Briefing 3 – 27th March 2020
This Briefing concentrates on the Self-Employed Income Support Scheme and the Coronavirus Job Retention Scheme, albeit there is a small piece at the end on a filing extension now offered by Companies House. Earlier Briefings deal, with other Business Financial Support Measures.
The weblink below is probably the best resource on Support, for full detail in one location, as it covers off all elements of the Governments Financial Support Package. As said above, most of which we have covered off in earlier briefings. Most importantly, however, there is the detail on the new Self-employment Income Support Scheme that was issued last night.
For those that prefer a summary and a bit of commentary:-
The Self-employment Income Support Scheme (SEISS)
Where we say self-employed this means sole traders or partners in trading partnerships. You are not self-employed if you are the director and owner of a limited company
- The Self-employment Income Support Scheme (SEISS), is designed to support self-employed individuals (including members of partnerships) whose income has been negatively impacted by COVID-19. The scheme will provide a grant to self-employed individuals or partnerships, worth 80% of their profits up to a cap of £2,500 per month.
Please note this is the profit as declared on your Tax Returns, not as per your accounts. These figures often differ due to things such as claims for capital purchases.
- HMRC will use the average profits from tax returns in 2016-17, 2017-18 and 2018-19 to calculate the size of the grant. The scheme will be open to those where the majority (so over 50%) of their income comes from self-employment and who have profits of less than £50,000. The scheme will be open for an initial three months with people able to make their first claim by the beginning of June.
- To be eligible, you must meet all the below criteria:
1) Be self-employed or a member of partnership;
2) Have lost trading/partnership trading profits due to COVID-19
3) Filed a tax return for 2018-19 as self-employed or a member of a trading partnership. Those who have not yet filed for 2018-19 will have an additional 4 weeks from this announcement to do so (by 23 April 2020)
- Have traded in 2019-20; be currently trading at the point of application (or would be except for COVID 19) and intend to continue to trade in the tax year 2020 to 2021
- Have trading profits of less than £50,000 and more than half of your total income coming from self-employment. This can be with reference to at least one of the following conditions:
- Your trading profits and total income in 2018/19
- Your average trading profits and total income across up to the three years between 2016-17, 2017-18, and 2018-19.
What we are unclear on is:
– How HMRC will determine whether your business has suffered a negative impact.
-Will funds given under this support scheme represent taxable income in your 20/21 accounts
-If your self-employed income for 20/21 (with or without the inclusion of the grant) exceeds £50K – will there then be some clawback of support given.
• To access the scheme, individuals should not contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications to apply once the scheme is operational. HMRC will then pay the grant directly to eligible claimants’ bank account. HMRC is urgently working to deliver the scheme.
Please find more information in the link: https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme
- In the interim, the self-employed are still able eligible for other government support including universal credit at a rate equivalent to Statutory Sick Pay for employees (£94.25 per week for up to 28 weeks, to be paid from day 1, rather than day 4) and business continuity loans.
For our self-employed clients, we have today organised our team to produce indicative calculations on the support we believe you will be due. These will be sent to you by email. We have lots to do but shall make our best endeavours to get these to you early next week.
Maybe understandably, but certainly painfully, the Government have managed expectation that you will not get this money until June, so please use the support advice detailed above to try and claim any grants you are due, claim your mortgage holidays, talk to your landlords if you rent and make Universal credit claims if need be, to tied you over.
Coronavirus Job Retention Scheme
Over the course of this week it has become clearer how the Coronavirus Job Retention Scheme will work including how it will work in operational terms.
Likewise, we now know how to Furlough and have drafted a template letter that needs to be given to team members that are to be Furloughed.
Call or email us if you’d like a copy
- HMRC has now confirmed that ‘individuals will pay income tax and national insurance contributions (NICs) on any payments received through this scheme as they are replacement for income in line with normal practice for benefits or grants that replace income’.
- For employees whose pay varies, if the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:
• The same month’s earning from the previous year
• Average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work. If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.
- All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.
- You can choose to provide top-up salary in addition to the grant. Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).
For those of you that do your own Payrolls.
In Practical terms within your payroll systems you:-
Create a new pay element Called Furlough. That has a pre-tax flag, making it fully taxable.
Put the 80% figure calculated into this pay element.
Add in any normal gross pay under the usual section if the week or month you are processing is part normal pay and part furlough/or if you are making up the 20% to full pay. This is Optional.
Then run your payroll through as normal
The gross pay from the date of furlough will = £2500 per month or less depending on what 80% of average earnings to date for 19/20 is. Watch this calculation where employment has been for a part year obviously or if the furlough happened part way through a month. For weekly payroll’s the maximum is £576.92 not £2500 obviously.
Also, check was the team member employed at 28/02/20.
Do call us for assistance
Where this Practice does your payroll – whether just for you as Directors or a whole team we are sending emails under separate cover today, detailing what we need you to do.
You can claim a grant from HMRC to cover wages for a furloughed employee, equal to the lower of 80% of an employee’s regular salary or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages.
So although you have to pay the net wages to the Furloughed Employee, the Auto Enrolment Contributions and the PAYE due to HMRC you do get 100% of this back from the Government.
The reclaim is accessed via a portal where you declare all furloughed workers. This portal is not yet open so there may be a cashflow lag between you paying wages out for furloughed workers, if you have the money and getting it back.
Where we do your payroll, we currently intend to make the portal claims for you, if it is possible for us as your agents to do this. If not we’ll let you know at a later date.
- You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.
Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account. You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll. You must pay the employee all the net pay element of the grant you receive for their pay, no fees can be charged from the money that is granted.
- Furloughing of any individual who has been subject to PAYE will be possible – meaning directors and casual workers will be able to be furloughed.
- There will be no provision to partially furlough staff. This means employees will need to be entirely non-active to qualify. CJRS relief can be backdated to the 1 March, but will be limited to being backdated to the day the employee completely stopped undertaking duties of the employment post 1 March. As employees are required to be completely in-active, CJRS will not apply to employees who have been put on reduced hours. So, if an employee had a reduced workload because of Coronavirus from the 8 March, and then completely in-active from the 15 March, the CJRS grant could only be backdated to the 15 March.
- For Zero-houred furlough employees, employers will be required to use an average of their hours worked to calculate the amount available under the CJRS.
- National minimum wage (NMW) does not apply as the employee will not be allowed to work. As NMW is concerned with working time, no work means any payment will be outside the scope of NMW. Therefore it will be quite possible for the 80% payment to take the employee below NMW.
As an aside to this point, the employee could then be eligible for universal credit if they are in this position
Businesses to be given an additional 3 months to file accounts
- A joint initiative between the government and Companies House means that businesses will from today be able to apply for an additional 3 months to file accounts. The move is designed to help companies avoid penalties as they deal with the impact of COVID-19. As part of the agreed measures, those citing issues around COVID-19 will be automatically and immediately granted an extension. Applications can be made through a fast-tracked online system which will take just 15 minutes to complete.
- The government is also in close consultation with company representative bodies, legal practitioners and others, to look at solutions for the impact COVID-19 may have on companies’ ability to hold Annual General Meetings. Updated guidance on this matter will be published in due course.
Please follow the link for more information: https://www.gov.uk/guidance/apply-for-more-time-to-file-your-companys-accounts