There have been many changes to the financial support schemes available to those affected by the Coronavirus over the last few months, and the introduction of the three tiered lockdown measures has led to calls over the last couple of weeks for improvements to these schemes. This has resulted in Mr Sunak announcing a number of changes, and most are available to businesses in all areas, not just those which are in Tiers 2 and 3.
I have therefore summarised the changes and given an update on the other schemes below.
Support for Employers
The original Coronavirus Job Support Scheme (CJRS) is finishing at the end of October having been gradually phased out since the end of July. The scheme is now only refunding 60% of salary costs, which can be claimed in advance of the pay day. The hope back in the summer was that this support would not be required after seven months, but of course this has turned out to be over-optimistic. However the Government has decided that it would be too expensive to continue with the furlough scheme, and originally announced in September that a new, less generous scheme called the Job Support Scheme (JSS) would replace it from the end of October. This scheme is very different from the CJRS in that it does not provide financial support for furloughed staff, but requires that the staff concerned are working for part of their usual hours, for which the employer must pay them, in which case the Government would pay one third of their pay for the “non-working” period, with the employer required to pay at least another third of that pay. Clearly this was nowhere near as generous as the CJRS, and the grant will be paid in arrears.
Mr Sunak has announced that the JSS will provide much more generous support by allowing employees who work only 20% of their usual hours to be supported, and paying 62% of their pay for the “non-working” period, requiring the employer to pay just 5% of that sum. This change is not limited to businesses in Tier 2&3 areas, and therefore needs to be considered by everyone whose business is affected by the lock down rules in all areas, as a follow up to any furloughing for which they are still claiming for. There is a limit to the wage level that is supported by the scheme with the monthly grant per employee limited to £1,541.75 per month, and there is no grant for the related employers’ NIC or pension contributions. There is a related scheme described as an addition to the JSS which was announced on 9 October and relates to businesses which are required to close by the lockdown rules. This grant will cover two thirds of employees’ salaries for affected businesses, up to £2,100 per employee per month and is one of the main reasons why Tier 2 businesses have felt badly done by the schemes to date because they are not being forced to close. This gap has been partly addressed by last week’s enhancement of the JSS.
It should be noted that employees who qualify for either the standard or additional JSS are those who were on the payroll (and for whom a submission had been made to HMRC) by 23 September, the day before the Winter Economic Plan was announced and the maximum amount that will be paid per employee under the additional JSS is £2,100 per month. The way in which the grant can be claimed will be announced soon, and will be a similar process to that for claiming the CJRS grants.
The other high profile grant available to employers is the Job Retention Bonus, which was announced in August as part of the Chancellor’s “Plan for Jobs”. Under this scheme employers will be able to claim £1,000 for each employee who has had a furlough (CJRS) claim made for them, and is employed throughout the period from the date covered by the last furlough claim for them up to 31 January 2021, and received a salary of on average at least £520 per month from 1 November to 31 January. This is clearly a provision to encourage employers not to part with employees following the end of the CJRS at the end of this month and can be claimed once the PAYE submission has been made to HMRC for the month of January 2021 and will be paid in February 2021. Details of how to make this claim will be made available nearer the time, but this is something for businesses to bear in mind, along with the grants available under the JSS, when considering their staffing for the next three months. It should however be noted that it will not be available for people who are under notice of redundancy or retirement at the end of January.
On the subject of jobs, the Kickstart scheme is available for employers to create new jobs for 16-24 year olds in receipt of Universal Credit. Under the scheme, the Government will pay 100% of salary for a minimum of 25 hours per week for 6 months at the National Minimum Wage level (or National Living Wage depending on the age of the employee), plus the related employers’ NIC and pension contributions. In addition there is a grant of £1,500 per job placement to help with the development of each employee. The scheme will apply to new jobs created in the period to 31 December next year (2021), but a business can only apply for a grant covering a minimum of 30 new jobs –for most employers (who will not be in a position to take on 30 new junior employees over the next 14 months), you will have to go through what is known as a “Kickstart Gateway” run by an organisation such as a local authority, charity or trade body which will process the claim for you. Details of appropriate gateway organisations can be found online.
Support for Employees
Many employees have been required to work from home as a result of social distancing measures that have had to be introduced in the workplace. This has been in the face of ambiguous advice from the government as to whether people should work at home or in the workplace, but there are undoubtedly thousands more people now working from home than before the pandemic. There has always been a tax allowance available to homeworking employees as a recognition of their additional domestic costs, which can be based on the higher of the actual additional costs for such things as heat, light, communications, etc., or a basic standard weekly amount. The latter figure was increased from £4 per week to £6 per week as from 6 April 2020. Employers may pay that amount to employees for any week during which that person worked at home (either the whole or part of the week) and that amount will not be taxable on the employee. Alternatively, if the employer does not pay the allowance to the employee, the latter can make a claim to have the figure deducted from their income for tax purposes. It should be emphasised that the employee tax claim will only save the tax on the allowance and the government will not be refunding it in full. For example a claim for 52 weeks at £6 per week will be for £312 to be deducted from taxable income, with the employee actually receiving the benefit of a tax reduction through their PAYE code at their top income tax rate – that is £5.20 per month for a basic rate taxpayer and £10.40 for a higher rate taxpayer for the whole year – so not exactly life changing, but better than a kick in the teeth……….
HMRC have recently set up an online portal for employees to make these claims which has apparently been very well used, hopefully not by too many people expecting a “grant” of £6 per week.
Support for Self-employed
The Self-Employed Income Support Scheme (SEISS) was extended by the Chancellor in September to cover the period of six months from 1 November, but at a reduced rate of 20% (of the now established base profit figure) for the three months to 28 February and a figure yet to be determined for the subsequent three months. He has today recognised the continuing Coronavirus problems and doubled the rate for the first three month period to 40%. This means that the maximum grant claimable by a self-employed person for that period will now be £3,750. The rate for the second period will be set at a later date and details of how to claim will be announced in due course, but will probably be along the same lines as the previous grant applications.
Many self-employed people, and other self-assessment taxpayers, will have taken advantage of the government’s offer to defer the second payment on account for 2019/20 from 31 July 2020 to 31 January 2021, and that new deadline is now rapidly approaching. In light of the continuing problems, the government has announced that the total amount due for payment on 31 January 2021, including the deferred 2019/20 second payment on account, any balancing payment for that year and the first payment on account for 2020/21, can be automatically spread by monthly instalments over the next year (to 31 January 2022) if the total is less than £30,000 using the HMRC portal known as “self serve Time to Pay”. This facility has previously only been available for bills up to £10,000, and is already available for deferment claims. For people whose bills are over £30,000, they will need to contact the HMRC “Time to Pay” section to negotiate a further deferral, if required. Anyone considering this option should bear in mind that interest will be charged by HMRC on the outstanding amount from 31 January 2021 until the dates of payment, whereas no interest is being charged up to 31 January 2020.
Like the self-assessment taxpayers referred to above, many businesses deferred a quarter’s Vat bill, taking advantage of one of the government’s early initiatives at the height of lockdown. The deferral in this case was to 31 March 2021, and that date will soon be looming. These people can also benefit from a further 12 month’s deferral on application, by paying in instalments up to 31 March 2022. This will only apply to the amount deferred from 2020, but unlike the income tax deferral, the instalments will be interest-free.
Mr Sunak announced that the grant available to businesses that are required to close by the lockdown rules will be increased from £1,500 to £3,000 per month, and it will be payable after two weeks of closure, down from three. The amount of the grant will depend on the rateable value of the business’ premises. This is only really applicable to businesses in Tier 3 areas, and the government also announced additional funding being made available to local authorities in Tier 1&2 areas, with the amount based on the number of hospitality, hotel, B&B, and leisure businesses in their area. It will then be at the discretion of the local authority who to pay this out to as grants, with a maximum of £2,100 per month payable to businesses with premises rateable values of £51,000. This is similar to the local authority grant scheme introduced at the outset of lockdown, but this time it is discretionary and not an entitlement for businesses. A business applying for a grant will need to demonstrate that it is still severely impacted by restrictions on socialising.
The closing date for applications for Bounce Back Loans of up to £50,000 and Coronavirus Business Interruption Loans (up to £5m) has been extended to 30 November 2020, and it is now possible for banks to extend the term of Bounce Back loans to 10 years and to make six month capital/interest payment holidays available.
Author; Peter Hedgethorne, Director, Plus Accounting
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Date published: 26 October 2020