The chancellor announced extensions to the two main schemes for providing help during the COVID pandemic, to help businesses.
There are two schemes
- The first is to help subsidise the salaries of employees that are not working at 100% capacity.
- The second is an extension to the SEISS scheme for the self-employed including those in partnerships.
The scheme is at least some help but if you are facing long term reduction in turnover it may be best to look at restructuring your staffing levels. That is why we are taking the approach to speak to each client individually,
If you feel that you will have staff at less than 100% capacity, please call the office and we can schedule in a meeting to look at your options. We need to focus on long term profitability and short-term cash flow of your business. The scheme is certainly very limited in our view.
If you are self-employed, the scheme will at least provide some additional income. However, we feel that there has been a lot of mis claims by some self employed that think the is a grant for all. There are criteria to make a claim the first being you must be affected by the Covid pandemic. We have written up the current HMRC guidance below after the job support scheme guidance. Please read it carefully and if you have any doubts before claiming please get in touch with us first.
Job Support Scheme
What is it?
- The Job Support Scheme is designed to protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19, to help keep their employees attached to the workforce. The company will continue to pay its employee for time worked, but the burden of hours not worked will be split between the employer and the Government (through wage support) and the employee (through a wage reduction), and the employee will keep their job.
- Now the economy is opening up, we should target support on those businesses that need it most: focusing on those that are being impacted by Coronavirus and who can support their employees doing some work, but that need more time for demand to recover.
- The Government will pay a third of hours not worked up to a cap, with the employer also contributing a third. This will ensure employees earn a minimum of 77% of their normal wages, where the Government contribution has not been capped.
- Employers using the Job Support Scheme will also be able to claim the Job Retention Bonus if they meet the eligibility criteria.
- The scheme will open on 1 November 2020 and run for 6 months, until April 2021. Further guidance will be published shortly.
Who is eligible?
- All employers with a UK bank account and UK PAYE schemes can claim the grant. Neither the employer nor the employee needs to have previously used the Coronavirus Job Retention Scheme.
- Employees must be on an employer’s PAYE payroll on or before 23 September 2020. This means a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made on or before 23 September 2020.
- In order to support viable jobs, for the first three months of the scheme the employee must work at least 33% of their usual hours. After 3 months, the Government will consider whether to increase this minimum hours threshold.
- Employees will be able to cycle on and off the scheme and do not have to be working the same pattern each month, but each short-time working arrangement must cover a minimum period of seven days.
What does the grant cover?
- For every hour not worked by the employee, both the Government and employer will pay a third each of the usual hourly wage for that employee. The Government contribution will be capped at £697.92 a month.
- Grant payments will be made in arrears, reimbursing the employer for the Government’s contribution. The grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer.
- “Usual wages” calculations will follow a similar methodology as for the Coronavirus Job Retention Scheme. Full details will be set out in guidance shortly. Employees who have previously been furloughed, will have their underlying usual pay and/or hours used to calculate usual wages, not the amount they were paid whilst on furlough.
- Employers must pay employees their contracted wages for hours worked, and the Government and employer contributions for hours not worked. Our expectation is that employers cannot top up their employees’ wages above the two-thirds contribution to hours not worked at their own expense.
What does it mean to be on reduced hours?
- The employee must be working at least 33% of their usual hours.
- For the time worked, employees must be paid their normal contracted wage.
- For time not worked, the employee will be paid up to two-thirds of their usual wage.
- Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee.
How can I claim?
- The scheme will be open from 1 November 2020 to the end of April 2021. Employers will be able to make a claim online through Gov.uk from December 2020. They will be paid on a monthly basis.
- Grants will be payable in arrears meaning that a claim can only be submitted in respect of a given pay period, after payment to the employee has been made and that payment has been reported to HMRC via an RTI return.
- HMRC will check claims. Payments may be withheld or need to be paid back if a claim is found to be fraudulent or based on incorrect information. Grants can only be used as reimbursement for wage costs actually incurred.
- Employers must agree the new short-time working arrangements with their staff, make any changes to the employment contract by agreement, and notify the employee in writing. This agreement must be made available to HMRC on request.
- Our intention is that employees will be informed by HMRC directly of full details of the claim.
- Beth normally works 5 days a week and earns £350 a week. Her company is suffering reduced sales due to coronavirus. Rather than making Beth redundant, the company puts Beth on the Job Support Scheme, working 2 days a week (40% of her usual hours).
- Her employer pays Beth £140 for the days she works.
- And for the time she is not working (3 days or 60%, worth £210), she will also earn 2/3, or £140, bringing her total earnings to £280, 80% of her normal wage.
- The Government will give a grant worth £70 (1/3 of hours not worked, equivalent to 20% of her normal wages) to Beth’s employer to support them in keeping Beth’s job.
|Hours Employee Worked||33%||40%||50%||60%||70%|
|Hours Employee Not Working||67%||60%||50%||40%||30%|
|Employee Earnings (% of normal)||78%||80%||83%||87%||90%|
|Gov’t Grant (% of normal wages)||22%||20%||17%||13%||10%|
|Employer Cost (% normal wages)||55%||60%||67%||73%||80%|
Self-Employment Income Support Scheme (SEISS) Grant Extension
What is the scheme?
The Chancellor recognises the continued impact that COVID-19 has had on the self employed and has taken action to provide support.
The SEISS Grant Extension provides critical support to the self-employed. The grant will be limited to self-employed individuals who are currently eligible for the SEISS and are actively continuing to trade but are facing reduced demand due to COVID-19.
To be eligible for the scheme, self-employed individuals, including members of partnerships, must meet the following criteria:
- Currently be eligible for the SEISS (although they do not have to have claimed the previous grants)
- Declare that they are currently actively trading and intend to continue to trade
- Declare that they are impacted by reduced demand due to COVID-19 in the qualifying period. The qualifying period for the first grant is between 1 November and the date of claim
What does the grant cover?
The extension will provide two grants and will last for six months, from November 2020 to April 2021. Grants will be paid in two lump sum instalments each covering a threemonth period.
The first grant will cover a three-month period from the start of November until the end of January. The Government will provide a taxable grant covering 20 per cent of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £1,875 in total.
The Government are providing broadly the same level of support for the self-employed as is being provided for employees through the Job Support scheme.
The second grant will cover a three-month period from the start of February until the end of April. The Government will review the level of the second grant and set this in due course.
The grants are subject to Income Tax and National Insurance Contributions.
How can I claim?
HMRC will provide full details about claiming and applications in guidance on gov.uk in due course.
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