Personal Managers Association
Detailed guidance can be found at: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme A useful breakdown from our accountants:
Here is a breakdown of the scheme from our accountants (Fisher Philips)
Who can claim under the scheme?
o The scheme was initially thought to be open to anyone who had employees paid through a PAYE scheme but this has now been clarified and is open to any UK organisation with employees, including businesses, charities, recruitment agencies (agency workers paid through PAYE) and public authorities.
o This does mean that it is not thought that domestic payrolls for nannies and cleaners will be eligible to use the scheme.
o The organisation must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
o The government currently expects the claim system to be live by the end of April. At the date of this email, no claims are possible.
Which employees can you claim for?
o Furloughed employees must have been on the PAYE payroll on 28 February 2020, and can be on any type of contract, including full-time employees, part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts. Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
o The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
o To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue.
o A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.
o Not all employees need to be placed on furlough. However, those employees who are on furlough cannot undertake work for the organisation.
o While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
o To be eligible for the subsidy, employers should write to their employee confirming that they have been furloughed and keep a record of this communication. We can provide a draft template of the letter if required.
o Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this. Employees who are shielding in line with public health guidance can be placed on furlough.
How much can be claimed?
o The grant from HMRC will cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included when calculating an employee’s regular wage.
o At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
o 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%. Fees, commission and bonuses should not be included.
o For employees whose pay varies, if the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, the claim will be for the higher of either:
⢠the same month’s earning from the previous year
⢠average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, the claim will be for an average of their monthly earnings since they started work.
o All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.
o 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.
How to make a claim?
o Claims will be made via a portal. This portal is not yet up and running but is expected in late April.
o Once the portal is active, employers will need the following to claim:
⢠PAYE reference number
⢠number of employees being furloughed
⢠claim period (start and end date)
⢠amount claimed (per the minimum length of furloughing of 3 weeks)
⢠bank account number and sort code
⢠contact name
⢠phone number
⢠Amount of the claim. HMRC will retain the right to retrospectively audit all aspects of the claim.
o Only one claim can be submitted every 3 weeks. This is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable (i.e. if the employee was placed on leave at this time).
o Once HMRC have received the claim and confirmed eligibility, they will pay it via BACS payment to a UK bank account.
o The claim should be made in accordance with actual payroll amounts at the point at which the payroll is run or in advance of an imminent payroll.
How are payments made to employees on the scheme?
o Salaries will be processed through the RTI PAYE system as usual but according to the revised terms agreed with the employee.
o The employee must be paid all the grant received for their gross pay, no deductions can be made from the money that is granted. The employer can choose to top up the employee’s salary, but does not have to.
o When the government ends the scheme, the employer must make a decision, depending on circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
o 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.
o 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.
o 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.
What is the tax treatment of the Coronavirus Job Retention Grant?
o 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.
o Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
How does this affect directors of limited companies?
This has not been specifically addressed in the issued Guidance but we believe that the intention is that Directors, who receive a PAYE salary and dividend package, will be eligible to use the scheme in respect of the PAYE salary element of their income only. However, this would only be applicable where the Director can be furloughed and will not be providing ANY services or generating revenue for the company during the period. For example, if a Director receives an annual PAYE salary for 2019-20 of £12,000 and the director can become a furloughed worker (i.e. does not undertake any work for the company), the company can apply for a grant towards 80% of the gross pay. This will result in a claim being made for £800 per month plus the associated Employer National Insurance contributions.
Directors of limited companies are not considered self-employed for the purposes of the Coronavirus Self-employment Income Support Scheme and therefore there it is not possible to claim through this unless the directors have a separate sole trade/partnership and the relevant conditions are met.
All best,
Cx