General

Dear Payroll Client

We are trying to continue to run our payroll service as best possible in the current situation, with regards to the new changes to employees pay in relation to the job retention scheme we will need you to confirm the following to ensure that we process the correct pay figures to HMRC:-

• Do you want us to reduce your employees Salaries to 80% or maintain the 100% payment and the employer pay 20%?

• If you do want us to reduce the salary to 80% when is this to commence?

We have set out below an update from HMRC on the Job Retention scheme to explain the claim process and help you with any further questions you may have.

Claim for wage costs through the Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. We expect the scheme to be up and running by the end of April. It is designed to support employers whose operations have been severely affected by coronavirus (COVID-19).

Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.

The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020.

Who can claim

• Any UK organisation with employees can apply, including:
• Businesses
• Charities
• Recruitment agencies (agency workers paid through PAYE)
• Public authorities
• You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
• Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme.

Employees you can claim for

Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:

• Full-time employees
• Part-time employees
• Employees on agency contracts
• Employees on flexible or zero-hour contracts

The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

This scheme is only for employees on agency contracts who are not working.

If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.

Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.

Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.

You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.

If your employee is on unpaid leave

• Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.

If your employee is on Statutory Sick Pay

• Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.

• Employees who are shielding in line with public health guidance can be placed on furlough.

If your employee has more than one job

• If your 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.

If your employee does volunteer work or training

• A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.

• However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

If your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay

• Individuals who are on or plan to take Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby. This is a health and safety requirement. In practice, most women start their Maternity Leave before they give birth.

• If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.

• Employees who qualify for SMP, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.

• If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.

• The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.

Work out what you can claim

• Employers need to make a claim for wage costs through this scheme.

• You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.

• At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.

• We will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.

Full time and part time employees

• For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.

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.

Employer National Insurance and Pension Contributions

• 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 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.

• 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).

National Living Wage/National Minimum Wage

• Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working.

• Therefore, furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.

• However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

What you’ll need to make a claim

Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.

• To claim, you will need:

• Your ePAYE reference number

• The number of employees being furloughed

• The claim period (start and end date)
• Amount claimed (per the minimum length of furloughing of 3 weeks)
• Your bank account number and sort code
• Your contact name
• Your phone number

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

Claim

• 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.

What to do after you’ve claimed

• 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 grant you receive for their gross pay, no fees can be charged from the money that is granted. You can choose to top up the employee’s salary, but you do not have to.

When the government ends the scheme

• When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).

Employees that have been furloughed

• Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
• Once the scheme has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme.

Income tax and Employee National Insurance

• Wages of furloughed employees will 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.
• Employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.

Tax Treatment of the Coronavirus Job Retention Grant

• Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

A recent survey has shown that many SME’s believe speed is one of the most essential requirements of their accountants, along with them being tech savvy. The survey was carried out by business software provider Exact in which they spoke to 2,500 SME’s and accountants.
Because their clients are looking for them to be able to work rapidly and accurately accountants are gaining more IT and software knowledge so they can keep up with the demands placed upon them. Talking about this Gavin Fell, who is the general manager of Exact, commented: “Rising demand for information ‘now’ combined with advances in new technology mean that accounting is increasingly seen as a commodity. Accountants that can keep the pace providing real-time and in-depth business insight for clients, have the best chance.”

The report on the survey in the Accountancy Age also said that:

‘The survey revealed that 67% of accountants highlighted better integration of admin software as a crucial focus area, as well as replacing paper forms with online forms (62%), and improving home/mobile access (43%). There has been a drop in ‘spreadsheet accounting’ from 25% in 2015 to 20% this year, and the number of UK SME customers that are entering their data online, are slowly on the rise from 10% last year to 16% this year.

Less than half, 40%, think that ‘robotisation’ is over-hyped, and yet 23% believe that highly-automated competitors pose a very real threat. When it comes to their SME customers, only 10% would trust a robot to do their accounting.’

In fact accountants in the UK are a lot more tech savvy than most of their European counterparts, with 45% of them using some sort of online solutions to aid their administration, which is only beaten into 2nd place by the Netherlands where 60% of accountants use digital help.

For more on this story you can visit the Accountancy Age website at the following link: Accountancy Speed Essential To SME`s

And if you require any help with your own accounts, tax advice or advice on growing or funding your business then please contact our offices here at WHR Accountants by ringing us on 028 3752 2909.

There have been calls for the Chancellor to make tax changes in the Autumn statement and give a break to the five million employed people here in the UK, as critics of the Governments tax policy feel that they have been targeted unfairly and punished enough.
Speciality accountancy firm Danbro feel that there are too many restrictions on the self employed and they should be treated more flexibly by the government so that they will be able to contribute more fully to the UK economy. 

Speaking on this issue, the chairman of Danbro Damian Broughton said: “The UK has proved to be resilient and we consistently recover from dips in the economy faster than most of our partner nations. This is because we have been able to utilise our powerful temporary workforce.

“Everyone recognises the importance and value of this rich pool of freelance expertise and our Chancellor must use this Autumn Statement to support that workforce and avoid the mistakes of his predecessors who have restricted its potential.

“This sector has been hit with a multitude of detrimental levies, rules and regulations in the past and this has placed a drag on one of our most critical tools for economic success.

“Prime Minister Theresa May has launched a major Employment Review as she recognises employment laws must be overhauled to meet the needs of the modern workplace. I’m asking the Chancellor to follow suit and recognise that businesses have evolved. He must not impose any further rules and regulations and make it easier for this sector to operate.”

Broughton feels that the Chancellor needs to make some radical changes in order to support the UK economy in the wake of Brexit. You can read more on this story by visiting the Online Recruitment Resource website at the following link: Self Employed Need A Tax Break Says Accountancy Firm

That is all from us for today, but if you need any accountancy advice all you need to do is either drop us an email or give us a call on 028 3752 2909 and we will be glad to be of assistance to you.

There was welcome news for the self employed last week after Chancellor of the Exchequer Phillip Hammond did a u-turn and decided not to raise National Insurance Contributions (NIC) for them. This was after the Chancellor came under enormous pressure from his own party to change his budget announcement on NIC for the self employed. This is certainly a humiliating climb-down for both Hammond and the Prime Minister Theresa May. The rise would have broken a key Conservative manifesto pledge claimed many Tory MP`s and after a great deal of negative publicity the Chancellor announced that the proposed rise was going to be scrapped.

National Insurance Contributions For Self Employed

The rise in NIC for the self employed would have affected approximately 2.5 million people across the UK. This would have led to them paying an extra £240 per year. When the rise was announced it was stated that a move to abolish the Class 2 category would reduce the number of people losing out financially to around 1.6 million. They also said that nobody earning less than £16,200 would be worse off after the changes.

But the rise has now been shelved and Mr Hammond said in a letter to his MP`s that: “It is very important both to me and to the Prime Minister that we are compliant not just with the letter, but also the spirit of the commitments that were made. In the light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measure set out in the Budget.”

Speaking on the about turn Labour leader Jeremy Corbyn said: “Seems to me like the Government are in a bit of chaos here. A budget that unravels in seven days, a Conservative manifesto with a very pensive Prime Minister on the front page saying there would be no increase – a week ago an increase was announced.”

The quotes have been taken from an article on the Independent website and you can read the full article at the following link: No Rise In National Insurance For Self Employed

If you are self employed and you want help with your tax returns and/or bookkeeping please give us a call for an informal chat and some expert advice on 028 3752 2909.