PIXIE PAYROLL Blog

Following on from the Prime Minister’s announcement earlier this week which tightened some of the restrictions we’ve all got to live under, the Chancellor Rishi Sunak yesterday announced a new range of support packages for businesses to try and keep people employed and to protect the economy.

The current Coronavirus Job Retention Scheme – which we all know as being on furlough – had always been due to come to an end at the end of October. When it was initially announced back in March, there was some hope and expectation that the virus would be under control by now and we would all be getting back to normal. But as we now know, that’s not the case at all and more support for businesses and employees is required.

Job Support Scheme

So yesterday, the Chancellor has announced the Job Support Scheme which replaces the CJRS and will start on the 1^st November and run for six months. In order to qualify, the employee must be working at least a third of their normal hours and so be earning at least a third of their normal pay. The employer will then be expected to top up those earnings with a third of the lost pay and the government will support the employer by paying another third of the lost pay.

So as an example, if an employee normally earns £2,000 working full time but is currently only working for a third of those hours, they would be earning £666. That means they have lost £1,334 and so the government will pay a third of that – £444 and the employer would pay the same. So the employee earns £1,554 for working just a third of their normal hours.

Under this scheme, the employer would still be able to claim the Job Retention Bonus early next year and they would be prohibited from issuing any redundancy notices during the duration of the scheme. The scheme is also open to employers who didn’t claim under the Coronavirus Job Retention Scheme.

Self Employed scheme extended

The Self Employment Income Support Scheme will also be extended under similar terms to the Job Support Scheme to help the self-employed although it will only cover 20% of average earnings over the last 3 years. The Chancellor also announced time to pay income tax bills up to January 2022.

Pay As You Grow on Bounce Back Loans

Repayment terms on Bounce Back Loans have also been adjusted to help businesses survive. The time a business can take to repay their loans can be extended to 10 years, can be changed to interest-only and there is also the possibility of a repayment holiday if a business is really in trouble.

VAT

VAT was reduced to 5% in certain sectors over the summer and this has now been extended till 31^st March 2021. We have already seen some businesses pass on that discount to customers and others retain the extra money to help their cashflow and we expect that to continue.

Whilst some of these measures are less generous than we saw at the beginning of the Coronavirus crisis in March, they have been designed to keep job losses down whilst recognising that some businesses have reopened and have been able to bring their employees back to work. But they also recognise that we are in no way back to normal and we have a tricky winter ahead of us.

The Job Support Scheme involves some difficult calculations so even if you have been managing your payroll yourself up to now, do get in touch if you need help.

As we reach the end of August, you can really feel the change in the season and the start of autumn. Normally, we’d be thinking about back to school and the start of ‘Strictly Come Dancing’ about now but as with a lot of things, it will be a bit different this year.

One thing that has been reassuringly familiar though is how busy Cornwall has been this month. Lots of holidaymakers have been enjoying a bit of a break and our tourism and hospitality clients have been busy looking after everyone, which in turn leads to a busy payroll for us!

So whilst the Coronavirus updates pace of change has slowed a little, there are still some news this month, so here’s our update:

Furlough Scheme

As we mentioned in our blog last month, the flexible Job Retention Scheme has continued unchanged in August but modifications are due next week. From the 1st September, the scheme will only cover 70% of the wages of furloughed employees (down from 80%) as the support starts to taper off towards the end of the scheme. This means that employers will have to top up more of the employees’ wages or the employees will see a cut in the money they are paid.

Self Employment Income Support Scheme

The second phase of the SEISS opened for applications last week and self-employed people can now claim a second grant if their business was impacted by Coronavirus after 14th July 2020.

This time the grant will be calculated on 70% of average monthly profits over the last 3 years and will be paid in one lump sum to cover 3 months.

At the moment, there are no plans to extend the scheme further.

Grant schemes

Most of the grant schemes funded by central government have now closed to new applications although you can use this support finder tool to see if you are eligible for anything.

The Cornwall Growth and Skills Hub has just announced that a new Kickstart Grant scheme launches on 2nd September which will pay up to £5,000 to help businesses which have been affected by the pandemic to start to recover. More information can be found here.


Job Retention Bonus

People are beginning to come off furlough and return to work although it is clear that pressure on businesses is not easing off. The Chancellor recently announced a one-off Job Retention Bonus which is a one-off payment of £1,000 for every employee who was on furlough but who is still employed by the employer on 31st January 2021.

The bonus will be paid through the PAYE scheme from February 2021 so we will be looking after this for our clients early next year. More guidance is due next month but this page introduces the scheme.

There are signs that things are returning to some sort of normal as the summer comes to an end but the pandemic isn’t over by any means. We are still subject to social restrictions and new challenges will come up as children go back to school. But as always, we are here to help with any of your payroll queries and can still take on the overall management of your payroll which will be one less thing for you to worry about.

It feels like quite a lot has changed since we wrote our blog last month and there are definite signs of some things starting to return to normal. Summer has also well and truly arrived, which for us here in Cornwall would normally mark the start of the busiest time for businesses and events but which will feel a little different this year.

Furlough scheme

With many more businesses reopening this month, more employees have returned to work and have come off the Job Retention Scheme. On 1^st July, the flexible furlough scheme started which means employees can return to work part time and still remain on furlough for the hours they are not working.  This carries on through August as well, with the government still picking up 80% of the wages of employees on furlough.

From September, the amount the government will cover reduces to 70% and in October, the final month of the scheme, the amount reduces to 60%. The Coronavirus Job Retention Scheme will close at the end of October.

Businesses reopening

Throughout this month, more and more businesses have been given the go-ahead to reopen provided they follow social distancing guidelines. Pubs, bars, restaurants, hairdressers, hotels & B&Bs to name just a few were able to open earlier this month and soon to be given the go-ahead are gyms, swimming pools and exhibition halls.

This has all meant lots of people returning to work and has really helped to make things feel like they’re getting back to normal. It’s also allowed some holidaymakers to come to Cornwall for their summer holidays.

Temporary VAT reduction

Earlier this month, the Chancellor announced that there would be a temporary reduction in VAT to 5% for hospitality, accommodation and some attraction businesses.

Whilst not directly related to payroll and employees’ wages, this reduction does give businesses the opportunity to either pass on the savings to their customers or retain the extra money to invest in the business, which we anticipate will mean some employees can return to work rather than remain on furlough or be made redundant .

Arts support

One area that has been particularly hard hit during the pandemic has been the arts, especially as their route to reopening hasn’t been clear. So this month, a £1.57bn support package was announced for cultural and heritage institutions such as museums, galleries, music venues, independent cinemas and performing arts venues. Many employees in this sector have already been on furlough but it is hoped the grants and loans will help the organisations restart their plans and employees keep their jobs.

2^nd SEISS

The first stage of the Self Employed Income Support Scheme is now closed for applications but the second phase will open in August. HMRC will contact those who are eligible but this link gives you more information.

As in previous months since the pandemic started, it has felt that things have changed fast this month and we have had to navigate uncharted waters. We have been working closely with our clients to support them and their employees during furlough and as they return to work. Thanks to being a Member of the CIPP, we have always had the latest information to hand which has been really important in keeping everyone up to date so if you have any questions at all about payroll, just get in touch.

As we come to the end of another month dealing with all the ramifications of Covid-19 – both personal and business – we have some more updates for you about the various arrangement the government has put in place to help businesses cope.

Furlough – Coronavirus Job Retention Scheme

The Flexible Furlough scheme is being introduced from 1^st July 2020, which means employers can start bringing their employees back part time. The hours or days that the employees work is for the employer and employee to decide and employees can stay completely on furlough if required. The business should pay the employee for the hours worked and then apply to the scheme for the hours on furlough.

This adds a bit more complexity for employers so even if you have been managing your payroll yourself up to now but find you need a bit of extra help now, just get in touch.

Statutory Sick Pay Rebate scheme

This scheme allows small to medium size businesses claim back the costs of SSP and is now open for claims. We have been handling the rebates for our clients but this page of the government website has useful information and you can find out if you are eligible to make a claim. 

Employee benefits

Because people have either been on furlough or working from home, some aspects of taxation have needed some new arrangements although you may not have seen them discussed at the daily Downing Street briefing.

When employees receive benefits from their employer such as meals, company cars or travel costs, they are all considered as part of that employee’s overall taxation. Since employees have either been on furlough or working from home – so there’s a company car on the drive not being used for business purposes for example – HMRC has published new guidance on what to do in these circumstances.

The guidance can be found here.

Calculating maternity and parental pay

The amount of maternity and parental pay is calculated based on the Average Weekly Earnings (AWE) in the 8 weeks prior to the leave starting. Due to furlough, these amounts may have been reduced for some and so new rules have been introduced to ensure no one loses out due to the pandemic.

So, if an employee was on furlough for part or all of the relevant 8 week period and their period of family-related pay starts on or after 25^th April 2020, these are the new rules for calculating AWE:

The earnings used to calculate AWE for that period will be the higher of:

1. What they actually receive from their employer;

or b) What they would have received from their employer had they not been on furlough

As with other payroll matters, if you are at all unsure about calculating family-related pay for your employees, please just ask.

Covid-19 Scams

HMRC are reporting that criminals and scammers are taking advantage of the current situation and so are asking everyone to be on alert. The scammers text, email or phone businesses offering spurious financial support or tax refunds. They try to get financial and personal information or attempt to infiltrate computer systems to steal data or demand ransom. HMRC has detected more than 95 Covid-related financial scams since March, most by text message.

HMRC’s advice to businesses is:

Stop: If you receive a request to make an urgent payment, change supplier bank details, or provide financial information, take a moment to stop and think.

Challenge: Could it be fake? Verify all payments and supplier details directly with the company on a known phone number or in person first.

Check GOV.UK for information on how to recognise genuine HMRC contact and how to avoid and report scams. If you think you have received an HMRC-related phishing/bogus email or text message, you can check it against examples published here.

These are still uncertain times and whilst there are signs that lockdown is easing, we know many businesses still have staff on furlough and are unsure about what the future holds. If you need any help or advice regarding payroll, bringing staff back to work or taking on new employees, just get in touch.

Protect: Contact your business’ bank immediately if you think you’ve been defrauded and report it to Action Fraud. Use the latest software, apps and operating systems on your phone, tablet or laptop. Update these regularly or set your devices to automatically update. Forward suspicious emails claiming to be from HMRC to phishing@hmrc.gov.uk and texts to 60599.