Previously in our blog, ‘Coronavirus Grant of 80% of Wages and Salaries’, we had described how, as an employer, you could furlough employees and apply for the CJRS grant to cover a portion of their usual monthly wages. The grant took place on 1 March 2020 and was expected to end by 30 June 2020. Due to the current economic state, the CJRS has become an indispensable measure and thus, the Coronavirus Job Retention Scheme has been extended until the end of October 2020.
From 1 July 2020, the government is planning to enter the second phase of the Coronavirus Job Retention Scheme. This introduces flexibility into the previous scheme and asks businesses to contribute to the pay of an employee’s furloughed hours from 1 August 2020. Taj Accountants provides today’s blog to raise awareness to the changes that will occur in the Coronavirus Job Retention Scheme.
Highlights of the Extension:
From 1 July, you will still be able to claim the grant for the hours not worked. Additionally as an employer, you can bring furloughed employees back to work for any amount of time and any shift pattern. Therefore, employees who are ‘currently’ furloughed, will be able to work part-time for their employers, but must be paid for the hours they work. Under the second phase of the Coronavirus Job Retention Scheme, if the employer brings an employee back into the workplace, they are responsible for paying their employee’s wages for the hours worked (and associated NICs3 and pension contributions) as per their employment contract.
Note: HMRC’s new guidance describes how claims should be calculated for furloughed workers from 1 July 2020, including those who return to work part time. The calculation method is complex and will require employers to obtain data on working hours for those employees returning to work part time. If you’re a small business owner, and do not have a prior experience in managing such tasks, it is better to get your work done by the Small Business Accountants in London, who specialise in such services.
Eligibility:
Only the employees that you (the employer) have successfully claimed a previous grant for will be eligible for more grants under the updated terms of the scheme. To be eligible for the scheme, your employees must have been furloughed for at least 3 consecutive weeks which started from 1 March to 30 June 2020 or have returned from statutory parental leave after 10 June (this has been added since the announcement on 29 May). Employees are required to be on the PAYE payroll on or before 19 March 2020 and must have been included on a Real Time Information (“RTI”) submission on or before 19 March.
Check our previous blog to know more regarding your eligibility. Also, your reliable Accountants in London can support both employers and employees in guiding them through the complexities of the scheme.
Changes In the Scheme:
HMRC updated their CJRS guidance on 1 July which included clarification of when overtime payments should be included in the calculation of furloughed workers’ reference pay. The following changes are based on the updated announcement of 1 July 2020:
July: No changes have been imposed to grant levels - 80% of wages up to a cap of £2,500 for the hours will be paid by the government for when the employee is on furlough, as well as employer National Insurance Contributions and pension contributions for the hours the employee is on furlough.
From 1 July 2020, furloughed workers can return to work on a flexible, part time basis. The employer must bear the contractual salary costs of any part time hours worked by a furloughed employee.
You can now submit claims for periods started on 1 July. 31 July is the last day for you to submit claims.
August: The government will continue to pay 80% of wages up to a cap of £2,500 for the hours an employee is on furlough but from 1 August, employers cannot claim a CJRS grant in respect of any employer’s NIC or pension contributions.
September: The government will start paying 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Additionally, the employers will be required to pay employer NICs, pension contributions and top-up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500.
October: The grant will then fall to 60% of wages up to a cap of £1,875 for the hours the employee is on furlough. Employers will still be required to pay employer NICs, pension contributions and ensure 80% of employee wages are paid up to a cap of £2,500.
The Coronavirus Job Retention Scheme will close on 31 October 2020.
Notes to Employers:
1. As an employer, you’ll continue to be able to choose to top up employee wages above the 80% requirement and £2,500 cap for the hours not worked at their own expense if they wish.
2. Employers will have to pay their employees for the hours worked.
3. ‘Furlough’ can be any length of time, but a new minimum claim period of one week can be applied.
4. Make sure your claim periods begin and end in the same month.
5. Remember that the final claim you submitted for the period to 30 June could impact the size of future claims that can be made.
6. The combination of both furlough payments and employer payments for the employees returning to part-time work from July 1 means you need to make sure your employees continue to receive 80% of their wages up to a maximum of £2,500 each month until the scheme ends.
7. The number of employees that can be included in a single claim from 1 July cannot exceed the highest number of employees included in any one claim submitted under the scheme for periods up to 30 June and this limit, however, does not include any employees who have returned from statutory parental leave and been furloughed for the first time in that claim period.
Final Thoughts:
Finally, the Coronavirus Job Retention Scheme closes on 31 October 2020, meanwhile makes sure to submit all the information accurately. HMRC will check CJRS claims over the coming months and years. If any CJRS grant was overclaimed, HMRC will issue an assessment equal to 100% of the sum overclaimed. The initial grant will face the imposition of corporation tax or income tax, and you may also be penalised an additional tax of 19% - 45% of the amount overclaimed - depending on the tax charged on the original claim.
To further support small businesses, the government has also extended the Self-Employment Income Support Scheme (SEISS) which has already received 2.3m claims during its first round of grants. From August 2020, eligible self-employed workers will be able to claim a second and final grant which will worth 70% of their average monthly trading profits and is capped at £6,570 in total.
How Taj Accountants Can Assist You:
As your reliable Small Business Accountants in East London, Taj Accountants can help you in all areas of your business accounting management and find the most suitable solution for your business, as per your requirements. Our specialized team of accounts are dedicated and always make sure that our clients stay well informed and advised about the financial matters of their companies.
DISCLAIMER: The purpose of the blog is to provide information and insight regarding the situation. The readers must contact experts before making any decisions based on the information. We highly appreciate you to contact Taj Accountants for further assistance.
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