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Guidance for Clients 27.03.20

On Thursday 26th March, the Chancellor announced a new scheme to help millions of self employed individuals affected by the Coronavirus outbreak.

Supporting the self-employed through this crisis is an enormous challenge, to which there are simply no easy answers. The commitment to parity with employees on company payrolls at 80% of earnings is fair, and this bold intervention by the Chancellor will do much to protect people in this vital part of the economy. As part of this help, HMRC has also extended the self-assessment tax return filing deadline for another four weeks, which will allow late filers to access the help for the self-employed.

The main points to note are:

  1. You may be entitled to a taxable grant up to 80% of average monthly profits (capped at £2,500 per month) based upon average profits for the last 3 years
  2. It is available to those with profits of less than £50,000 in 2018/2019 or an average profit of less than £50,000 over the last three tax years
  3. You must have traded throughout 2019 / 2020 and intend to continue trading during 2020 / 2021
  4. Only persons where greater than 50% of their income is derived from Self – Employment will qualify
  5. HMRC will make contact with those persons whom they believe qualify and payments will be made by the end of June 2020

You can access further detailed information at the following:

Tax & Coronavirus Job Retention Scheme

These are the key points, some of which had not previously been announced:-

  • the scheme is open to all UK employers that had a PAYE scheme in place on 28 February 2020
  • any organisation with employees can apply, including charities, recruitment agencies and public authorities; however, the government does not expect public sector employers to use it as long as central government continues funding wage costs in the normal way.  With agency employees, the scheme is only available for agency employees who are not working.
  • employers can reclaim up to 80% of wage costs up to a cap of £2,500 per month, plus (not including) the associated employer NICs and minimum auto-enrolment pension contributions on that wage.  Fees, commissions and bonuses are not included.
  • an employer can choose to top up to 100%, but does not have to (subject to employment law and renegotiating any contractual entitlements)
  • for employees whose pay varies, the employer can claim for the higher of (i) the same month’s earning from the previous year (eg earnings from March 2019); or (ii) average monthly earnings in the 2019-20 tax year
  • individuals are only entitled to the minimum wage for the hours they work.  So if they are furloughed and do not work, and 80% of their normal earnings would take them below the minimum wage based on their normal working hours, they still only receive 80% as they are not working.  However, they are entitled to be paid NMW for any time spent training.
  • to be eligible, the employee must have been on the payroll on 28 February 2020.  If they were hired later, they are not eligible.  Anybody who was on the payroll on 28 Feb and has since been made redundant can be rehired and put on the scheme
  • furlough leave must be taken in minimum blocks of three weeks to be eligible for funding
  • there is nothing in the guidance which prohibits rotating furlough leave amongst employees, provided each employee is off for a period of at least three weeks
  • the employee must not be working at all.  If they work for even an hour (presumably during their entire three week furlough period), they are not eligible.  However, they are able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer.
  • when agreeing changes in hours (and acceptance of 80% pay), assuming the contract does not already allow for that, normal employment law applies.  The employer must be careful not to discriminate in deciding who to offer furlough too.  My view is that prioritising vulnerable workers is unlikely to be discrimination, as prioritising the over 70s (direct age discrimination against those under 70) is almost certainly justifiable, and those who do not suffer from serious health conditions are not a protected class.
  • employees on sick-pay or self-isolating cannot be furloughed, but can be furloughed afterwards.  Employees who are shielding can be placed on furlough.
  • employers can only claim once every three weeks, ie they cannot get weekly reimbursement.  Claims can be backdated to 1 March 2020.

The Government will issue further guidance on the mechanics of claiming the payment in due course.  It says it expects the scheme will be up and running by the end of April.

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