Following our blog updates over the last week or so, we have been following the news and announcements carefully to gain further clarification around some of the government support. Please see further clarification around the Job Retention Scheme and VAT below.
Job Retention Scheme – updated information:
The government has announced plans for financial assistance to help employers pay employees who are not working, to avoid redundancies. Please note that this scheme is subject to continual review, dependant on Government guidance.
What is the job retention scheme?
The scheme involves employers designating employees as “furloughed workers”. The employer needs to gain agreement from the employee to do this, unless it’s covered by a clause in the employment contact.
An employee will stay “employed” whilst furloughed, but they must not work during this time.
Who is eligible?
All UK businesses operating a PAYE scheme – small or large, charitable or non-profit – will be eligible for the scheme.
How does the scheme work?
The scheme pays a grant to the employer (not a loan), through a new online system which is currently being built. The system is expected to go live before the end of April.
Furlough is backdated from 1st March 2020 and will be available for at least 3 months and may be extended by government. Even though the scheme is backdated to 1st March, an employer will only be eligible to claim the grant once they have agreed the furlough status with their employees and employees must have stopped working for the employer. Please bear in mind that employee status is subject to employment law in the usual way.
Until the new system is live and grants have been paid, employers are expected to bridge the gap and pay furloughed employees. Please contact us if you are concerned about cashflow and making these payments.
What is covered by the grant?
The grant will be calculated per furloughed employee and will be the lower of:
- 80% of “wages costs to the employer”. Our current understanding is that this includes employers’ NIC and pension contributions, however, we are waiting for further clarification.
- £2,500 per month (including employment costs e.g. salary, employer pension contributions required by auto-enrolment (if applicable) and employer NIC.)
Further considerations
As an employer you are able to decide if you wish to pay the furloughed employees 80% of their wages, or top up the grant to the full 100% – essentially costing you 20% of the wage costs.
I appreciate being an employer can be lonely, so if you would like to talk through your thoughts, please give us a call.
How will this affect payroll?
The employer will pay the employee through payroll and submit Real Time Information (RTI) in the usual way, as required by the employment contract.
VAT deferred payments – updated information:
What is the deferral period?
HMRC have advised that any VAT payable from 20th March to 30th June 20 is deferred until the end of the 20/21 tax year. E.g. VAT which is due and payable on 7th April, 7th May and 7th June 2020.
Do I need to apply for deferral?
This is an automatic offer and so no applications are required. However, you will still need to submit your VAT returns on time.
Will I still receive a refund, if I’m due one?
Any VAT refunds due should still be repaid back during this time.
Can I still pay may VAT bill?
If you do still wish to pay your VAT bill, you are still able do so.
Do I need to cancel my VAT Direct Debit:
Yes. If you do not want to pay your VAT during this period, you will need to cancel your VAT direct debit ASAP.
When will the revised VAT payment be due?
Our current understanding is that for any VAT liabilities accumulated during the deferral period will be given until 31 March 2021 to pay.
If you have any questions regarding the Job Retention Scheme or VAT deferral, please contact your manager or email: enquiries@advaloremgroup.uk
As soon as more information about the new online system for the Job Retention Scheme has been announced, we will update our Covid-19 blog and you as soon as possible.
