Budget protects jobs – Coronavirus Job Retention Scheme extended
The Coronavirus Job Retention Scheme (CJRS) that was first introduced a year ago was due to end on 30 April 2021. But, having seen furlough claims gradually rise over the last few months and in a bid to continue to protect jobs, the Chancellor has announced an extension to the CJRS until the end of September 2021.
The current scheme will continue unchanged, with employees continuing to receive 80% of their current salary for the hours they work, up to a cap of £2,500 per month.
As we saw in 2020 when lockdown restrictions were eased, employer contributions will start to kick in from July 2021, as the lockdown restrictions are eased and the economy reopens.
Employers will be expected to pay the following contributions towards the hours that their staff do not work from July 2021:
- July 2021 10% of hours not worked
- August 2021 20% of hours not worked
- September 2021 20% of hours not worked
How the scheme currently works
To be eligible under the CJRS extension, employees need to have been notified to HMRC via a PAYE Real Time Information Submission.
Since July 2020, flexibility was introduced to the scheme with furloughed workers able to return to work part-time.
It is important to note that the cap is proportional to the hours not worked. For hours worked by furloughed employees, the employees are paid by their employers who are responsible for paying the tax and NICs due on those amounts.
An employer can choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
Further guidance on flexible furloughing and how employers should calculate claims is available via the HMRC portal here.
Claims should be submitted by day 14 of the following month. The employer will pay the employee through payroll, and report payments to HMRC using the Real Time Information (RTI) system as usual. Once HMRC has received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account
PAYE, pension and NIC
All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees. These costs cannot be recovered as part of the claim.
If an employer chooses to top-up their employees’ salary in addition to the grant, employers 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.
Wages of furloughed employees continue to be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
- More than one job – If an employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
- Employment benefits – The rules for the grant will not displace the existing employment contract so the entitlement to holiday and sick pay will continue in line with employees’ contracts.
- Tax treatment for the employer – The scheme pays a grant (not a loan) to the employer. Payments received by a business under the scheme must be included as income in the business’ calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles. Businesses can then deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
Support for the self-employed, shareholder directors or Salaried LLP members
The scheme does not apply to self-employed people, separate measures were announced to support this group of people, please see our article here for more guidance.
HMRC has issued guidance about the eligibility of this scheme to office holders (including company directors) and salaried members of LLPs. Provided they are paid via PAYE, the grant can be claimed for these individuals. Please see our article here for more guidance.
For further information, please speak with your usual Kreston Reeves contact or contact me here.
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