Is my business eligible for the Coronavirus retention scheme?

The Coronavirus Job Retention Scheme (CJRS) has been introduced to encourage businesses to furlough workers rather than 'laying them off', to avoid widespread hardship and an economic crisis deepening across the UK.

How will it work?

The Coronavirus Job Retention Scheme (CRJS) will be a government grant to reimburse employers for 80% of furloughed workers' (who are required to take a temporary unpaid leave of absence) wage costs, up to £2,500 per month.

Directors can also furlough themselves, but currently, if they do, then they can only carry out their legal and company duties. They are not permitted to complete any paid company work within the business or to generate new business.

This also applies to sole directors of limited companies (often contractors). The government has come under increasing criticism in the Media for excluding this large group in the package of help available, so it is possible the current rules could be revised.

Employers can choose to top-up the pay, either for the unfunded 20% or the amount above £2,500 for higher earners, but this will not be a formal requirement. 

The Chancellor has also said that he was “placing no limit on the amount of funding available for the scheme. We will pay grants to support as many jobs as necessary.”

Furloughed employees

Employers should discuss with their staff and make any changes to the employment contract by agreement and may need to seek legal advice on the process.

Furloughed employees must have been on the relevant PAYE payroll on March 19, 2020 and can be on any type of contract including employees on agency contracts or on flexible or zero-hour contracts.

When on furlough, an employee cannot undertake work on behalf of the business and the employee's wage will be subject to the usual income tax and other deductions. If an employee is working but on reduced hours or pay, they will not be eligible for this scheme. Employers will need to write to their employee confirming that they have been furloughed and keep a record of this.

Employees on sick leave or self-isolating should get SSP but can be furloughed after this. Employees who are self-isolating can be placed on furlough.

If workers are required to complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

Employees on maternity leave, contractual adoption pay, paternity pay or shared parental pay

If an employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply. If an employer offers enhanced (earnings-related) contractual pay to women on Maternity Leave, this is included as wage costs that can be claimed through the scheme. The same principles apply where an employee qualifies for contractual adoption, paternity or shared parental pay.

What can be claimed?

Businesses will receive a grant from HMRC to cover the lower of 80% of an employee's regular wage, plus the associated employers' NIC and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.

For full-time and part time salaried employees, the employee's actual salary before tax, as of March 19, 2020, should be used to calculate the 80%.

For those whose pay varies, if an employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, a claim can be made for the higher of either the same month's earnings from the previous year or the average monthly earnings from 2019/20. If the employee has been employed for less than a year, a claim can be made for an average of their monthly earnings since they started work. If the employee only started in March 2020, use a pro-rata for their earnings so far.

The government portal dealing with furloughed employees is set to open on April 20.

Making a claim

Information will be needed to make a claim, including the ePAYE reference number, the number of employees being furloughed, the claim period (start and end date), the amount claimed (per the minimum length of furloughing of 3 weeks) and the bank account number and sort code.

Only one claim can be submitted at least every 3 weeks, which is the minimum length an employee can be furloughed for.

Business treatment of the Job Retention Grant

Payments received by a business under the scheme must be included as income in the business' calculation of its taxable profits. Businesses can deduct employment costs as normal when calculating taxable profits.

All UK businesses are eligible and the CRJS scheme will be administered by HMRC

The employer will need to designate affected employees as furloughed workers (an employee is furloughed when they are required to take a temporary unpaid leave of absence) and submit the required information to HMRC through a new online portal. HMRC will set out further details on the information required on the portal.

The grant is a reimbursement to the employer, with the employer making the salary payment to the furloughed worker and will then be reimbursed by HMRC.

When will the scheme be going live?

No precise date yet, however, HMRC say that they are working “night and day” to set up the system for reimbursement as the existing systems aren't set up to make payments to employers.

The Chancellor stated in his news conference that he expects the first payments to be made “within weeks”.

If you need help to pay employees in the interim or require short term cash flow support, you could be eligible for the Coronavirus Business Interruption Loan Scheme.

Questions and answers…

• How do employers know if they can furlough an employee and are there employment law implications? Check The Citizen's Advice website for more details https://bit.ly/2WFcNNk
• How long will employers have to wait to receive payment from CJRS? The Chancellor seems to be suggesting that the scheme will be paying out by the end of April at the latest.
• Can an employer delay making payment to employees until they receive funding from the scheme? It seems from the initial guidance that employers will have to make the payment initially and then be reimbursed. Employers may be able to apply for a business disruption loan suggesting this can be used to bridge the cash flow gap until the employer is reimbursed.

Things are changing on a daily basis and we will keep you updated. Read more on our website https://bit.ly/3bB35jj.

Feel free to get in contact if you have questions relating to your business or tax on 01403 33749. Stay safe everyone.

Why Giltinan and Kennedy?

At Giltinan and Kennedy, we're always striving to improve our service to clients and our new quarterly complimentary reviews, save you £200 per meeting. The offer also applies to prospective new clients.

Get your finances on track, discuss your savings and business goals with an expert and feel reassured that we'll help you to make provision for what matters.

The no-pressure meeting (currently by phone or video call) will cover your long-term aims and how we can support you towards achieving them with robust and up-to-the-minute business and financial planning.

And if you recommend us to a friend and they go ahead and work with us, we'll make a £50 donation to the charity of your choice.

Working with me and my hand-picked team, you have access to my many years' experience as a financial accountant and small business owner.

We can:

• ensure you save on tax costs and pay competitive fees for your accounts
• provide a complete, objective, service, with the benefit of calling on our wide range of professional partners
• be proactive, ensuring we are up to date with the latest changes and legislation
• offer a fixed fee tax return service to help you budget.

Why me?

Especially in these challenging times, I understand the pressures you face and I tailor my services to meet your changing needs.

As well as general accountancy and extensive tax skills, myself and another partner also have individual specialist skills which enable us to provide you with a comprehensive, first-class service.

This means that you can stop worrying about your finances and instead be reassured that your accounts and any tax work will be carried out by my qualified and experienced accountants. They will never be delegated to unqualified staff or subcontracted, as is increasingly the case with other practices.

I provide a high quality service at a reasonable price, within budget. There are no hidden extras and we agree all fees in advance.

Email me here, direct message or call me on 01403 337490 to see how we can support you through the COVID-19 crisis and beyond.