Coronavirus: Help for Businesses – position at 22 March 2020
The Government has announced a further package of measures to help businesses deal with the coronavirus.
- a Coronavirus Job Retention Scheme
- deferring VAT payments
- deferring Income Tax payments Maintaining cashflow is probably the most important issue for a business at the moment.
Support for businesses who are considering making staff redundant:
The Government has announced a new scheme called “Coronavirus Job Retention Scheme”. Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been made redundant during this crisis. To access the scheme employers will have to do the following:
- designate affected employees as ‘furloughed workers’, and notify your employees of this change – 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 a new online portal (HMRC will set out further details on the information required)
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. However, the furloughed worker must not carry out any work for their employee during this time but they will remain an employee.
Support for businesses by deferring VAT Payments
There will be a VAT payment deferral for 3 months, the deferral will apply to VAT payments due from 20 March 2020 to 30 June 2020. This will apply to all UK businesses. This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 20/2021 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. No penalties or interest for late payment will be charged in the deferral period.
Support for Self Employed by deferring Income Tax payments
If you are self-employed, Income Tax Self-Assessment, payments due on the 31 July 2020 will be deferred until the 31 January 2021.
This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.
Coronavirus Job Retention Scheme
Here’s what we know about the Coronavirus Job Retention Scheme so far:
Whilst there is limited guidance on the scheme and how it will operate in practice at present, we have pulled together some additional detail based on what information is known at present. This information is up to date at the time of this communication being published and remains subject to further guidance from HMRC.
Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis. The scheme has been backdated to 1 March 2020 and is currently anticipated to run until the end of May, albeit the government has said they will extend the scheme if necessary. HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
However, we also await further guidance on what the term “wage costs” will encompass. It remains to be seen whether other aspects of an employee’s income such as commission, bonuses, etc will be included. Also, does this include deductions to be made by the employer for NI and pension?
The employer will need to designate affected employees as “furloughed workers,” and notify employees of this change. We are told that the employer will then need to provide certain details to HMRC through a new online portal (the details of which are yet to be released).
HMRC will administer the scheme and will make the reimbursement payments to employers. They are setting up an online portal and new systems to do so, of which we await details. It is currently anticipated that the grants will be made within weeks and before the end of April although the timing remains to be confirmed.
How does this work in practice and will software be adapted quickly enough to cope with this?
We have added more resource to our in-house payroll bureau team so that we have sufficient capacity to assist businesses with this. They are monitoring developments and liaising with our software providers and will be happy to help with your queries or assist with your payroll or reclaims under this scheme.
One crucial point under the scheme is that the employee will not be able to undertake any work for their employer during the period in which they are on furlough. The aim of the scheme is to support workers who would otherwise be facing redundancy or unpaid layoff. This means that furloughed workers must stop working immediately. If an employer still wants an employee to perform certain aspects of their role or some of their duties, the scheme will not be suitable.
Does the employee have to consent to being a furloughed worker?
The answer is that it depends on a number of factors and legal advice should be sought on your specific situation. However, in broad terms, a payment of less than 100% of wages will normally represent a unilateral change to an employee’s contractual terms. Such a change would need consent unless the employer was going to follow a longer route for trying to force a contractual change.
There are aspects of the scheme about which we await more clarification and we anticipate that HMRC will be publishing further guidance in the coming days. Some burning questions include:
- What precisely are “wage costs”?
- How will deductions such as NI and pension contributions be managed?
- How will this affect employees already off sick or self-isolating? Can they be re-designated as furloughed?
This is a general guidance note based on what we know as at 22 March 2020 and specific advice should be sought on your situation. Existing systems are not set up to facilitate payments to employers and we will keep you informed of these developments as and when they happen.
As part of the UK200Group we have access to up-to-the-minute information and can help you get the support you need. We’ll be keeping you informed in general terms, but please don’t hesitate to get in touch if you have any questions or concerns.