COVID-19: Other Tax Related Measures

The Coronavirus Job Retention Scheme online portal launched on 20 April 2020, with claims to be paid within 6 working days. All UK employers, who cannot maintain their current workforce because their operations have been severely affected by Coronavirus, are eligible to claim financial support under the scheme.

This is a temporary scheme designed to help those employers retain their employees and to protect the UK economy. It commenced on 1 March 2020 and will continue in its current form for the five months to 31 July 2020, following which the claim criteria will change for the three months to 31 October 2020, with employers required to pay a percentage towards the salaries of those staff who may remain furloughed.

The scheme will close to new entrants from 30 June 2020. From this point onwards, employers will only be able to furlough employees that have already been furloughed for a full three-week period prior to 30 June 2020. Where employees have not been furloughed, the last date for furloughing an employee under the scheme will be 10 June 2020.

The guidance for employers contains a list of what will need to be provided when making a claim (see below), however it does not ask for evidence that the current workforce cannot be maintained due to operations being severely affected by coronavirus. It is therefore unclear as to what is required of employers in this regard. However, the guidance does state that HMRC reserve the right to retrospectively audit all aspects of a claim.

Grant Available

The maximum grant will be calculated per employee and is the lower of:

• 80% of ‘an employee's regular wage’; and
• £2,500 per month.

In addition, employers can also claim the associated employers’ National Insurance Contributions (NIC) on this amount and the minimum automatic enrolment employer pension contributions on that wage.

From 1‌‌ July 2020, businesses using the scheme will have the flexibility to bring furloughed employees back to work part-time with the government continuing to partially subsidise the normal hours which they do not work.

Employers can decide the hours and shift patterns their employees will work on their return and will be responsible for paying their wages in full whilst working. Any working hours arrangement agreed between a business and their employee must cover at least one week and be confirmed to the employee in writing.

If employees are unable to return to work, or employers do not have work for them to do, they can remain on furlough and the employer can continue to claim the grant for their full hours under the existing rules.

In addition, the scheme will be tapered from 1 August 2020, with employers being required to pay a percentage towards salaries as follows:

• the government will continue to pay 80% of wages up to a cap of £2,500 but employers will pay Employers NICs and pension contributions from 1 August 2020;
• from 1 September 2020, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work, employers will be required to pay Employers NICs, pension contributions and 10% of wages to make up 80% of the total up to a cap of £2,500;
• from 1 October 2020, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work, employers will be required to pay Employers NICs, pension contributions and 20% of wages to make up 80% of the total up to a cap of £2,500.

Fees, commission and bonuses should not be included.

Please note employers can top up wages to beyond the scheme maximum thresholds if they wish, but there is no requirement to do this.

What Employers need to do

• designate affected employees as “furloughed workers”, and notify employees of this change, noting that changing the status of employees will remain subject to existing employment law and, depending on the employment contract, may be subject to negotiation. Once “furloughed”, these employees will not be able to undertake work; and
• submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required).

When employers are making decisions in relation to the furloughed process, it is recommended they seek advice of an employment lawyer.

Eligible Employees you can claim for

Furloughed employees must have been on your PAYE payroll on or before 19 March 2020, notified to HMRC on a Real Time Information (RTI) submission on or before 19 March 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.

The scheme also covers employees who were on the payroll as of 28 February 2020 (i.e. notified to HMRC on an RTI submission on or before 28 February 2020) and were made redundant or stopped working for the employer in the period prior to 19 March 2020, if the employer re-employs them and places them on furlough.

To be eligible, when on furlough, an employee can not undertake work for or on behalf of the business. This includes providing services or generating revenue.

If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.

Employees whose pay varies

If the employee’s salary varies (e.g. staff on zero- hour contracts) and they have been employed for a full twelve months prior to the claim, employers claim for the higher of either:

• the same month’s earning from the previous year; and
• average monthly earnings from the 2019-20 tax year.

Employees who have worked less than a year

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work. If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.

How to claim

Employers (or their agents that are authorised to act for PAYE matters) need to calculate the amount they are seeking to claim in accordance with the actual payroll amounts (either shortly before or during running payroll) and will need:

• Employer PAYE reference number;
• the number of employees being furloughed;
• NI number of furloughed employees;
• Unique Tax Reference number for the business;
• the claim period (start and end date);
• amount claimed (per the minimum length of furloughing of 3 consecutive weeks);
• bank account number and sort code;
• contact name; and
• phone number.

Please note HMRC will retain the right to retrospectively audit all aspects of any claim and will monitor employers after the scheme has closed.

When claiming for part-time furloughed hours, employers need to submit the usual hours an employee would be expected to work in a claim period and the actual hours worked. These claims must be made for a minimum period of a week.