COVID-19: Other Tax Related Measures

HMRC have announced that the Coronavirus Job Retention Scheme will launch on 20 April 2020 with claims to be paid within 6 working days. This was initially announced as a temporary three-month scheme, however has since been extended by one month and now operates from 1 March 2020 to 30 June 2020. 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.

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.

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 an 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
  • 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.