T: 0131 341 4250|E: andrew@salonfrog.com
T: 0131 341 4250|E: andrew@salonfrog.com
Here’s the key points about the extended furlough scheme (CJRS):
Eligibility
From 1 November, you can add new employees who were not eligible under the scheme before November.
The earlier versions of the CJRS (which ended on 31st October) required an employee to have been employed and an RTI submission to have been made on or before 19 March 2020.
You can now include staff employed at 30 October 2020 provided an RTI submission has been made between 20 March 2020 and 30 October 2020 notifying at least one payment of earnings for that employee.
In other words, staff hired in late spring and summer are now eligible for furlough grants.
Employment agreements
Employers should remember to change the terms of employment contracts (with each staff’s agreement) before furlough starts. This is very important as HMRC has threatened to start checking this; and in fact HMRC says that only contracts signed and dated up until 13 November 2020 can be relied on for the purposes of a CJRS claim.
What can employers claim for periods starting from 1 November 2020?
Scenario 1: Employee on fixed pay
The claim is based on 80% of the usual salary/wages in a reference period.
The reference period is the last pay period ending on or before 19 March 2020 for employees who:
Scenario 2: Employee on variable pay
For an employee on variable pay, or variable hours, their ‘usual’ hours should be used.
Again, the claim is based on 80% of the usual salary/wages in a reference period.
For an employee:
Pension and NIC
You cannot claim for any pension or NIC paid by you for your employees.
How long will support remain at 80%?
CJRS has been extended to 31 March for all parts of the UK. From 1 November, the UK Government will pay 80% of employees’ usual wages for the hours not worked, up to a cap of £2,500 per month. But, the UK Government has said it will review the policy in January for claims for February and March.
Beware publicity
HMRC has said it intends to publish details of employers who use the scheme for claim periods from December 2020 onwards. It will publish the employer name and also, where relevant, the company registration number, including for LLPs.
Employees will be able to find out if their employer has claimed for them under the scheme. It has not yet been confirmed how employees will be able to obtain this information.
Deadlines
There are now shorter deadlines for submitting monthly claims. Claims for periods starting on/after 1 November must be submitted within 14 calendar days after the month they relate to, unless this falls on a weekend, in which case the deadline is the next week-day.
However, a claim once made can be increased provided it is amended within 28 calendar days of the end of the month it relates to (note that if you have over-claimed, this extension doesn’t apply).
Maximum number of employees
When CJRS V2 was introduced from 1 July 2020, the maximum number of employees which could be included in a claim was limited to the maximum number the employer had ever previously claimed for in any single claim made for periods before 30 June 2020.
For claims under CJRS V3 this limit no longer applies. This will be useful to businesses who have taken on additional staff since 1 July, who would otherwise not have been able to furlough all their staff, eg, those currently facing a new compulsory lock down of their entire business.
Some other bits to remember
Today we listened to Rishi Sunak expanding support for businesses once the existing furlough scheme ends.
Changes are:
All the detail here:
A longer read than usual for one of our posts but Nicholas Macpherson, former permanent secretary to three chancellors, hits the nail on the head, just like tax is going to hit us all in the pocket to pay for furlough in the not too distant future…
Nicholas Macpherson:
Taxes are going to have to rise.
As with war, the immediate cost of the coronavirus can be financed by borrowing. But as and when we return to normal times, the government will need to set out a plan which stabilises and then reduces public sector debt as a share of national income.
The problem is public expectations of healthcare are rising. Voters will expect greater spare capacity to guard against future pandemics and they will demand better care homes. Demographic pressures on spending are already on the rise. And Mr Johnson’s government has shown little interest in public expenditure control: it was elected on a platform of ending ‘austerity’.
My guess is that taxes will have to rise by at least £50bn a year. The question is how?
I worked on two major fiscal consolidations when I was at the Treasury: 1992–93 and 2010–12.
The first lesson I learnt is that tax reform and tax increases are difficult to reconcile. Extending VAT to domestic fuel in the early 1990s led to an almighty row and government defeat. Similarly, George Osborne had little difficulty raising an extra £13bn by raising the VAT rate from 17.5% to 20%, but he found it impossible to raise £100m by extending VAT to pasties and holiday caravans. It’s better to leave tax reform to the good times when you can lower the rate while extending the base, as Nigel Lawson demonstrated in the 1980s.
The second lesson is that introducing small new taxes can help, but if they are not to cause upset the government should not push them too far. Airport passenger duty and insurance premium tax have been nice little earners. But the revenue they raised initially was in millions not billions. Everybody is in favour of a carbon tax in principle, until they have to pay a higher price at the pump or on their fuel bills. There’s a wider point about tax acceptability: push a tax too far, as New Labour did with council tax and the fuel duty escalator, and you spend many years repenting at leisure as you freeze the tax.
The third lesson is about fairness. Voters won’t tolerate openly regressive taxes like the so-called community charge or poll tax. But at the same time, you won’t raise serious money by soaking the rich. It’s tempting to think that the rich and the companies they own can bear the burden of higher taxes. They won’t. Capital is mobile. Tax it more and it tends to move elsewhere. It’s irritating that digital companies operate out of Luxembourg or Ireland but, the United States apart, governments are never going to extract serious revenue from them. The same can be said of the rich. President Hollande’s tax hike in 2012 merely led to an exodus of the affluent, many of whom came to London.
Taxing wealth is tempting. But wealth taxes rarely raise much revenue, once the inevitable exemption for housing is introduced. And experience suggests that people will go to extraordinary lengths to avoid inheritance tax.
There’s a good case in principle for taxing land – after all, it doesn’t move. But the politics of property taxation are notoriously difficult. All the chancellors I worked for worried about the asset rich but income poor widow. And it is no coincidence that there hasn’t been a revaluation of council tax in 30 years. I much admired the Irish reform of reducing stamp duty rates and introducing a self-assessed property tax. Stamp duty rates are too high and discourage mobility. But I can’t see it happening here. And even if it did, it would be more likely to take the form of a revenue neutral package than as a serious tax raiser.
That does not mean the government should do nothing in these areas. Corporation tax rates were probably reduced too far too fast. And there’s a good case for higher tax rates on capital gains, though economists tend to overestimate the likely yield: experience suggests if you wait long enough a government is elected which will tax your gains at a much lower rate. It’s worth looking again at pensions tax relief though this is already constrained and fiendishly complicated. The government might also consider more council tax bands, though in the absence of a revaluation it might be difficult to make these stick. But measures like these will raise billions rather than tens of billions.
That takes me to the final lesson I learnt. If you need to raise serious revenue, there is no substitute for raising the main rate of one of the big taxes. There is a reason why income tax, national insurance and VAT account for the vast majority of tax revenue. They are easy to collect and they are paid by most of the population.
The problem, in the short run at least, is the government made a manifesto commitment not to raise the rates of these taxes.
Here, the solution is simple. Introduce a new tax: a ‘temporary’ social solidarity charge. It would be modelled on national insurance and based on ability to pay, but unlike NICs it would be paid by old as well as young, and on pension, dividend and rental income as well as earnings. Unlike income tax, there would be no reliefs, and so with the broadest possible base the increase in tax rates could be kept to the minimum.
The new charge could be sold as a way of spending more on health and social care. I’m under no illusion. It won’t be popular. Taxes never are. Sometimes, you have to raise taxes to recreate a coalition for lower spending. The pendulum will swing.
Rishi Sunak has announced 2 further measures:
An extended version of the Job Support Scheme, and additional grants. We look at these both below.
1. Extended version of the Job Support Scheme
The Government’s Job Support Scheme (JSS) announced in September will be extended to protect jobs and to support businesses that are legally required to close down due to coronavirus restrictions.
If your salon is told to close under Coronavirus measures (eg a full local lockdown), the Government will pay two thirds of your employees’ salaries under this extended scheme.
Eligible salons will be able to claim two thirds of each employees’ salary, up to a maximum cap of £2,100 per month. A sort of Furlough scheme version 3.
Salon owners will however be asked to pay the employer’s NIC and pension contributions.
Businesses are only able to claim the grant whilst subject to the restrictions, and employees have to be off work (on furlough) for a minimum of seven consecutive days. The scheme is UK wide, and the UK Government has confirmed that it will work alongside the devolved administrations, ensuring that the scheme works effectively in all four nations.
The scheme will be open from 1 November 2020, and will run for a period of six months, but will be reviewed in January 2021.
Payments will be made in arrears and made through a HMRC claims service, which it has been confirmed will be available from early December 2020.
In summary:
Until 31 October – salons are covered by the Job Retention Scheme (CJRS).
From 1 November 2020 – 31 March 2021, either of:
2. Additional grants
The Government’s second announcement is to increase the amount of grant paid to businesses in England that are shut due to local lockdowns from the previously announced £1,500 per month, paid every three weeks, to a maximum of £3,000 per month, paid every two weeks.
The smallest salons can now claim £1,300 per month, medium sized ones can claim £2,000 per month, and larger salons can claim £3,000, all paid in two fortnightly instalments.
The devolved administrations in Scotland, Wales and Northern Ireland will also receive an additional £1.3 billion to their guaranteed funding for 2020-21, to help with the response to the outbreak of coronavirus.
Additional guidance on the extended JSS will be issued in due course.
Further reading:
Job Support Scheme | A practical run through
SEISS | The Self-Employment Income Support Scheme is being extended by Sunak, but these third and fourth grants less generous.
HMRC’s factsheet explains that to be eligible for the further grants, taxpayers must meet the following criteria:
The qualifying period for the third grant runs from 1 November to the date of claim and the qualifying period for the fourth grant is expected to run from 1 February 2021 to the date of that claim.
The requirements to be “actively trading” and to be “impacted by reduced demand” are new and HMRC is expected to publish further guidance to clarify the meaning of these terms.
The requirement to be actively trading will mean that businesses that have had to close during the pandemic will not be able to claim if they have not restarted during the qualifying period.
The policy decision has likely been designed to ensure that only viable businesses are supported and to align the scheme with the Job Support Scheme which will require employees to be working at least of a third of their usual hours.
The grants will be based on the same tax years as the previous grants, which means information on 2019/20 self-assessment tax returns that have been filed will not be considered.
The third SEISS grant will provide a taxable sum calculated as 20% of average monthly trading profits paid out in a single instalment covering three months’ worth of profits and capped at £1,875. This level has been set so as to offer broadly the same level of government support that is being provided to employees through the Job Support Scheme.
The level of the fourth SEISS grant is to be kept under review and will be set in due course.
HMRC will provide full details about how to claim on gov.uk and the Tax Faculty will publish more information as it becomes available.
Under Coronavirus HMRC guidance, you were able to delay making your second payment on account for the 2019 to 2020 tax year, which was due by 31st July 2020.
Your June 2020 Self Assessment statements (a letter HMRC will have sent you) showed 31 January 2021 as the due date for paying the July 2020 Payment on Account.
This is because HMRC updated its IT systems to prevent customers incurring late payment interest on any July 2020 Payment on Account paid between 1st August 2020 and 31 January 2021.
HMRC will not charge interest or penalties on any amount of the deferred payment on account, provided it’s paid on or before 31 January 2021.
Rishi Sunak announced a package of new measures to support the economy during the Coronavirus pandemic over the coming ‘winter’ months: including a new job support scheme, continuing reduced VAT rates, and additional time to pay deferred taxes.
In Summary
The ‘Winter Economy Plan’ came as the government cancelled the Autumn 2020 budget:
Here they all are in more detail
Job Support Scheme
The new scheme is to apply for 6 months from 1 November 2020 to April 2021.
See our practical guide video here:
Job Support Scheme | A practical run through
Self-Employed Grant extension
There is to be similar support for the self-employed by way of extending the Self-Employed Income Support scheme (SEISS) to April 2021.
Business funding and cashflow
Under the new ‘pay-as-you-grow’ terms of the bounce-back loan scheme loan repayments may be extended from 6 to 10 years.
Deferred tax bills
VAT and the hospitality and tourism sectors
Salonfrog recorded a quick practical run through of Yesterday’s announcement by Rishi Sunak – around the Furlough scheme replacement – which is called The Job support scheme.
The scheme will run from 1 November 2020 for 6 months until April 2021.
In summary, you can reduce an employee’s hours down to a minimum of
1/3rd of their usual hours, paying them for the hours they work, and also paying them for 2/3rds of the hours they don’t work.
Our video explains this:
HMRC has started sending letters to hundreds of employers, asking them to review their CJRS claims. However, they don’t say which claim, or what they think is wrong with them!
HMRC estimates that 5% – 10% of CJRS grants contain mistakes or have been illegally claimed.
More likely, it is thought that there have been numerous small errors that all add up to a large number (offset to some extent by many that have under-claimed). The rules were fast changing and complicated in many areas, causing accountants and payroll bureaus many headaches along the way.
HMRC has said that it will focus on fraudulent claims and not on cases where the employer has made an innocent error. Its systems have initially highlighted 27,000 CJRS claims where something looks wrong, and it has selected 11,000 of those – hence the generic letters being sent out.
If you receive such a letter, it asks you to respond to HMRC by telephone, if you think the CJRS claim was correct but given the amount of time it can take HMRC to answer phone calls, it would be worth replying by email as well.
Salonfrog clients simply scan a copy of the letter to us and we deal with it.
Businesses in England required to close due to localised COVID-19 interventions will now be able to claim either £1,000 or £1,500 per property every three weeks, Chief Secretary to the Treasury Steve Barclay told MPs today.
To receive the grant, a business must have been required to close due to local COVID-19 restrictions. According to a government release on the new scheme:
Local authorities will be responsible for distributing the grants and could add further eligibility criteria.
To help other businesses affected by closures which may not be on the business rates list, local authorities will also receive additional government support. Payments made to businesses from this discretionary fund can be any amount up to £1,500 and could be less than £1,000 in some cases.
The government also confirmed that local grants to closed businesses will be treated as taxable income. Businesses still closed at a national level (for example nightclubs) will not be eligible.
Chief Secretary to the Treasury Steve Barclay told MPs the grants provide businesses with “a safety net as they temporarily close their doors to help save lives in their local areas.”