Covid-19

What is the Coronavirus Job Retention Scheme?

The scheme is intended to be an alternative to redundancy. The employee remains on your books, while the Government reimburses you for 80% of their wages. This alternative requires furloughing the respective employee.

Who is eligible for the scheme?

This is available to all UK businesses. To be eligible, employers must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.

What is flexible fulough? 

From 1 July 2020, your employer will be able to bring you back to work on a part-time basis. Your employer will have to pay your wage for any hours that you are in work.

There’s no limit on the number of hours you can work. For example, If you work a 40-hour week and your employer wants to, it can get you to work 39 hours and then furlough you for the remaining hour. The amount of time you work each week can also vary over the month, with employers varying it week by week. 

As well as this, employers will start to contribute more to the payments of their furloughed staff. 

• From August, your employer will be expected to cover national insurance and any pension contributions.
• From September, the state will pay your employer 70% of your salary, up to £2,190/month and the employer covering the remaining 10%.
• From October, the state will pay your employer 60% of your salary, up to £1,875/month and the employer covering the remaining 20%.

Coronavirus calculator

You can now calculate how much you have to pay your furloughed employees for hours on furlough, how much you can claim for employer NICs and pension contributions and how much you can claim back. Click here. 

How can my business access the scheme?

You will need to:

• designate affected employees as ‘furloughed workers,’ and notify your employees of this change. Set this out in writing.
• remember changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
• submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal, currently being developed (HMRC will set out further details on the information required).

Can my employee continue to complete work for me while furloughed?

Not currently. If an employee is working, including if they are placed 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.

This may however change from the end of August, when the Government has indicated that employees may be able to return as part time workers on furlough, provided the employer also contributes to their wages.

How much will I be reimbursed?

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month and is working urgently to set up a system for reimbursement.

The associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage are included. However, fees, commission and bonuses should not be included.”

What about the remaining 20% of my employees’ wages?

Employers are not obliged to top up the remaining 20% but employers can ask employees for their consent to this reduction in their wages, and it is expected that they will consent if this is considered preferable to redundancy or unpaid leave.

How does the scheme work for employees whose pay has varied?

If the employee has been employed for a full twelve months prior to the claim, you 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, you can claim for an average of their monthly earnings since they started work.

How do I make a claim?

HMRC have made an online portal.

In order to make a claim you should keep strong records, and you will need to provide:

• 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 three weeks)
• Your bank account number and sort code
• Your contact name
• Your phone number

How long will the Coronavirus Job Retention Scheme run for?

The intention is for the Coronavirus Job Retention Scheme has been extended to last until the end of October. However, please note that there will be a change from 1 September 2020 which will allow employees to return part time provided employers pay for some of their wages.

More information:

Claim for wage costs through the Coronavirus Job Retention Scheme, our article on accessing the Coronavirus Job Retention Scheme, and more can be found in the TTF News Section.

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.

If you have fewer than 250 employees, you will be able to claim back statutory sick pay for any employee who has claimed statutory sick pay as a result of Covid-19. The mechanism for how this will work is still being arranged, however ensure you keep strong records during this time.

The changes being made include:

• Giving companies greater breathing space from creditors seeking to ensure their debts for a period of time while they seek a rescue or restructure;
• Protecting their supplies to allow them to continue trading during this period; and;
• A new restructuring plan, which will bind creditors

Key safeguards for creditors and suppliers will be included to ensure they are paid, while existing laws against fraudulent trading and the threat of director disqualification will continue to act as an effective deterrent against reckless misuse of these new measures.

Wrongful trading provisions are also being suspended retrospectively from 1 March 2020 for three months so directors can keep their businesses going without the threat of personal liability.

More information: 

You can find out more in Business Secretary, Alok Sharma’s announcement on the 28 March and our article on the New Restructuring Tools to be added to Insolvency Law.

When will deferral of VAT payments apply? 

Deferral will apply to all VAT payments due between 20 March and 30 June, with an option to defer payments up until 31 March 2021.

Annual payments and payments on account due between 20 March and end of June can also be deferred.

Am I eligible?

All VAT-registered UK businesses are eligible.

How do I access it?

This is an automatic offer with no applications required. UK Registered businesses will not need to make VAT payments normally due with VAT returns during this period.

Taxpayers will be given until the end of the 2020-21 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.

Do I need to cancel my direct debit if I want my VAT payment to be deferred?

Businesses who normally pay by direct debit should cancel their direct debit with their bank if they wish to defer their VAT payments. HMRC has now confirmed that it will not automatically cancel collection of VAT payments by direct debit.

Businesses will also need to remember to reinstate their direct debit mandate once the deferral is over and to make arrangements to pay the accumulated VAT by the end of the 2020/21 tax year.

Will interest be due if payment has been deferred? 

HMRC will be inhibiting all default surcharges and interest will not be accrued on amounts deferred as a result of this announcement.

Would there be penalties if I do not render my VAT on time? 

HMRC said that while surcharges would be “inhibited” during the deferral period, businesses need to continue to render their VAT return on time.

If you’re in temporary financial distress because of COVID-19

If you are experiencing financial difficulties more help is available from HMRC’s Time to Pay service.

More information:

For more information please read the Government’s guidance on deferring VAT payments and HM Government’s Business Support page on VAT deferral.

When does the deferral of income tax apply? 

The deferral for income tax self assessment applies to the second payment on account for 2019/20 due on 31 July 2020 which is deferred until 31 January 2021. This is an automatic offer and no application is required.

Am I eligible? 

All taxpayers with a second self-assessment payment on account due on 31 July 2020 can defer payment until 31 January 2021. It is not necessary to be self-employed to be eligible for the deferral.

How do I access it?

This is an automatic offer with no applications required. No penalties or interest for late payment will be charged if you defer payment of your July 2020 payment on account until January 2021.

HMRC have also scaled up their Time to Pay offer to all firms and individuals who are in temporary financial distress as a result of coronavirus and have outstanding tax liabilities.

When can I access it?

On 31 July 2020 when your self-assessment payment on account, ordinarily due to be paid on that date, may be deferred until 31 January 2021.

Do I have to defer my tax payment? 

The deferral is optional. Taxpayers can still pay the July payment if they wish to avoid a larger payment in January 2021.

Do I need to cancel my direct debit? 

Any taxpayer who wishes to defer payment needs to cancel any direct debit set up for this payment on account and ensure they reinstate it in time for the January 2021 payment.

Should I still file my self assessment returns?

Self assessment returns should still be filed by their due date and it may be advantageous to file the 2019/20 return as soon as possible after 5 April 2020.

This might help facilitate the tax payment due in January 2021 and highlight any refund due, including as a result of any loss relief available.

If you’re in temporary financial distress because of COVID-19

If you are experiencing financial difficulties more help is available from HMRC’s Time to Pay service.

More information: 

For more information, please see the Government’s page on being unable to pay your tax bill on time, and the Government’s Support for Businesses page.

What are ‘Bounce Back Loans’?

This scheme aims to help small and medium-sized businesses borrow quickly. Loans of between £2,000 and £50,000 are on offer, with the Government to guarantee 100% of the loan with no fees or interest to pay for the first 12 months.