UPDATE: EXTENDED SUPPORT FOR BUSINESSES THROUGH THE JOB RETENTION SCHEME
EMPLOYERS: The Coronavirus Job Retention Scheme has been extended until the end of March 2021. It will cover 80% of employees' wages (which will be reviewed in January 2021). Employers will need to pay NIC, PAYE and pension contributions etc.
Further guidance can be read here>
DEADLINE FOR CLAIMS
EMPLOYERS should note that all Job Retention Scheme claims for the periods before 1 November need to be made by 30 November 2020
Click here for more information>
CHANCELLOR ANNOUNCES SUPPORT TO PROTECT JOBS AND HELP BUSINESSES WITH CASH FLOW
Today the Chancellor announces further support for businesses and individuals as the government looks to manage the virus whilst protecting jobs.
We are in a very different position to back in March, when there were many uncertainties and the measure implemented were for immediate support and thought temporary. We now know that further restrictions are likely for the next 6 months, and the hence the support announced today.
The primary goal of the next stage is to protect jobs, yet the current Job Retention Scheme, more commonly known as "furlough" will finish at the end of October 2020. The new scheme is aimed at protecting genuine jobs, and not to support those that can only survive through the furlough scheme.
Lucinda Matkin of LM Insolvency welcomed the new scheme stating "it offered continued support in unprecedented times, but also acknowledged that support must be focused viable businesses" she went on to say" It is clear that not all jobs will be saved. nor all companies, but this is not possible for any government. The rate of insolvencies have been significantly lower than the previous year, with company insolvencies for the month of August 2020 being 43% lower than the same time last year. Likewise bankruptcies were also down 43% on the same month last year. These statistics illustrate the need to support what the chancellor termed viable jobs and not just those that can survive through the furlough scheme, as many businesses that would originally have been insolvent have in effect been given a lifeline, or the inevitable has been delayed"
So what is the continued support?
There are two elements;
Job protect comes in the way of a New Job Support Scheme with three objectives;
The scheme will run for 6 months from 1 November 2020 (follow on from the furlough scheme which will end). Its aimed at viable jobs, so is support for those working.
It is support for those working at least one third of their normal hours, which a company/employer will pay for as normal.
For the remainder which they do not work, the employee will be supported further by the government and the employer, with each contributing one third of the pay for normal hours not worked.
All small and medium sized businesses will be eligible to claim for the scheme, but large business will need to prove they have been affected with a fall in turnover. The scheme will also be open to those that did not utilise the furlough scheme.
The Job Retention Bonus and Kick Start Schemes remain in place and are unaffected by the new scheme.
CASH FLOW SUPPORT
The second part of the support announced today by the chancellor is aimed at support the cash flow of businesses, whilst they protect jobs.
There are no new loan schemes or grants announced rather an extension of existing schemes.
Bounce Back Loans
Bounce Back Loans gave a £38 billion boost to businesses, and originally were interest free for year and then repaid over 6 years. The "Pay as You Grow" announced today means these loans can now be paid back over a period up to 10 years, almost halving the monthly payments, companies also have options to make interest only payments for a period of time and take 6 months repayment holiday if really struggling. Further more these measure would not impact the credit score of a business using them.
Lucinda Matkin of LM Insolvency said "this will help businesses as they look to recover, but I hear of many businesses that took a minimal loan amount, thinking the impact would only be temporary, and under current terms are unable to top up that loan. Now that it is clear we face longer term restrictions, an option for those that had not utilised the support fully would have been extremely beneficial to those businesses that miscalculated the impact of the outbreak or the longevity of it"
Business Interruption Loans (CBILS)
The government backed guarantee has also been extended to 10 years for these loans, and the deadline for applying has been extended.
Over £30 billion of vAT was deferred to March 2021. To help cash flow rather than the a lump sum becoming due, companies will be able to spread the cost over 11 months interest free.
In addition the reduced VAT rate of 5% for the hospitality industry will remain at 5% until the 31 March 2021.
Self Assessment Tax
Deferred Self Assessment payments due January 2021, can also be spread over 12 months from next January, rather than a lump sum becoming due.
If you are still going to find managing cash difficult, having utilised cash reserves and are juggling reduced income with your outgoings, please do not hesitate to contact us at LM Insolvency, you have more options the soon you act.
Likewise if you have decided that you no longer wish to continue, we can talk you through the options available, whether insolvent (unable to pay all your debts including redundancies) or solvent (and looking to save tax on exiting your business). Email firstname.lastname@example.org or call 07972928153
THE HEADLINESTHE ANNOUNCEMENT
At the Budget 2020, the Chancellor announced an unprecedented package of measures to seeing companies receive grants to pay their workers 80% of their salaries up to a limit of £2,500 per month.
The grant would be for those that can no longer work due to restrictions as a result of the outbreak, but would be retained as employees by their employer. i.e. "Furloughed Workers"
This scheme has probably seen the most changes and clarification being issued since its launch, together with a very similar scheme for Self employed and freelancers being launched (this scheme does not cover Self employed)
Employers can claim 80% of furloughed workers (employees on leave of absence) usual monthly wage costs, up to £2,500 per month, (£576.92 per week) per employee, plus the associated Employer National Insurance contributions and minimum automatic enrolment pension contributions on that wage
The following are not eligible under this scheme;
IMPORTANT - CAUTIONARY NOTE: We recommend you seek professional legal advice in respect of employment contracts and the ability to furlough employees - a change to their employment contract may be required, depending of the terms
WHENThe scheme will cover the cost of wages backdated to 1 March 2020, and was initially open for 3 months. This has now been extended to 30 June 2020
The scheme can be used at anytime during this period, and opened for claims on 20 April 2020
IMPORTANT - CAUTIONARY NOTE: We recommend you seek professional legal advice with regards the selection to employees to furlough
HOW TO APPLYTo access the scheme you need to:
We recommend you seek professional advice in respect of furloughing workers and the terms of contracts of employment, and read the detailed guidance provided by HMRC and the Government below.
DETAILED GUIDANCE AND UPDATESGUIDANCE FOR EMPLOYERS
Ahead of the portal opening, HMRC launched its calculator tool to help firms identify the level of grant they are entitled too through the scheme
Here is a link to the the calculator tool >
Check if you can claim for your employees wages through CJRS - Latest guidance for employers (updated 17 April 2020)>
There is also new guidance (published 17 April 2020) on how to calculate the 80% of wages for furloughed employees to claim through CJRS, see the guidance here >
Together with a Step by Step guide to making a claim, together with examples of claims can be found here >
GUIDANCE FOR EMPLOYEES
Check if your employer can use CJRS - Latest guidance for employees (updated 17 April 2020)>
FRAUDULENT USE OF THE SCHEME & WHISTLE BLOWINGHMRC has confirmed that:
REPAYMENT AND FEESThis is a grant scheme so there is no repayment.
FREQUENTLY ASKED QUESTIONSARE DIVIDENDS COVERED?
The scheme does not cover dividends, only salaries through the PAYE system
WHO MAKES THE CLAIM AND WHO RECEIVES THE MONEY?
The employer makes the claim, and receives the monies as a reimbursement of employees wages
WHAT IF I HAVE MORE THAN ONE JOB ?
While we understand that an employee who is furloughed can do no work at all, our current understanding is that the employee can hold a separate employment with a different and unconnected employer which will be unaffected.
WHAT IS A 'FURLOUGHED EMPLOYEE'?
“Furloughed” is not a term normally used in UK employment law. The Direction now sets out the definition of “furloughed employee” in paragraph 6.1 of the Direction:
“An employee is a furloughed employee if:-
(a) the employee has been instructed by the employer to cease all work in relation to their employment,
(b) the period of which the employee has ceased (or will have ceased) all work for the employer is 21 calendar days or more, and
(c) the instruction is given by reason of circumstances arising as a result of coronavirus or coronavirus disease.”
A furloughed employee will remain on the employer’s pay-roll if they are furloughed but they should not undertake any work for the employer during this time.
CAN AN EMPLOYEE GO ON AND OFF FURLOUGH?
The minimum length of furlough is three weeks (21 calendar days) but an employee can be furloughed more than once. This means they can go on and off furlough subject to the three week minimum. Accordingly it would be open to employers to rotate employees on to furlough.
IS IT A REQUIREMENT THAT THE EMPLOYER PAYS THE 80% OR £2,500 CLAIMED?
Yes. The Direction states (para 7.1(b)(ii)) that if the employee is being paid less than £2,500 they must be paid “an amount equal to at least 80% of the employee’s reference salary”.
Paragraph 7.12 of the Direction goes on to provide that if between the 1 March and 18 April the employer has paid the employee less than 80% of their regular wages as required under the Direction (for those on less than £2,500) then the employer can pay the difference and it will satisfy the requirement of the Scheme.
CAN AN EMPLOYER CLAIM FROM HMRC BEFORE IT ACTUALLY PAYS THE EMPLOYEE?
The Direction states that the employer can claim for earnings which it “reasonably expects to be paid”. However, it cannot claim for any salary which is “conditional on any matter”. This seems to permit the employer deferring payment to the employee in order to claim the reimbursement but prohibits any arrangement whereby the employee was only entitled to be paid on condition the reimbursement is received from HMRC.
COULD AN EMPLOYER ASK VOLUNTEERS TO GO ON FURLOUGH ?
FURTHER GUIDANCEGuidance for Employers by Federation for Small Business >
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