October 2020 Covid Update


Our earlier blog outlined the details of the Job Support Scheme which were released on 24 September, and we await with interest and some trepidation the detail of how this scheme will operate.  In the meantime, there are a few announcements of interest worth commenting on as we get ready to leave the Furlough scheme behind and move into considering the Job Retention Bonus and other reliefs.

The Job Retention Bonus (JRB)

The JRB was announced in July 2020 and is:

  • a one-off payment to employers of £1,000,
  • payable for every employee for whom the employer has made a valid claim under the CJRS and who remains continuously employed through to 31 January 2021.

Eligible employees must earn at least £1,560 in total for the period between 1 November 2020 and 31 January 2021, with at least one payment being reported through RTI in each month.

The bonus will be taxable, so the business must include the whole amount as income when calculating its taxable profits for corporation tax or income tax.

Employers will be able to claim the JRB through gov.uk after they have filed their RTI returns for January.

Payments will be made to employers from February 2021.

Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) are also eligible for the JRB, just as they have been for the original and also the part-time furlough schemes, but will not have to pay tax on grants received under the scheme. 

Rules for employers

All employers are eligible for the scheme including recruitment agencies and umbrella companies. The employer must:

  • have a UK bank account;
  • have complied with their obligations to pay and file PAYE accurately and on time under the RTI reporting system for all employees to the end of January 2021; and
  • be up-to-date with payroll obligations and have addressed all requests from HMRC to provide missing employee data in respect of historic CJRS claims. 

Rules for employees

Each employee must have been:

  • furloughed and the subject of an eligible Coronavirus Job Retention Scheme claim;
  • continuously employed by the relevant employer from the time of the employer’s most recent CJRS claim for them, to 31 January 2021; and
  • paid a total of at least £1,560 for the period 1 November 2020 to 31 January 2021. The employee does not have to be paid £520 in each month, but must have received some earnings in each of the three calendar months that have been paid and reported to HMRC via RTI.

Claims may be made for employees who are office holders, company directors and agency workers, including those employed by umbrella companies. These criteria must be met regardless of the frequency of the employee’s pay periods, their hours worked or rate of pay.

Employees who have returned from statutory parental leave or who are military reservists returning to work after 10 June 2020, for whom a CJRS claim has been made, all qualify provided the other eligibility criteria are met, as do employees who are on fixed term contracts.

The employee must not be serving a contractual or statutory notice period, that started before 1 February 2021.

Employees transferred under TUPE or due to a change in ownership

A new employer may be eligible to claim the JRB in respect of employees of a previous business which were transferred to the new employer if either TUPE applies, or the PAYE business succession rules apply to the change in ownership.

A new employer may also be eligible to claim the JRB in respect of the employees associated with a transfer of business from the liquidator of a company in compulsory liquidation where TUPE would have applied were it not for the company being in compulsory liquidation.

To claim the JRB under these circumstances the transferred employees must have been furloughed and successfully claimed for under the scheme by their new employer. An employer will not be eligible for the JRB in respect of any employee transferred under TUPE or under the business succession rules after 31 October 2020.

Important Deadlines

Self-employment Income Support Scheme

This is the claim available to certain Self-employed individuals or members of  partnerships.

We are currently within the claiming period for the second grant,  calculated as 70% of 3 months trading profits, up to a maximum of £6,570. Applications for the second grant opened on 17 August 2020 and will close on 19 October 2020. HMRC has not yet provided details about applications for the third and fourth grants.

An extension was announced on 24 September 2020 to provides two further grants. The third grant will be calculated as 20% of three months trading profits, up to a maximum of £1,875. The level of the fourth SEISS grant is to be kept under review and will be set in due course.

Average trading profits remain based on 2016/17, 2017/18 and 2018/19 with some exceptions for particular circumstances. This will not change for the third and fourth grants.

Subject to eligibility, the second, third and the fourth grants can be claimed even if previous grants were not claimed.

Claims have to made by the taxpayer themselves and cannot be made by agents. HMRC does all the calculations needed for the claims, using the information in the submitted tax returns. The taxpayer does not have to provide any figures, although these should be checked.

The grants are subject to income tax and self-employment national insurance contributions in the 2020/21 tax year. HMRC expects to provide a specific section in the 2020/21 self assessment tax return for the reporting of SEISS grants. It is possible that the fourth grant will be taxable in 2021/22, that has yet to be decided.

Coronavirus Job Retention Scheme Grants

The CJRS finishes on 31 October 2020 and all claims must be made by 30 November 2020.  This imposes a particularly short deadline for some 4 weekly payrolls.

Overclaimed CJRS and SEISS grants

The onus is on the taxpayer to notify HMRC if they have overclaimed a CJRS or SEISS grant and this must be done by 20 October 2020 or 90 days of receipt of the grant, whichever is the later. 

The penalty regime is based on the usual failure-to-notify penalties with an additional provision which means that if the taxpayer knew that they were not entitled to the grant at the time when they received it (or ceased to be able to retain it), the overpayment must be notified or repayment made in full by the end of the notification period. Any failure arising from this additional provision will be treated as deliberate and concealed. Failure to notify penalties could be as much as the entire amount overclaimed.

For SEISS grants the key risks affecting entitlement are:

  • the trade was not adversely affected by coronavirus;
  • the trade did not continue in the tax year 2019/20 (eg, because the business was incorporated); or
  • there was no intention to continue to trade in the tax year 2020/21.

The key risks affecting entitlement to CJRS grants include:

  • grants not used for the purposes for which they are intended;
  • calculation errors; and
  • employees working during periods that they are on furlough

31 January 2021 self assessment payments – time to pay rules

Another announcement made by the Chancellor on 24 September was around enhanced payment arrangements for taxpayers who are unable to pay their self assessment bill that falls due on 31 January 2021.

We now have more detail on this.  This enhanced payment arrangement will apply to all tax due on that date including:

  • the deferred second payment on account for 2019/20 which was originally due on 31 July 2020.
  • The balancing payment for 2019/20 due on 31 January 2021.
  • And the first payment on account for 2020/21 due on 31 January 2021.

And the relaxation announced is that this total amount due can be paid in monthly instalments over a period of up to 12 months.

There are however some requirements to enable this time to pay arrangement to be simply set up online:

  • The taxpayer must have no outstanding tax returns 
  • They must have no other tax debts, or HMRC payment plans set up.
  • The total amount due must be between £32 and £30,000.
  • The payment plan must be set up no later than 60 days after the tax falls due, so by 1 April 2021. However, to avoid late payment penalties the payment plan must be set up by the trigger date for late payment penalties which is 30 days after the due date ie, 2 March 2021.

Interest will be applied to any outstanding balance from 1 February 2021. This contrasts with the deferral of the second payment on account due in July 2020 on which no interest was charged.

Taxpayers who owe more than £30,000 or need longer than 12 months to pay may still be able to set up a time to pay arrangement by calling the self-assessment payment helpline on 0300 200 3822.

The online time to pay service is not currently available to agents.