The Coronavirus Job Retention Scheme – some guidance

HMRC has now issued its guidance on how the Coronavirus Job Retention Scheme will work. It expects the scheme, designed to support employers whose operations have been severely affected by coronavirus, to be up and running by the end of April.

It says employers can use a portal to claim for 80 per cent of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month.

They can also claim the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

The scheme is open to all UK employers that had created and started a PAYE payroll scheme on February 28, 2020.

Any organisation with employees can apply. As well as businesses, that includes charities, public authorities and recruitment agencies.

Employees you can claim for

Furloughed employees must have been on the PAYE payroll on February 28, 2020 and can be on any type of contract, including:
• full-time employees
• part-time employees
• employees on agency contracts
• employees on flexible or zero-hour contracts

The scheme also covers employees who were made redundant since February 28 2020, if they are rehired by their employer. Employees hired after that date cannot be furloughed or claimed for.

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.

While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme.

HMRC says employers should discuss with their staff and make any changes to the employment contract by agreement.

They may need to seek legal advice on the process and if sufficient numbers of staff are involved, it says it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.

When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

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. Businesses do not need to place all their employees on furlough.

Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after the February 28 date.

Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this. Those who are shielding in line with public health guidance can be placed on furlough.

If an employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.

What you can claim

Employers need to make a claim for wage costs through the scheme. Fees, commission and bonuses should not be included.

At a minimum, employers must pay their employee the lower of 80 per cent 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 do so.

HMRC plans to issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.

Employees whose pay varies

If the employee has been employed or engaged by an employment business for a full 12 months prior to the claim, businesses can claim 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, they can claim for an average of their monthly earnings since they started work.

If they only started in February 2020, employers can use a pro-rata for their earnings so far to claim.

To claim, you will need:

• your 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)
• your bank account number and sort code
• your contact name
• your phone number

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of the claim.

Employers can only submit one claim at least every three weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until March 1 if applicable.

Once HMRC has received your claim and you are eligible for the grant, it will pay it via BACS payment to a UK bank account.

You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.

Employers must pay the employee all the grant they receive for their gross pay, no fees can be charged from the money that is granted.

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.

Once the scheme has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme.

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.

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.

Tax Treatment of the Coronavirus Job Retention Grant

Payments received by a business under the scheme are made to offset these deductible revenue costs.

That means they must 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.

Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

For more details visit: www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Support for the self-employed

The government has announced a new Self-Employed Income Support Scheme to support those who work for themselves as they struggle to cope with impact of the coronavirus crisis.

Unveiling the plan, Chancellor Rishi Sunak said that self-employed people facing financial difficulties would receive a taxable grant based on their previous earnings over the last three years.

It will be worth up to 80 per cent of earnings and it will be capped at £2,500 a month.

The figure will be calculated using average monthly profits over the last three financial years. Support will initially last three months. However, it may be June before people can access the money.

Mr Sunak said that the scheme would only be open to those who are already self-employed and have a self-assessment tax return for 2019. It will apply to those with trading profits up to £50,000 a year.

The government says that 95 per cent of people who are majority self-employed will benefit from the support scheme and he hopes people will be able to access it no later than June. The scheme will be backdated.

The money will be paid in a single lump sum and anyone who missed the January deadline for their tax return will get an extra four weeks to submit.

Self-employed people who are eligible for the new scheme will be able to apply directly to HMRC for the taxable grant, using an online form, with the cash being paid directly into people’s bank account.

To minimise fraud, only those who are already in self-employment and meet the above conditions will be eligible to apply. HMRC will identify eligible taxpayers and contact them directly with guidance on how to apply.

The Chancellor described the scheme as an “unprecedented level of support” and said ministers had worked to ensure it was targeted at those who need it the most.

Unveiling the scheme, he said he was treating the self-employed like the employed and told them: “You have not been forgotten” and he added: “We are all in it together”.

However, he also implied that he was looking to reform the tax system in the future.

He told a press conference announcing the scheme there was “currently an inconsistency” between what the employed and self-employed pay, despite the actions taken “treating them the same”.

Asked about the self-employed and freelancers who don’t have three years’ worth of accounts, Mr Sunak said the Treasury would look at what they do have.

However, those who are recently self-employed and do not have a full year of accounts will not receive any help under this scheme.

Full details of the Self-Employed Income Support Scheme will be announced by the government later.

Other support measures aimed to help the self-employed include changes to sick pay, aimed at giving assistance to sole traders. The Minimum Income Floor in Universal Credit is being suspended ‘for everyone affected by the economic impacts of coronavirus’.

The move means that self-employed people can now access Universal Credit at a rate equivalent to Statutory Sick Pay for employees – approximately £95 a week.

The ‘new style’ Employment and Support Allowance will be payable for people directly affected by COVID-19 or self-isolating according to government advice from the first day of sickness, rather than the eighth day.

People will also be able to claim Universal Credit and access advance payments where they are directly affected by COVID-19 or self-isolating, without the current requirement to attend a Jobcentre.

The Chancellor announced last week that the government would cover 80 per cent of at-risk employees’ salaries for three months, as part of a raft of measures aimed at supporting the economy during the crisis.

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of the salary of employees that would otherwise have been laid off.

The scheme will cover 80 per cent of a regular salary up to £2,500 a month, which is just above the median income. All UK businesses are eligible.

To discuss any issues that you are facing as a result of coronavirus and how you can access support please contact WNJ on 01772 430000. We are here for you.

Filing accounts – a three-month extension

Businesses are being given an additional three months to file their accounts as they work to deal with the impact of COVID-19.

The joint initiative between the government and Companies House will mean businesses can prioritise managing the impact of the crisis and it will also help them avoid penalties.

There are approximately 4.3 million businesses on the Companies House register and they must submit their accounts and reports each year.

Under normal circumstances, companies that file accounts late are issued with an automatic penalty.

However, as part of the agreed measures, while companies will still have to apply for the three-month extension to be granted, those citing issues around COVID-19 will be automatically and immediately granted an extension.

Applications can be made through a fast-tracked online system which the government says will take just 15 minutes to complete.

Full guidance on applying for an extension can be found at:

https://www.gov.uk/guidance/apply-for-more-time-to-file-your-companys-accounts

Companies that have already extended their filing deadline, or shortened their accounting reference period may be ineligible for an extension.

The government says the policy will be kept under review and “amended as necessary” in light of the progress of the COVID-19 pandemic.

Companies House chief executive Louise Smyth said: “We recognise that these are uncertain times for businesses and that’s why we’re doing all we can to help.

“By easing the burden, we can help businesses through this period and enable them to thrive in the future. I would encourage companies who believe they would benefit from this new flexibility to make an application in good time.”

The government is also in close consultation with company representative bodies, legal practitioners and others, to look at solutions for the impact COVID-19 may have on companies’ ability to hold Annual General Meetings. And it says that updated guidance on this matter will be published in due course.

To discuss this filing extension and any issues that you are facing as a result of coronavirus and how you can access support please contact WNJ on 01772 430000.

VAT deferral – an update

Businesses and sole traders that make VAT payments to the HMRC by direct debit are being advised to cancel the arrangement to ensure they take advantage of the government’s deferral scheme.

The government is looking to support the economy during the coronavirus pandemic by deferring payments from March 20 until June 30.

VAT-registered businesses and individuals will not need to make a payment during this period and this is an automatic offer with no applications required.

Cancelling any direct debit will ensure that payments aren’t automatically processed. However, they will also need to remember to set up the direct debit for future VAT returns.

And they should also continue to prepare their VAT returns as normal and submit them on time.

VAT-registered businesses and individuals will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period.

VAT refunds and reclaims will be paid by the government as normal.

For more information about the government’s support for business during the coronavirus crisis visit: www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

To discuss any issues that you are facing as a result of coronavirus and how you can access support please contact WNJ on 01772 430000. We are here for you.

MTD – nothing to be scared of!

Making Tax Digital (MTD) is nothing to be scared of – and digital accounting could actually save you and your business time and money.

That was the message of our free interactive workshop for small business owners which we held with The Business Clinic in Preston earlier this month.

The aim of the presentation given by myself and WNJ colleague Donna Helm was to de-mystify the subject and take away some of “the panic” around the subject.

Donna supervises our accountancy software programmes and helps clients with training, and integration to make sure they get the most out of the software they choose.

We touched on some of the concerns people have, including increased compliance burdens, short timescales and additional costs.

Our aim was to give you the truth about digital accounting. We also looked at the whole concept of cloud accounting and its potential benefits.

Donna told the audience: “It can be of huge benefit to your business, in efficiencies and cost savings.”

She also stressed the importance of proper training to ensure businesses get the best out of the software and technology that is available.

The countdown to MTD is now well and truly on. As part of MTD, businesses registered for VAT with a taxable turnover above the VAT registration threshold of £85,000 will need to keep VAT records digitally and file their VAT returns using MTD compatible software.

This will start from their first VAT period starting on or after April 1 next year.

Businesses with a taxable turnover below the VAT threshold will not have to operate MTD, but can still choose to do so voluntarily.

VAT Notice 700/22: Making Tax Digital for VAT provides information to customers and adds to amendments to the VAT Regulations made earlier this year.

WNJ also has also set up a dedicated team which we have put together to address MTD issues and to help our clients chose, install and train how to best use the different software on offer.

The workshop was our latest collaboration with The Business Clinic – a growing Preston-based community interest company set up to support companies across Lancashire.

The Business Clinic delivers independent and thought-provoking strategy, skills and support to ensure healthier profits.

To discuss any issues regarding the HMRC’s MTD plans please contact me on 01772 430 000.

2018 Budget Summary

We are delighted to announce our summary of the key announcements in the Budget 2018 statement, made on Monday, 29 October.

Expectation leading up to the Budget had been for tax rises, with various revenue raising options discussed ahead of the statement. Despite this, the headline changes announced by the Chancellor included some good news for taxpayers and businesses:


• The personal allowance will be raised to £12,500 from April 2019, one year earlier than previously planned. At the same time, the higher rate threshold will rise to £50,000, also a year ahead of schedule.
• The pension lifetime allowance will increase to £1.055 million for 2019/20, with no change to the annual allowances.
• The VAT registration threshold has been frozen for another two years, meaning it will be £85,000 until 2022.
• The annual investment allowance (AIA) will increase to £1 million for all qualifying expenditure on plant and machinery made between 1 January 2019 and 31 December 2020.
• Business rates for retail properties with a rateable value below £51,000 will be cut by a third. Local newspapers will continue to receive a £1,500 discount and public lavatories will receive 100% business rate relief. These reductions will apply until 2021 when the rates will be re-evaluated.
• Fuel duties were frozen for the ninth year in a row, despite some speculation that the Chancellor would scrap the freeze.
It is worth noting that the draft Scottish Budget will be published on 12 December, which will include details of any changes to income tax rates and thresholds there for 2019/20.

If you have any questions about the summary’s contents, want a more detailed breakdown or how any aspects of your tax and financial planning may be affected by the Budget, please call us to discuss them.