COVID_ 19_ _ Update_ on_ Recent_ Government_ Announcements

14 April 20Peter Grossmark

Following on from recent Government announcements please find below a round up of the main points and further clarification on issues surrounding The Coronavirus Job Retention Scheme and The Statutory Sick Pay Scheme.

Clarification is also provided on the issue of furloughing Directors of their own Personal Service Company’s. A more targeted bulletin will be sent out next week covering Owner / Directors.

Coronavirus Job Retention Scheme

  • Claimants must have created and started a PAYE payroll scheme on or before 28 February 2020 and enrolled for PAYE online (this can take up to 10 days). Online enrolment can be done here.
  • Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed.
  • Individuals can furlough employees such as nannies provided they pay them through PAYE and they were on their payroll on, or before, 28 February 2020.
  • Employers can only claim for furloughed employees that were on the PAYE payroll on or before 28 February 2020.
  • 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.
  • If employees were made redundant, or they stopped working for the employer on or after 28 February 2020, they can be re-employed, put on furlough and the employer can claim for their wages through the scheme.
  • If an employee is working, but on reduced hours or working for reduced pay, they will not be eligible for this scheme.
  • Claims for employees on unpaid leave can only be made if that unpaid leave started after 28 February 2020.
  • Employees who are on sick leave or self-isolating are able to get Statutory Sick Pay.
  • Employers 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 the employer would otherwise have needed to make them redundant.
  • 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 can be furloughed.
  • Employees with more than one employer 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.
  • 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.
  • The normal rules for maternity and other forms of parental leave and pay apply. Employers can claim through the scheme for enhanced (earnings related) contractual pay for employees who qualify for either:
  1. maternity pay
  2. adoption pay
  3. paternity pay
  4. shared parental pay
  • As well as employees, the grant can be claimed for any of the following groups, if they are paid via PAYE:
  1. office holders (including company directors)
  2. salaried members of Limited Liability Partnerships (LLPs)
  3. agency workers (including those employed by umbrella companies)
  4. limb (b) workers
  • As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. 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.
  • This also applies to salaried individuals who are directors of their own personal service company (PSC).
  • 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.
  • 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.
  • 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.

Employers will need to claim:

  • 80% of the 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.
  • For full or part-time employees on a salary: 80% of an employee’s salary, as of 28 February 2020, before tax.
  • For employees on variable pay who have been employed for 12 months or more, the higher of:
  1. same month’s earning from the previous year
  2. average monthly earnings for the 2019-2020 tax year

Additional details regarding how to make the necessary claims are given here.

Self-Employed Income Support Scheme

  • Taxpayers will be eligible if they are a self-employed individual or a member of a partnership and:
  1. have submitted an Income Tax Self-Assessment tax return for the tax year 2018-19
  2. traded in the tax year 2019-20
  3. are trading when they apply, or would be except for COVID-19
  4.  intend to continue to trade in the tax year 2020-21
  5. have lost trading/partnership trading profits due to COVID-19
  • ​Self-employed trading profits must also be less than £50,000 and more than half of total income must come from self-employment. This is determined by at least one of the following conditions being true:
  1. having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of total taxable income
  2. having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of average taxable income in the same period
  • If trading began between 2016-19, HMRC will only use those years for which a Self-Assessment tax return has been filed.
  • If an Income Tax Self-Assessment tax return for the tax year 2018-19 has not yet been filed, taxpayers have until 23 April 2020 to do this.
  • HMRC will use data on 2018-19 returns already submitted to identify those eligible and will risk assess any late returns filed before the 23 April 2020 deadline in the usual way.
  • HMRC will pay a taxable grant equal to 80% of the average profits from the tax years (where applicable):
  1. 2016 to 2017
  2. 2017 to 2018
  3. 2018 to 2019
  • To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount. It will be up to a maximum of £2,500 per month for 3 months and will be paid directly into the claimant’s bank account, in one instalment.

HMRC will contact taxpayers by the beginning of June if they are eligible for the scheme and invite them to apply online. Self-employed individuals should not get in touch as the scheme is not yet open for applications. Contacting HMRC now will only delay the urgent work being undertaken to introduce the scheme.

Access to the scheme will be through GOV.UK only. HMRC are aware of an increase in scam emails, calls and texts. If someone makes contact claiming to be from HMRC, saying that financial help can be claimed or that a tax refund is owed and asks the taxpayer to click on a link or to give information such as their name, credit card or bank details, they should not respond because it is a scam.

HMRC will never contact a taxpayer out of the blue to ask for these details.

Full details are on HMRC’s website at here.

Statutory Sick Pay Scheme

  • The Coronavirus Statutory Sick Pay Rebate Scheme will repay employers the current rate of SSP that they pay to current or former employees for periods of sickness starting on or after 13 March 2020.  Employers who pay more than the current rate of SSP can only claim the current rate amount.
  • The repayment will cover up to 2 weeks starting from the first day of sickness, if an employee is unable to work because they either:
  1. have coronavirus
  2. cannot work because they are self-isolating at home
  • Employees do not have to give you a doctor’s fit note for you to make a claim. Employees must get an Isolation note through NHS111.
  • The scheme can be used by employers who:
  1. are claiming for an employee who’s eligible for sick pay due to coronavirus
  2. had a PAYE payroll scheme that was created and started on or before 28 February 2020
  3. had fewer than 250 employees on 28 February 2020
  • The scheme covers all types of employment contracts, including:
  1. full-time employees
  2. part-time employees
  3. employees on agency contracts
  4. employees on flexible or zero-hour contracts

HMRC will advise in due course when this scheme will end.

Additional details regarding record keeping can be found here.