Q&A: THE CORONAVIRUS JOB RETENTION SCHEME (CJRS)
Harwood Hutton partner Adam Stronach provides an introduction to the most common questions we are fielding from business owners on the Government’s key financial support measure for PAYE employees. Please note, this article is not comprehensive or exhaustive and is for general information only. It does not constitute professional advice which may or may not apply to your specific circumstances. Neither Adam nor Harwood Hutton are responsible for any actions you decide to take or not to take as a result of reviewing the points set out below.
Q. What is the Coronavirus Jobs Retention Scheme (CJRS)?
A. It is a grant available to all UK-based businesses initially for three months backdated to March 1, 2020. The grant is available in respect of employees on the payroll as at 28 February 2020.
Q. How much is it?
A. Employers will be able to claim for 80% of ‘furloughed’ (see details below) employees’ usual monthly wage costs, up to £2,500 a month, plus the associated employer’s National Insurance contributions (NIC) and the minimum automatic enrolment employer pension contributions on that wage. It excludes fees, commission and bonuses. This gives a maximum cap of £2,500 +£245 (employers’ NIC) + £59 (auto-enrolled pension contribution) = £2,804 of total possible grant that can be applied for per employee per month.
An employer can choose to top up an employee’s salary beyond the 80% level but it is not compulsory.
There are some useful illustrations of potential CJRS claims on the ICAEW website
Q. What does ‘furloughed’ mean?
A. Furloughed workers are employees who have been asked to stop working but who are being kept on the payroll. In effect, they are on a leave of absence while there is no work for them to do. Furloughed employees must have been on your PAYE payroll on 28 February 2020 and can be on any type of contract, including full- and part-time, agency, flexible or zero-hour. The scheme also covers employees who were made redundant since 28 February 2020 if they are rehired by their employer. Furloughed members of staff must do no work at all for you during the furlough period.
Q. What businesses are eligible?
A. The scheme applies to all UK-based businesses. Eligible businesses include charities and not-for-profit organisations and single director companies, with the rules applying as to other businesses. Only salary is relevant for the scheme.
Q. What’s the position regarding sole director/shareholder owner-managed limited companies
Typically, these type of workers take a mixture of salary and dividends. They can take advantage of the CJRS but only to the value of their salary. You can claim a grant of up to 80% of your ‘regular wage’ or £2,500 (whichever is lower). This claim can be backdated to 1 March 2020. Your regular wage is the higher of the same month’s earnings from the previous year or the average monthly earnings from the 2019-20 tax year. The ICAEW believes statutory duties can be carried out but no services or revenue-generating work is allowed. There is detailed guidance on the position of sole directors available from the Institute of Chartered Accountants in England & Wales. Click here for details.
Q. What’s the process for furloughing someone?
A. The Government has been clear the CJRS does not create a legal right to place employees on furlough leave. The employee’s status will continue to be subject to employment law and existing contracts of employment. So, unless your contracts of employment have what is called a ‘lay-off clause’, which allows you to send employees home without pay, you need to proceed with caution.
Q. What if employees have more than one employment?
A. If your employee has more than one employer, they can be furloughed for each job.
Q. What will I need to make a claim on the CJRS?
A. To make a claim you will need the following information:
• Your ePAYE reference number
• The number of employees being furloughed
• The claim period (start and end date)
• Amount claimed (per the minimum period of furloughing of three weeks)
• Your bank account number and sort code
• Your contact name and phone number
You will need to calculate the amount you are claiming. HMRC will be able to retrospectively audit your claim. Once the system is operational, HMRC will be paying grants via BACS payment to a UK bank account.
Q. When can I apply for the Scheme?
A. Employers need to wait until the CJRS portal is developed, which is expected to be by the end of April 2020. If you are already struggling with your cash flow, you should look to the Coronavirus Business Interruption Loan Scheme for support.
Q. Is tax payable on the grants?
A. Yes. Payments received by a business under the scheme must be included as income in any calculation of taxable profits for Income Tax and Corporation Tax purposes. Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
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