On Thursday evening, HMRC issued further guidance on the Job Retention Scheme and we have updated our guidance, below, to reflect these changes.
Lat week, Jim Harra, Director of Personal Tax Customer Operations at HMRC, met with the Treasury select committee and clarified a number of aspects as to how the Job Retention Scheme is progressing and how it operate. Key points to note are:
The portal is currently in Beta testing and is planned to be available from 20th April with the first payments planned before the end of April;
Claims can be made up to 14 days in advance of a payroll run and will be paid out within 4-6 working days of a claim;
The portal will be available 24 hours a day 7 days a week and will be capable of dealing with 450,000 users an hour;
Claims are to be made on a self-service basis. Employers need to get themselves into a position where they can use the portal without assistance as they will struggle with call volumes;
Claims can be made once every 3 weeks or longer and can include multiple pay periods. For weekly payrolls the ability to make claims 14 days in advance will assist.
You may have well have recently received an email from HMRC regarding what is needed to make the claim. This will include:
The bank account number and sort code you’d like HMRC to use when they pay your claim;
The name and phone number of the person in your business for HMRC to call with any questions;
Your Self-Assessment UTR (Unique Tax Reference), Company UTR or CRN (Company Registration Number);
The name, employee number and National Insurance number for each of your furloughed employees;
The total amount being claimed for all employees and the total furlough period.
It is important that you have a PAYE Online account set up. You must ensure that you have the ability to access your own Government Gateway account and have enrolled for PAYE Online. If you have not already enrolled for PAYE Online then you should do this NOW as this process can take up to 10 days. If PAYE Online is not enabled on your Government Gateway then this will delay the reclaiming of the Job Retention Grant. Your accountants should be able to support you in setting this up.
HMRC will be issuing further guidance in advance of the portal going live and we shall keep you updated.
Further Details v.3
The government has now provided version 3 of the Coronavirus Job Retention Scheme. Full details can be found here.
The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. HMRC have indicated that the scheme will be in place by 20 April 2020 and will be operated via an online service.
If you cannot maintain your current workforce because your operations have been severely affected by coronavirus (COVID-19), you can furlough employees and apply for a grant that covers 80% of their usual monthly wage costs, up to a maximum of £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
This is a temporary scheme in place for 3 months starting from 1 March 2020, but it may be extended if necessary and employers can use this scheme anytime during this period. It is designed to help employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees and protect the UK economy. All employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus.
Who can claim
You must have:
· created and started a PAYE payroll scheme on or before 28 February 2020
· enrolled for PAYE online - this can take up to 10 days
· a UK bank account
Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies and public authorities.
Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed.
However, you must pay your Apprentices at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training. This means you must cover any shortfall between the amount you can claim for their wages through this scheme and their appropriate minimum wage.
Guidance is available for changes in apprenticeship learning arrangements because of COVID-19.
Employees you can claim for
You can only claim for furloughed employees that were on your PAYE payroll on or before 28 February 2020.
Employees hired after 28 February 2020 cannot be furloughed and claimed for in accordance with this scheme. The only exception to this is where employee have been transferred under the TUPE regulations after 28 February and was employed by the transferor on 28 February.
Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed.
To be eligible for the grant, when on furlough, an employee cannot undertake work for, or on behalf, of the organisation. This includes providing services or generating revenue.
Employers are free to consider allocating any critical business tasks to staff that are not furloughed. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
If you made employees redundant or they stopped working for you after 28 February
If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme.
If your employees are working reduced hours
If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme.
If your employee is on unpaid leave
You can only claim for employees that started unpaid leave after 28 February 2020.
If your employee is self-isolating or on sick leave
If you’re employee is on sick leave or self-isolating, they’ll be able to get Statutory Sick Pay.
You cannot claim for employees while they’re getting Statutory Sick Pay, but they can be furloughed and claimed for once they are no longer receiving Statutory Sick Pay.
The new guidance suggests that if an employee becomes sick whilst on furlough leave then you have the option of leaving them on furlough rather than moving them to statutory or contractual sick pay.
You can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and you would otherwise have to make them redundant. The new guidance indicates that this covers those required to care for children as a consequence of the effects of the virus.
Employees with caring responsibilities
Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. For example, employees that need to look after children as a result of school closures may be furloughed.
If your employee has more than one job
If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
Employees can be furloughed in one job and receive a furloughed payment but continue working for another employer and receive their normal wages.
If your employee is on a fixed term contract
Employees on fixed term contracts can be furloughed. Their contracts can be renewed or extended during the furlough period without breaking the terms of the scheme. Where a fixed term employee’s contract ends because it is not extended or renewed you will no longer be able claim grant for them.
Eligible individuals who are not employees
As well as employees, the grant can be claimed for any of the following groups, if they are paid via PAYE:
· office holders (including company directors)
· salaried members of Limited Liability Partnerships (LLPs)
· agency workers (including those employed by umbrella companies)
· limb (b) workers
The guidance below sets out specific considerations for those individuals who are paid via PAYE, but who are not necessarily employees in employment law. Unless explicitly set out below, all other guidance is applicable to these cases, and should be followed.
Office Holders, including Directors
Office holders can be furloughed and receive support through this scheme. The furlough, and any ongoing payment during furlough, will need to be agreed between the office holder and the party who operates PAYE on the income they receive for holding their office. Where the office holder is a company director or member of a Limited Liability Partnership (LLP), the furlough arrangements should be adopted formally as a decision of the company or LLP.
As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.
Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
This also applies to salaried individuals who are directors of their own personal service company (PSC).
Salaried Members of Limited Liability Partnerships (LLPs)
Members of LLPs who are designated as employees for tax purposes (‘salaried members’) under the Income Tax (Trading and Other Income) Act (ITTOIA) 2005 are eligible to be furloughed and receive support through this scheme.
Agency Workers (including those employed by umbrella companies)
Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through this scheme, including where they are employed by umbrella companies.
Furlough should be agreed between the agency, as the deemed employer, and the worker, though it would be advised to discuss the need to furlough with any end clients involved. As with employees, agency workers should perform no work for, through or on behalf of the agency that has furloughed them while they are furloughed, including for the agency’s clients.
Where an agency supplies clients with workers who are employed by an umbrella company that operates the PAYE, it will be for the umbrella company and the worker to agree whether to furlough the worker or not.
Limb (b) Workers
A ‘Limb (b) worker’ is typically registered as self-employed, but provides a service as part of someone else’s business. They generally must carry out the work personally, rather than being able to send someone in their place. Their contract is not with their own client or customer, but with another party.
Where Limb (b) Workers are paid through PAYE, they can be furloughed and receive support through this scheme.
Those who pay tax on their trading profits through Income Tax Self-Assessment, may instead be eligible for the Self-Employed Income Support Scheme (SEISS), announced by the Chancellor on 26 March 2020.
Read more information on the Self-Employed Income Support Scheme, including eligibility criteria and how to claim.
If your employee does volunteer work
A furloughed employee can take part in volunteer work, if it does not provide services to or generate revenue for, or on behalf of your organisation. Your organisation can agree to find furloughed employees new work or volunteering opportunities whilst on furlough if this is in line with public health guidance.
If your employee undertakes training
Furloughed employees can engage in training, as long as in undertaking the training the employee does not provide services to, or generate revenue for, or on behalf of their organisation. Furloughed employees should be encouraged to undertake training.
Where training is undertaken by furloughed employees, at the request of their employer, they are entitled to be paid at least their appropriate national minimum wage for this time. In most cases, the furlough payment of 80% of an employee’s regular wage, up to the value of £2,500, will provide sufficient monies to cover these training hours. However, where the time spent training attracts a minimum wage entitlement in excess of the furlough payment, employers will need to pay the additional wages (see National Minimum Wage Section for more details).
Agreeing to furlough employees
Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. A record of this communication must be kept for five years.
You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.
How much you can claim
You’ll need to claim for:
· 80% of your employees’ wages (even for employee’s on National Minimum Wage) - up to a maximum of £2,500. Do not claim for the worker’s previous salary.
· minimum automatic enrolment employer pension contributions on the subsidised wage
You can choose to top up your employee’s salary, but you do not have to. Employees must not work or provide any services for the business while furloughed, even if they receive a top-up salary.
Full or part time employees on a salary
Claim for the 80% of the employee’s salary, as of 28 February 2020, before tax.
Employees whose pay varies
If the employee has been employed for 12 months or more, you can claim the highest of either the:
· same month’s earning from the previous year
· average monthly earnings for the 2019-2020 tax year
If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work.
If the employee only started in February 2020, work out a pro-rata for their earnings so far, and claim for 80%.
Employer National Insurance and Pension Contributions
You’ll still need to pay employer National Insurance and pension contributions on behalf of your furloughed employees, and you can claim for these too.
You cannot claim for:
· additional National Insurance or pension contributions you make because you chose to top up your employee’s salary
· any pension contributions you make that are above the mandatory employer contribution
Past Overtime, Fees, Commission, Bonuses and non-cash payments
You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.
Benefits in Kind and Salary Sacrifice Schemes
The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary. Where the employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.
Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.
Apprenticeship Levy and Student Loans
Both the Apprenticeship Levy and Student Loans should continue to be paid as usual. Grants from the Job Retention Scheme do not cover these.
National Minimum Wage
Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW)/ Apprentices Minimum Wage (AMW) for the hours they are working or treated as working under minimum wage rules.
This means that furloughed workers who are not working can be paid the lower of 80% of their salary or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage. However, time spent training is treated as working time for the purposes of the minimum wage calculations and must be paid at the appropriate minimum wage, taking into account the increase in minimum wage rates from 1 April 2020. As such, employers will need to ensure that the furlough payment provides sufficient monies to cover these training hours. Where the furlough payment is less than the appropriate minimum wage entitlement for the training hours, the employer will need to pay the additional wages to ensure at least the appropriate minimum wage is paid for 100% of the training time.
Where a furloughed worker is paid close to minimum wage levels and asked to complete training courses for a substantial majority of their usual working time employers are recommended to seek advice from Greystone Legal.
Minimum furlough periods
Any employees you place on furlough must be furloughed for a minimum period of 3 consecutive weeks. When they return to work, they must be taken off furlough. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.
Employees still have the same rights at work, including:
· Statutory Sick Pay
· maternity and other parental rights
· rights against unfair dismissal
· redundancy payments
Grants cannot be used to substitute redundancy payments. HMRC will continue to monitor businesses after the scheme has closed.
Working for a different employer
If contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough.
What about holidays?
Unfortunately, the updated guidance of 11 April 2020 still does not give any guidance on the interplay between furlough leave and holiday. Some commentators believe that furlough and holiday can be taken at the same time and that it does not break the furlough leave period - the employer will simply be required to “top up” pay to 100% for the duration of the holiday. This view has not been confirmed by any formal guidance (let alone legislation) and so, at this point, it remains safer to assume that you are required to pay holidays in full and that it does break furlough leave. Hopefully, specific guidance on the point will be forthcoming soon.