UPDATE 17 APRIL: Claim for your employees’ wages through the Coronavirus Job Retention Scheme (CJRS) A step by step guide for employers
UPDATE 17 April: Job Retention Scheme Extended By One Month
UPDATE 15 April: Furlough Scheme Cut-Off Date Extended To 19 March
We are now aware of important information regarding the HMRC portal being created to process claims under the Coronavirus Job Retention Scheme (CJRS). Whilst the Government and HMRC are yet to release any formal announcement, yesterday, senior representatives from HMRC appeared before a Parliamentary Select Committee to answer questions about the CJRS. During the two hour meeting the representatives provided the select committee with a lot of extremely useful information which we expect to be formally released in the coming days:
HMRC portal to process claims under the CJRS – all you need to know:
- The portal will be open from 20th April. This date has been brought forward from 30th April which was the original date provided by the government.
- The first payments to employers will be made on 30th April.
- The aim is that payments will be made within 4-6 working days of submission of the data to HMRC via the portal. This is to allow HMRC a small chance to test for fraudulent claims.
- Apparently, live testing started yesterday and HMRC are confident they can cope with a large volume of claims and have tested up to 450,000 claims an hour.
- A guidance document explaining the process for submitting claims will be released within the next week so employers can get claims ready for submission.
- Employers who pay weekly can submit a claim weekly but only one claim can be made per pay period i.e. one each week for weekly payroll schemes and one each month for monthly schemes.
- A high proportion of the first claims can expect to include payments of salary backdated to 1st March.
- Employers can submit claims 14 days ahead which means that if a monthly pay period involves paying salary on the last day of the month, employers can submit their claims 14 days beforehand and presumably therefore receive the payment from HMRC 4-6 days later and still have it several days before pay day.
- There are no plans to extend the scheme to those who started employment after 28th February.
- HMRC are alert to the possibility of employers abusing the scheme, (a common issue likely to be employees still working whilst furloughed). As a result of this, there is an employee hotline for employees to report employers who abuse the scheme.
- If there is evidence of a breach of the rules now, claims will not be paid out.
- In the future, HMRC will continue to check that claims they have paid were correct. We already know that employers are required to keep written records of those furloughed for 5 years. As a result of this it is likely that retrospective investigations will probably last a long time.
- HMRC stated that depending on the severity of employers’ conduct, some investigations could result in criminal proceedings being considered.
We will be offering the service of submitting claims for our clients, there will be a small admin charge for this service. We will provide further information to our clients once HMRC have released their official statement.
We would like to assure you that we are proactively working with HMRC to provide a seamless payroll process for our clients through the CJRS. If you have any concerns, please contact your payroll adviser direct on 01255 850 002
Further HMRC Clarification: Coronavirus Job Retention Scheme
6 April 2020: HMRC has updated its guidance on the grants available under the Coronavirus Job Retention Scheme (CJRS), publishing further details about who and what is eligible.
The HMRC update was released on 4 April and addressed:
- Guidance for employers – Claim for your employees’ wages through the Coronavirus Job Retention Scheme
- Guidance for employees – Check if your employer can use the Coronavirus Job Retention Scheme
These new documents confirm some of the understanding we included in The Coronavirus Job Retention Scheme: furlough guidance as well as providing additional information. This is summarised below and should be read in conjunction with our earlier guide.
Access to the CJRS grant
Any entity with a UK payroll and a UK bank account will be able to claim, including individuals, businesses, charities, recruitment agencies and public authorities.
The online service through which claims will be made is expected to be available at the end of April 2020. The claimant, not HMRC, will need to calculate the amount being claimed. It is now clear that agents will be able to apply on behalf of their clients. The government and HMRC are yet to release any formal announcement
The following information will be needed:
- ePAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
- the relevant bank account number and sort code
- claimant’s contact name
- a contact phone number
After checking the claim, HMRC will pay it by BACS to a UK bank account.
The guidance states that HMRC will retain the right to audit retrospectively all aspects of the claim. Clearly since the employer will have submitted their payroll through the Real Time Information (RTI) system, HMRC will use this to make the necessary checks.
Note that the employer must pay the employee all the grant received for the employee’s gross pay. The employer cannot charge and deduct a fee from the grant.
Timing of claims
The intention is that employers will make their claims either shortly before or during running the payroll. Some employers who were quick to act to furlough staff shortly after the announcement of the CJRS, will be backdating claims to 1 March.
Given the employment law procedures needed to obtain employees agreements to vary employment contracts etc, it is likely that many staff will have already received their March salary. The grant will only accrue once the employee finishes work and starts furlough, not when the decision to furlough is made or when they are written to confirming their furloughed status. Grants will be prorated if the employee is only furloughed for part of a pay period.
The HMRC guidance notes that ‘if appropriate, workers’ wages should be reduced to 80% of their salary within your payroll before they are paid. This adjustment will not be made by HMRC’.
Salary on which claim is based
The grant is based on the lower of 80% of the monthly salary and £2,500, plus the associated employers NIC and pension contributions. For employees on a regular salary, use 80% of the employee’s gross salary as at 28 February 2020.
For an employee who has been employed for more than 12 months, but whose pay varies, use the highest of the
- Same month’s earnings from the previous year
- Average monthly earnings for the tax year 2019/20.
For an employee who has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work.
If the employee only started in February 2020, pro rate their earnings to date and use that as a base.
- You can only claim for furloughed employees that were on your PAYE payroll on or before 28 February 2020.
- Employees hired after 28 February 2020 cannot be furloughed and claimed for in accordance with this scheme.
- Employers can claim for any regular payments they are obliged to pay employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonuses (including tips) and commission payments and non-cash payments should be excluded.
The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable benefits in kind. Benefits provided through salary sacrifice, such as pension contributions, should not be included in the reference salary. So for example, if the salary was £40,000 but £5,000 was paid into the employee’s pension as a salary sacrifice, the reference salary becomes £35,000.
HMRC guidance makes it clear that where an employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.
HMRC has also confirmed that COVID-19 counts as a life event for the purposes of an employee’s right to request changes to salary sacrifice arrangements, if the employment contract is updated accordingly.
Period of furlough and multiple jobs
Employees must be furloughed for a minimum period of 3 consecutive weeks. When they return to work, they must be taken off furlough. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.
Employees cannot work for the employer during the period of furlough leave. They can however work for a different and unconnected employer during this period. An employee with multiple employers can be furloughed by more than one at the same time and in that case, each employment can pay the worker up to the maximum £2,500 at the same time.
Employees still have the same rights at work, including:
- Statutory Sick Pay
- maternity and other parental rights
- rights against unfair dismissal
- redundancy payments
Grants cannot be used to substitute redundancy payments.
Tax consequences of the grant
The grant paid to the employer is included within the business’ taxable profits for income tax or corporation tax purposes. It is not clear whether the grant is taxable on an employer who is not trading, such as those employing domestic staff, eg, an individual employing a nanny. The gross salary and associated NIC and pension costs continue to be tax deductible in the usual way.
The employee is taxed on the salary paid by the employer as usual.
The HMRC guidance confirms our understanding that directors, including those who are directors of their own personal service company, can be furloughed. The HMRC guidance reminds companies that:
‘company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.’
‘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, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.