Like many employers, charities have had to get to grips with furloughing some of their staff, and making claims via the Coronavirus Job Retention Scheme (CJRS).
The scheme launched in March and continued in its initial form until 31 July. There is now the introduction of part furlough and a sharing of the costs with employers.
From the start, the CJRS grant has provided up to 80% of the regular wages of the furloughed employee, subject to a cap of £2,500 per month, plus the associated employer’s National Insurance contributions (NICs) and minimum auto enrolment pension contribution. Furloughed staff are not currently permitted to do any work for their employer (or any connected party), including volunteering, during the furlough period.
The scheme will close on 31 October and is being phased down as follows:
- July – new cap on claims based on maximum claimed in previous periods.
- August – no further claims in respect of National Insurance and pension costs.
- September – the 80% due will be split between 70% HM Revenue & Customs (HMRC) claim/10% funded by employer.
- October – further change in split to 60% HMRC/20% employer.
- November – no claims possible.
Who can claim?
Any UK organisation with employees can apply, including businesses, charities, recruitment agencies and public authorities. You must have:
- Created and started a PAYE payroll scheme on or before 19 March 2020;
- Enrolled for PAYE online – this can take up to 10 days; and
- A UK bank account.
Which employees are covered by the scheme?
The scheme covers employees on full or part-time employment contracts, agency workers, those on flexible-working and zero-hour contracts, those on fixed-term contracts and foreign nationals.
An employer can furlough nearly all employees on PAYE, but there are exceptions.
You cannot furlough someone whose salary is paid for through public funds. Check with your public funders (DCMS, MHLCG, local authority etc) whether you can furlough staff or not. If you receive more than 50% funding it may not be possible. If the post is part-funded (under 50%) it may be possible.
Staff cannot furlough themselves but those that are ‘shielding’ (vulnerable, underlying conditions) or have caring responsibilities can be furloughed.
Employers will need to issue a notice to inform employees that they will be furloughed/part furloughed and issue a furloughed contract letter that the employee signs to show agreement. Records must be kept for five years and HMRC will be able to investigate claims in future, hence keeping accurate records will be very important.
Job Retention Bonus
The government have introduced a new grant to employers to encourage them to retain staff on returning to work after a period of furlough.
There will be a one-off payment of £1,000 to employers for every furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the CJRS and the end of January 2021. Payments will be made from February 2021, presumably through the PAYE online system.
Time to pay
Many businesses are looking to defer payments of PAYE where possible during this period of uncertainty. HMRC is being very receptive to requests for the deferments. In general, it is advisable to contact HMRC as soon as difficulty making payment is expected. HMRC’s systems do not easily facilitate setting up a payment arrangement too far in advance, so the best time to phone HMRC is usually one to two weeks in advance of the due date for payment. Large organisations with a customer compliance manager should contact that individual. If you do not have a contact, HMRC’s helpline for help and advice is T: +44 (0)800 024 1222.
Some key areas to note to ensure a successful application are:
- Make sure your returns are up-to-date.
- It is advisable to have financial forecasts and a statement of assets and liabilities available.
- HMRC will usually expect to set up a regular monthly payment plan with collection by direct debit. Most HMRC debt management contact centre staff have authority to agree time to pay over a period of up to 12 months. Longer periods can be arranged, but usually need to be escalated to more senior HMRC staff.
- If a formal time to pay arrangement cannot be reached, it is usually advisable to pay what you can when you can, as this shows willingness to pay and may delay further enforcement action by HMRC.
- A standard term of HMRC time to pay agreements is that future tax liabilities are paid in full as they fall due. Where this is not possible, it is necessary to contact HMRC again to renegotiate the arrangement to include the new debt. HMRC is often reluctant to agree repeated requests for time to pay, but may be more amenable in the current situation.
- An advantage of a formal time to pay arrangement is that late payment penalties will not be charged if the arrangement is in place at the trigger date for the penalties.
- Remember that interest continues to accrue during the deferral period, so if you can pay earlier than expected, it makes sense to settle the arrangement early.
If you would like advice on furloughing staff or on negotiating time to pay arrangements with HMRC, please speak to your usual Saffery Champness partner.