENT IF YOU FAIL TO CANCEL THE DIRECT DEBIT.

Companies House Filing Deadline

COMPANIES HOUSE WILL EXTEND ANY FILING DEADLINE FOR ACCOUNTS BY THREE MONTHS IF YOU COMPLETE A SIMPLE FORM REQUESTING THIS. WE WILL MEET ALL DEADLINES AND IF THERE IS ANY POSSIBILITY OF NOT FILING YOUR ACCOUNTS ON TIME THEN WE WILL CONTACT YOU.

Tax Helpline to support those affected by Covid-19

THE NUMBER TO CALL IS 0800 0159 559 IF YOU HAVE ISSUES WITH PAYING ANY TAX DUE OTHER THAN VAT. YOU WILL NEED TO JUSTIFY WHY YOU CAN’T PAY AND DEMONSTRATE THAT YOU HAVE TRIED TO RAISE FUNDS ELSEWHERE BEFORE A TIME TO PAY ARRANGEMENT CAN BE MADE.

Dividends

WE ARE BEING ASKED ABOUT FOR SUPPORT FOR THOSE WHO ARE SELF EMPLOYED AND THOSE WHO ARE REMUNERATED VIA DIVIDENDS. WE ARE WAITING FOR THE GOVERNMENT TO COMMUNICATE ANY SUPPORT AVAILABLE AND THEY ARE WORKING ON IT. DIVIDENDS SHOULD ONLY EVER BE PAID FROM PROFITS BUT WE SHALL SEE IF ANYTHING IS AVAILABLE BY WAY OF SUPPORT.

Modern Business Plans

Posted by / June 20, 2018 -

Business plans always seem to be in the same format these days with the primary purpose being to confirm what we already know. They are for the most part boring documents.

I came across a guy recently who got me thinking about business plans by looking at them in a different format. He split his plan into five sections and I would like to share his views:-

Truth, Assertions, Alternatives, People and Money.

Continue reading →

Digital records will be compulsory

Posted by / May 23, 2016 -

The government intends to force all businesses, large and small, to keep records electronically. When will this happen and how can we help you to prepare for the changes?

If you keep records manually then you will need to start planning for a change now. It is the governments plan to “make tax digital” for all businesses whether incorporated or not if you have an income of £10,000 or more. This may have serious consequences for many businesses.

In the governments manifesto about the future of tax administration you could be fooled into thinking that “making tax digital” was a vague policy. Well, you would be mistaken as the government is now in full consultation with the software houses and tax industry as a whole.  Although the deadline is 2020 for full implementation there will be a transition period where some businesses will be required to keep all records digitally by  April 2018.

So what will it mean for you?

If your income is over £10,000 and you operate a business (including landlords) you will need to use software in order to keep your records. There is some good news in that the government will provide free applications to help businesses. However, the software is likely to be very basic and it is likely that it will not be sophisticated enough to meet the requirements of all but the very basic businesses. The other issue is that in order to use the software the tax payer may need a basic understanding of double entry book keeping.

Park Lane Accountants is able to help you by assessing your needs and recommending the best software that suits your business. We are able to train you in the use of the software or offer comprehensive book keeping services. Our prices are reasonable and start at £25 per year for a basic cloud based system or £55 per year for a fully functioning system.

Give us a call on 01247 247160 to discuss your requirements.

Tax Changes – Autumn Statement

Posted by / November 29, 2015 -

Park Lane Accountants Summary of key changes affecting our clients

  • 3% added Stamp Duty Land Tax to second homes including Buy To Let with a starting threshold of £40k from April 2016.
  • Apprenticeship levy to be introduced in 2016 to raise £3bn from businesses.
  • From 2019 Capital Gains Tax on the disposal of residential property will be payable 30 days following disposal of the property instead of 31st January in the year following the tax year that the transaction takes place.

Our View

Continue reading →

Private Residence Relief

Posted by / May 1, 2015 -

Private Residence Relief is granted automatically on the sale of property that you have always lived in as your home meaning that Capital Gains Tax is not payable on any gain made on the property. You can also claim PRR for periods of time that you have lived in the property and until recently if you had ever lived in the property, then for the last 36 months of ownership you would have been deemed to have lived there. This was reduced to 18 months in the 2014 Autumn statement.

If you wish to claim a main residence exemption you need to compile evidence in support of this, especially if you own multiple properties. The occupation of a property does not necessarily make a person “resident” there for tax purposes. We look at the evidence and recommendations to come out of the case of Alison Clarke vs HMRC.

Continue reading →

No more employers National Insurance (NI) for under 21’s

Posted by / March 26, 2015 -

As of 6th April 2015 employers with employees aged under 21 years will no longer pay class 1 secondary national insurance in respect of those employees provided the earnings are below the upper earnings limit of £815 per week. The change in legislation was part of the Autumn statement of 2013 and is designed to encourage employers to employ youth, a sector of society that has been significantly affected by the recession that began in 2007.

Currently class 1 secondary national insurance would be payable by the employer at the rate of 13.8% above £156 per week and this will be the case for those over 21.

In practical terms it means that those businesses running their own payroll systems or tax advisers running payroll systems on behalf of clients must ensure that they identify employees under the age of 21 and apply the correct NI category letter to avoid paying too much National Insurance.

If you need any advice on Payroll Services or Taxation then please contact Park Lane Accountants on 01249 247160. We support entrepreneurs in Chippenham, Bath and the surrounding Wiltshire towns and villages and are friendly and approachable.