Category Archives: PAYE

COVID-19: Job Retention Scheme Update

Today, the COVID-19 Job Retention Scheme Update was announced by the government to provide further clarity on how the scheme will operate.

According to the announcement, the scheme will be backdated to 1 March 2020 and provided staff remain employed throughout the crisis the funding will be open to all employers with a PAYE payroll scheme that was created and started on or before 28 February 2020, including charities.

The announcement further explained that the grants will cover 80% of furloughed employees’ (employees on a leave of absence) monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

COVID-19: Job Retention Scheme Update

The cashflow dilemma for employers

The major stumbling block for employers is cashflow to fund the March 2020 payroll because the government is expected to cover 80% of both March and April payrolls at the end of April 2020.  

One option is to take out a business interruption loan or overdraft which is being guaranteed by the government and interest free for 12 months. Unfortunately, some banks are requesting personal guarantees which may deter some directors from considering this option.

Employers may also utilise the COVID-19 Time to Pay Scheme and the VAT Deferral scheme to free up cash resources to pay employees while waiting on the government Job Retention Scheme funds.

However, it is almost predictable that the majority of the business interruption loans and overdrafts secured under the government’s 80% guarantee will go bad and get hived off to the British Business Bank as COVID-19 bad loans.

The government’s 80% guarantee doesn’t equate to free money to employers and directors giving personal guarantees. These loans and overdrafts will have to be paid back by employers for as long as it takes or they will go to the wall.

Therefore, the dilemma is whether employers protect their own future or act in the national interest and provide for their staff during the COVID-19 crisis.

The COVID-19: Job Retention Scheme Update was sponsored by Canalitix.com

HMRC to fund 80% of wages for furloughed staff

On Friday 20/03/2020, The Chancellor made the historic announcement that the UK government was to step in and help to pay the wages and salaries of retained workers up to a maximum of £2,500 a month. This announcement placed the responsibility on HMRC to fund 80% of wages for furloughed staff.

The Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme has been set up to allow employers to contact HMRC for grants to cover most of the wages of staff who are not working but are furloughed and kept on the payroll instead of being laid off. The scheme will be backdated to 1 March 2020 and is intended to last for 3 months, initially, after which it will be reviewed.

How will HMRC fund 80% of wages for furloughed staff?

HMRC to fund 80% of wages for furloughed staff

HMRC is currently working on the mechanism for reimbursing employers directly into their bank accounts.

In the meantime, employers need to:

  1. designate affected employees as ‘furloughed workers’ and notify them of this change
  2. submit information to HMRC about the employees that have been furloughed and their earnings through a dedicated HMRC portal
  3. HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month

Canalitix Accountants would welcome the opportunity to act as your agent in relation to HMRC taxes. Once authorised by HMRC, we will manage the Coronavirus Job Retention Scheme application process on your behalf.

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VAT PAYE and Corporation Tax Help for Covid-19

The government has promised support for all businesses and self-employed people in financial distress, and with outstanding tax liabilities, such as VAT PAYE and Corporation Tax.

The HMRC’s Time To Pay service has been set up to support business with their tax affairs. Eligibility will be assessed on a case-by-case basis and will be tailored to individual circumstances and liabilities.

Covid-19: VAT PAYE and Corporation Tax Help

HMRC dedicated COVID-19 helpline 0800 0159 559 has been set up for those concerned about being able to pay their tax due