Covid-19 Response: Update on the main grant schemes (14 August 2020)
August brings the second (and final) round of claims for the self-employed income support scheme and also the first change to the job retention scheme that results in employers being required to contribute to the cost. This article describes these changes and also contains a section on the Job Retention Bonus, claimable in February by employers who used the job retention scheme.
SELF-EMPLOYED INCOME SUPPORT SCHEME (SEISS)
The second round of grants under this scheme will be claimable from Monday the 17th of August. If you meet HMRC's eligibility criteria, which are the same as those for the first round, then you will have a specific date from which to claim. This should have been communicated to you by letter, by email, or via the HMRC app if you use it. If you haven't received a communication from HMRC regarding this and you think you should have, we suggest that you log into your government gateway (HMRC) account from Monday the 17th and keep checking to see when the claim system becomes active for you, which should be by Friday the 21st of August at the latest.
Meeting this initial eligibility test doesn't however mean that you are definitely entitled to make a claim. HMRC based their data on tax returns up to 2018/19 and changes in circumstances after that can render you ineligible; for example having ceased trading. See our earlier news post for the detailed criteria HERE.
Critically for this second claim the condition that your business must have been adversely affected by Covid-19 has to be true from 14 July 2020 or later. If you were back trading prior to this and have no extra costs or loss of income from that date then you should not make a claim. For most people however this will not be the case; either your income will have been reduced or altered or your costs will have increased, or both. This should be directly as a result of Covid-19 however and you must prepare evidence to support your decision to claim the grant and retain that evidence for 5 years.
These grants need to be claimed by taxpayers direct so this isn't something we can do for you. Please retain a copy of the calculations in case the findings need to be checked or challenged, and note also that this grant will be based on 70% of average profits rather than 80%, so will be 7/8 (87.5%) of the last grant (if you claimed it), capped at a maximum grant of £6,570.
A final point to note here is that all claims for this second instalment of the SEISS should be made by 19 October 2020 at the latest. Claims for the first instalment closed on 13 July.
CORONAVIRUS JOB RETENTION SCHEME (CJRS)
This scheme has been evolving constantly since it was first set up, but it is now on a timetable to be wound up on 31 October 2020.
Until now the scheme would fund the full 80% of employment costs required to be processed for furloughed employees (top-ups to 100% were optional at the employer's cost). From 1 August employers are now no longer able to claim the employer NIC and employer pensions elements, so must fund these themselves for furloughed employees. The value of these to each employer depends on average employee pay as both contributions are based on thresholds, so the % cost is lower for lower-paid staff.
The employer's contribution to the cost of furloughed employees will be extended on 1 September to include 10% of qualifying earnings, while the grant drops to 70%. This employer contribution is not optional - employers are required to pay 80% of qualifying furloughed employees earnings so if they drop pay to below this level then no grant is due at all. Care should be taken as the terminology of 70% and 10% can be confusing - they relate to qualifying earnings rather than the % each party funds (which will actually be 87.5% and 12.5% if the employer doesn't top up the employee's pay to 100%). To illustrate this point, if qualifying earnings for a monthly-paid employee were £1,000 then the grant will be £700 and the employer must record at least £800 as that employee's gross pay in September. The grant will therefore be 87.5% of the gross pay (£700/£800).
On 1 October this funding mix changes to 60% of qualifying earnings covered by the grant. In the example above the grant will drop to £600 while the employer maintains the employee's earnings at a minimum of £800 (but can pay up to the full £1,000).
Note that we have referred to furloughed employees in these notes but the rules apply the same to flexibly furloughed employees as well (although the calculations will be a lot more complicated!).
JOB RETENTION BONUS
Some more detail has emerged on this one-off grant to employers. Employers will be able to claim £1,000 for every employee on payroll at 1 February 2021 where the following criteria have been met:
- the employee was furloughed and was included on a CJRS claim at any point during the scheme
- the employee has been continuously employed by the relevant employer from the time of the most recent CJRS claim on which that employee was included until at least 31 January 2021
- the employee has been paid an average of at least £520 per month (gross pay) between 1 November 2020 and 31 January 2021
- the employee has an up to date RTI (real time information) record to 31 January 2021
- the employee is not serving a contractual or statutory notice period that started before 1 February 2021 for the employer making the claim
- the employer has complied with their obligations to pay and file PAYE accurately and on time under the RTI system for all employees
- the employer has maintained enrolment for PAYE online
- the employer has a UK bank account
Please note that this grant is for the employer and is not payable to employees. As with all of these grants this will however be taxable income (taxable on the business or the individual if a sole trader).
More details on this scheme and the claim process will be issued in September 2020 but the available guidance does already state that this bonus will apply to all employees who meet the criteria, which will include company directors.