HMRC finally released guidance on the operation of the twin job support schemes that both start on 1 November 2020. Please read below for the essential details.

There are now two job support schemes (JSS). The original one designed for businesses that are legally required to close is now called JSS Closed, and the other one introduced by the Chancellor on 22 October for businesses that remain open but with employees working reduced hours is now called JSS Open.

The schemes may be used by the same business concurrently for different employees if it has premises in different areas, some of which are completely closed. A business could also move between the two schemes as the restrictions for the area it operates in change.

Businesses that qualify

The more generous JSS Closed can only be used by businesses which are required to close by the coronavirus regulations, such as under the tier 3 restrictions in England, or the similarly regulations in Wales, Scotland or Northern Ireland. However, where premises are restricted to delivery or collection services, or to serving food outdoors, they count as “closed” if located in a restricted area.

All other small and medium sized businesses can use JSS Open if some or all of their employees are working reduced hours.

Large employers (with 250 or more employees on 23 September 2020) wanting to use JSS Open must also show that their trade has been affected by coronavirus. The VAT returns filed between 31 August and 7 November 2020 must show level or reduced sales (looking at box 6 totals) compared with the VAT returns for the same period in 2019. Group VAT returns should be used, not those for individual companies.

There are also common conditions for both JSS Open and JSS Closed (see below).

JSS Open

The JSS initially proposed in September has been transformed into something closely resembling the CJRS which closes on 31 October. A new factsheet sets out a number of examples, but further legislation and more guidance is expected very soon.

Under JSS Open the employee must work at least 20% of their usual working hours (defined as per the CJRS), which would amount to one day of a normal five-day working week. This reduction in hours must be agreed in writing with the employee.

The employer must pay for all of the worked hours at the employee’s agreed reference salary, plus up to 5% of the value of the hours not worked, up to £125 per month, but the employer may top-up this figure if they wish to. The reference salary will be capped at £3,125 per month, and defined in a similar way to CJRS.

The JSS grant will cover up to two thirds of the hours not worked, capped at £1541.75 per month.

The employer must pay all of the employer’s national insurance (NIC) on all of the wages the employee receives plus any employer’s minimum contribution to a workplace pension.

An employee who works for 20% of their contracted hours will receive:

  • 20% of pay for worked time
  • 4% (5% x 80%) of pay for non-worked time, capped at £125 per month
  • 49.33 of pay (61.66% x 80%) for non-worked time, capped at £1541.75 per month

In total the employee receives 73.33% of their pay and foregoes 26.67% of their normal pay.

Example 1: Joe the campaigner and JSS Open

Joe is a campaigner employed by Biden Ltd on an annual salary of £36,000, or £3,000 per month. In a normal month he would work 225 hours, which is £13.33 per hour.Joe has agreed to work 45 hours per month for £600. To qualify for the JSS Open, Biden must pay Joe for 5% of his remaining normal hours: £120 (9 x £13.33). The JSS grant should cover the cost of 61.67% of the total 180 non-working hours: £1,479.63 (111 x £13.33).Joe receives pay of £2,199.63 (600 + 120 + 1,479.63), which is 73.33% of his normal pay.Biden Ltd must bear the cost of £720 (600 + 120), plus the employer’s NIC on the full amount paid of £2,199.63 and any relevant workplace pension contributions for Joe.

JSS Closed

Under this scheme the grant will cover for two thirds of the normal pay of furloughed employees, who cannot work at all, up to a maximum of £2,083.33 per month. The employee must give up one third of their wages, and will have to agree to that change in their employment contract in writing if they are not already on a zero hours contract.

Example 2: Donny the chef and JSS Closed

Donny is a chef employed by Trump, on a salary of £32,000 or £2,666.67 per month. Trump’s burger bar is closed as it is located in a tier 3 zone.Trump can claim for two thirds of Donny’s monthly salary (£1777.78) under the JSS Closed. Trump will also have to pay the employer’s NIC on that salary plus the minimum employer’s contribution the workplace pension, if Donny has not opted out of that scheme.Donny will receive £1777.78 before tax and NIC deductions, which is two thirds of his normal salary.

JSS common conditions

The twin JSS grants schemes will run from 1 November 2020 to 30 April 2021, with the conditions to be reviewed in January 2021. The employer need not have claimed under the CJRS to use either JSS. Publicly funded bodies are not expected to use either JSS.

The other conditions for both JSS are as follows:

  • The employer must have a UK, Isle of Man or Channel Island bank account
  • The employer must use PAYE online
  • Only payments to eligible employees qualify for the grants (see below)
  • Large businesses are strongly discouraged from paying dividends or returning capital to shareholders while using the scheme.

Which employees are eligible?

There is some difference between the advice on the JSS Open factsheet and the gov.uk guidance on this point.

The factsheet says employees must be on the payroll of the employer between 6 April 2019 and 23 September 2020, and included on at least one RTI return in that period that was submitted before midnight on 23 September 2020. This implies the employee does not have to be employed for that entire period, and employment at some point in the period would qualify.

The gov.uk guidance says the employee must be employed on 23 September 2020. But if the employee has been made redundant since that point and rehired (implied by the same employer), they are an eligible employee.

Any person who is taxed as an employee is an eligible employee for JSS, which would include contractors subject to IR35 and agency workers.

Claims

Employers will be able to claim under either JSS from 8 December 2020, although the first claim period can’t start before 1 November 2020. Where the pay period straddles 1 November 2020, separate claims will have to be submitted under CJRS and JSS.

The claims must be made for minimum seven-day periods, but employees can cycle in and out of the JSS Open and do not have to work the same pattern each month.

A claim can’t be submitted for a particular employee until that employee’s wages have been paid and reported under RTI. This is to reduce fraud, but means the employer has to fund the entire payment to the employee in advance.

Further detailed guidance on how to make claims under either JSS will be published shortly.

Transparency

HMRC will publish the names of the employers which use either JSS Open or JSS Closed.

Employees will be able to check if their employer has made a JSS claim relating to them via their personal tax account. This feature is designed to prevent employers from claiming JSS while also asking employees to work.

HMRC has clarified its practice for employees to claim a £6 per week homeworking tax deduction, but this may be a temporary concession for 2020/21.

In May 2020 HMRC changed its approach for employees who wished to claim a tax deduction for the costs they incur when working at home.

Until that point, there was a mismatch between employees who had agreed a homeworking arrangement with their employer who paid them a home working allowance (up to £6 per week), and employees who worked at home but didn’t receive the allowance.

Those who didn’t get the allowance could claim a deduction for the additional expenses incurred by using their home as their workplace, such as energy and telephone calls, but those extra costs were difficult to quantify so most people didn’t bother to claim.

How much?

HMRC’s change in practice has permitted employees, who are required to work at home, to claim £6 per week (£26 per month) as a deductible expense against their employment income, if they don’t receive the full homeworking allowance from their employer.

There is still a mismatch of-course, as the employee who receives the homeworking allowance has an additional £312 per year of tax-free (and NIC-free) money in their pocket. Whereas the employee who claims a tax deduction of £312 for the year will receive a tax refund of £62.40 (20% taxpayer), £124.80 (40% taxpayer) or £140.40 (45% taxpayer). These figures will vary slightly for Scottish residents. Those claimants won’t receive a refund of Class 1 NIC paid on their earnings.

Full-time or part-time?

In his blog, Martin Lewis raised a valid question over the required element of the homeworking deduction.

Where employees are given the choice of continuing to work at home or returning to the office, could the homeworking deduction still be claimed for the part of the working time spent at home?

HMRC has bowed to the pressure from Lewis, and the professional bodies, to clarify this point and has agreed that employees can claim the full £6 per week deduction even if they now split their time between their home and the office. The deduction does not need to be pro-rated if part of the employee’s working time is spent in the office and part at home.

The HMRC guidance says the employee must work at home on a regular basis to claim the deduction, so two weeks spent working at home while self-isolating won’t allow the employee to claim the homeworking deduction for the full tax year. Although ICAEW is reporting that if an employee has told HMRC they are working from home, and then later in the tax year they return to the office full time, there is no requirement for the employee to tell HMRC about this change in working location.

How to claim? 

HMRC is now actively encouraging employees to make claims for their homeworking costs through a new online portal that opened on 1 October. It says that over 54,800 people have already made such a claim.

Where an online claim is submitted now the employee’s PAYE code will be altered so the tax relief is given at source for the rest of this tax year.

Alternatively, the employee can claim in their self-assessment tax return after the end of the tax year, or submit a form P87, online or by post.

What about future years?

The claim for homeworking costs does not automatically roll-over to the next tax year, so the new claim will be needed for 2021/22 if the employee is still working at home in that period.

However, the ICAEW understands that HMRC will withdraw the concession for a flat rate amount to be claimed when the coronavirus pandemic is over. In that case, the employee who does not receive the allowance from their employer would have to prove they are incurring additional costs by working at home.

Deductions for the self-employed 

Self-employed individuals can claim a similar simplified deduction of up to £26 per month in their accounts, but the amount that can be claimed depends on the use of the property as follows:

Hours home used for business per month Deduction per month
25 to 50 £10
51 to 100 £18
101 or more £26

On this basis, the employee is better off as there is no minimum time set for the employee to work at home per week or month to claim the homeworking deduction.

A self-employed person can alternatively claim the business proportion of the actual costs of running the home, which may result in a higher deduction, especially where a large proportion of the home is used.

 

As announced by the Chancellor last week, Self Assessment customers can now apply online to spread the cost of their tax bill into monthly payments without the need to call HMRC.

The online self-serve ‘Time to Pay’ service, has been increased to £30,000 for Self Assessment customers, to help ease any potential financial burden they may be experiencing due to the coronavirus pandemic.

Once you’ve completed your tax return for the 2019-20 tax year, you can use the online self-serve ‘Time to Pay’ service through GOV.UK to set up a direct debit and pay any tax that is owed in monthly instalments, up to a 12-month period.

If you wish to set up your own self-serve ‘Time to Pay’, you must meet the following requirements:

  • no outstanding tax returns
  • no other tax debts
  • no other HMRC payments set up
  • your Self Assessment tax bill is between £32 and £30,000
  • it is no more than 60 days since the tax was due for payment.

If you do not meet these requirements, you might still qualify for Time to Pay, but you will need to call HMRC to set this up.

If you set up a ‘Time to Pay’ arrangement, you will have to pay interest on the tax paid late. Interest will be applied to any outstanding balance from 1 February 2021.

Yesterday the Chancellor announced various measures to help both businesses and employees. The following links give a lot of detail into what has been put in place so far to help:

Guidance for businesses: 

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

Guidance for employees:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-guidance-for-employees

More information will follow in the next few days and we will update you when we know more.

We are here to help so please get in touch if you have any queries on 01242 370278 or email office@wfrancisandco.co.uk

A glitch within the HMRC Self Assessment system glitch-300x300

A glitch within the HMRC self assessment system has meant that some taxpayers were not informed of the amount of tax to pay on account by 31 January 2019 and this problem won’t be fixed before 31 July 2019.

In January 2019, HMRC were experiencing a number of computer errors including the omission of tax demands for payments on account (POA) for 2018/19 from some taxpayers’ statements. This problem applies to the taxpayer’s online personal tax account, as well as to paper statements of account issued by HMRC.

How many are affected?

HMRC recognises that this is a real issue. When contacted for comment on this story a Revenue spokesperson said “We are aware of an issue with payment reminders for a small number of customers. Anyone who is affected should contact us and we’ll put it right. Nobody will be charged additional interest due to this problem.”

However, judging by the number of queries on the HMRC agent forum, this is a widespread problem.

The professional tax and accountancy bodies have complained, and HMRC has apologised to those bodies, but it has made no attempt to tell the affected taxpayers what to do. HMRC has also said it can’t fix the problem of missing POA demands in time for the 31 July 2019 payment date.

No interest

HMRC has confirmed that if the demands for POA have been omitted from the taxpayer’s statement, that taxpayer will not be charged interest as long as full payment of all the tax due for 2018/19 is made by 31 January 2020.

Nearly 1.1 million businesses have yet to register for MTD, according to the results of a Freedom of Information (FOI) request sent to HMRC by cash flow service Float.

Additionally, the data suggests that only 2% of accounting firms have registered any clients for MTD, from an estimated 72,000 tax ‘agents’ nationwide.

Float said that many businesses are “still unaware of MTD or are uncertain of what action needs to be taken to become compliant.” The company added that the MTD registration process is “confusing” and that HMRC have “much more to do to alert businesses to the change in the law”.

1.1 million businesses yet to register for Making Tax Digital (MTD) Making-Tax-Digital-Header-e1523542410732-300x150

If you are VAT registered and would like more information regarding MTD and MTD compliant software then please give us a call on 01242 370298 or email us on  office@wfrancisandco.co.uk