COVID-19 – Extensions to Furlough Scheme and Self-employed Income Support

Everything you need to know about Covid-19 extensions to furlough scheme and self-employed income support

As well as providing our usual level of client support, here at TAG Accountants Group, we continue our quest to keep abreast of the many changes that are being made due to the ongoing crisis that is COVID-19.

Many will be aware that at the end of this week pubs, restaurants and hairdressers will be able to open in England, and social distancing rules are due to change.

Furthermore, on 1st July, a new phase in the Coronavirus Job Retention Scheme (CJRS) starts. “Flexible furlough” as it is known, is a complicated process particularly if your employees are working part time and you are claiming furlough for the remainder of what is their working week. 

Additionally, those who were eligible for the first phase of the Self-Employment Income Support Scheme (SEISS) will now be able to claim an additional grant around mid-August. It will be worth up to 70% of average monthly trading profits (capped at £6,570) and like the initial grant will again be paid out in one single instalment and cover three months, being June, July, and August 2020.

Finally, for businesses that are struggling, there is now a “moratorium” procedure that can be put in place in order to give business owners time to process the various options that might be available to them.

CJRS V2 – Introducing flexible furlough.

The first version of the Coronavirus Job Retention Scheme (CJRS), whereby employees had to be furloughed full time for a minimum of 3 weeks, ends on Tuesday 30 June 2020 and the deadline for claims is 31 July 2020.

From 1 July 2020, Version 2 of the scheme (CJRC V2) commences and runs until 31 October 2020 with grant claims being filed in the same way as for CJRS V1. 

The key changes for CJRS V2 are:

• It is only available to employers that have made claims under CJRS V1.

• It is only available for employees that were furloughed under CJRS V1 although there are some exceptions for employees returning to work after parental leave and military reservists.
  
• There is now a limit to the number of employees who can be included in a single claim being the maximum number included in a single claim for that payroll in CJRS V1. 
  
• Employees can be flexibly furloughed, enabling part-time working with no minimum furlough period.

• Furlough claims must contain details of usual hours and actual hours worked with furloughed hours being the difference between the two. HMRC has not yet responded to requests for clarification of how usual hours should be calculated.

• Each claim made by an employer must be for a week or more unless the claim is for an ‘orphan period’ at the beginning or end of a month.

• No claim period can extend across a calendar month end which in some cases will mean that pay periods will have to be split with separate claims for different parts of the pay period.

• 30 November 2020 is the expected final date for submitting claims under CJRS V2.

While furlough becomes much more flexible, it is important to note that the level of the CJRS V2 grant will be reduced as below.

• In July, the grant will be restricted by reference to furloughed hours where the employee is working only some of the time, but will still be paid at 80% of usual salary (including employer pension and NIC) to a maximum of £2,500.

• During August to October the grant will be restricted to furloughed hours where the employee is working only some of the time, but also because the grant itself is being reduced. In August, the furlough claim will remain at 80% but exclude employer pension and NIC. In September, the furlough payment will reduce to 70% of salary and in October it reduces further to 60%.

Grants overpaid can be repaid by deducting the overpayment from future grants. No further action is needed, but a record of this adjustment should be kept for six years.

HMRC has published the process for repaying grants if no further claims are going to be made. You will need to contact HMRC to obtain a reference number. 

You will need to contact HMRC directly to amend an error that has resulted in an under-claim – expect HMRC to conduct additional checks on these.

As with any aspect of CJRS, the employer must keep a written agreement confirming the furlough arrangement. Records of these employee agreements must be kept until 30 June 2025.

We can provide a suggested template wording for furlough agreements with employees for CJRS V2 and furlough grant calculation spreadsheets if required – just contact us.

SEISS scheme extended.

Individuals can continue to apply for the first SEISS grant (covering March, April, and May 2020) until 13 July 2020. Under the first grant, eligible individuals can claim a taxable grant worth 80% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £7,500 in total. Those eligible have the money paid into their bank account within six working days of completing a claim. 

Applications for the second grant will open in August 2020 (covering June, July, and August 2020). Individuals will be able to claim a second taxable grant worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.

The eligibility criteria are the same for both grants, and individuals will need to confirm that their business has been adversely affected by coronavirus. An individual does not need to have claimed the first grant to receive the second grant: for example, they may only have been adversely affected by COVID-19 in this later phase.

The grant claim must be completed by the taxpayer through the Government Gateway. If you have not claimed the first grant there are only 2 weeks left to do so. HMRC should have been in touch by now if they believe you are eligible but if you have not been contacted and believe you are eligible please contact HMRC as soon as possible.

Deferral of VAT payments – a reminder.

If you are a UK VAT registered business and had a VAT payment due between 20 March 2020 and 30 June 2020, you had the option to either defer the payment until a later date or pay the VAT due as normal. HMRC will not charge interest or penalties on any amount deferred.

The VAT payment deferral period ends on 30 June 2020. This means you will need to:

• set-up any cancelled direct debits in enough time for HMRC to take payment
  
• submit VAT returns as normal, and on time
  
• pay the VAT in full on payments due after 30 June

Any VAT payments you have deferred between 20 March and 30 June should be paid in full on or before 31 March 2021. You can make additional payments with subsequent returns.

Moratorium option for struggling businesses.

If your business is struggling, you can get a “formal” breathing space to consider a rescue plan for your company by seeking a moratorium. This gives struggling businesses formal breathing space in which to explore rescue and restructuring options free from any creditor action.

Except in certain circumstances, no insolvency proceedings can be instigated against the company during the moratorium period. It also prevents legal action being taken against a company without permission from the courts. The exceptions to this are employment tribunal proceedings, or proceedings between an employer and a worker, which do not require the permission of the court to commence or continue.

Directors remain in control of the company and will still need to meet their filing obligations with Companies House. Late filing penalties will still be applied where accounts are filed late.

To set up a moratorium, the directors must file for or apply to the court for one. It will give the company 20 business days to consider rescue options.

The moratorium will be managed by a monitor, who is a licensed insolvency practitioner. The monitor must deliver notice of the commencement of a moratorium to Companies House.

The moratorium can be extended for a further 20 business days without creditor consent, or for a longer period with creditor consent, by filing relevant statements with the court. It can also be extended further on application to the court. Any extension must be made before the current expiry of the moratorium.

A moratorium can be applied for by companies and LLPs registered in England and Wales, Scotland, and Northern Ireland. If you believe this is an option you need to explore for your business, please contact us and we can put you in touch with a licensed insolvency practitioner.

Working safely guidance.

The Government has published 10 guides covering a range of different types of work to ensure employers take adequate precautions to keep their employees safe whilst employees’ transition back to work. 

Of course, many businesses operate more than one type of workplace, such as an office, factory, and fleet of vehicles, and consequently they may need to use more than one of these guides to keep people safe. 

Further guidance will be published as more businesses are able to reopen; click this LINK to read more.

Finally, we are always here to help.

It is vital to keep up to date with the Government support available to ensure you and your business are getting access to all the help that is available. It is also important to ensure you are providing employees with a safe working environment too.

Here at TAG Accountants Ltd, your accountants are always very happy to provide support and guidance on all of this, so if you feel we can help in any way, please call us here at on 01902 783172 or alternatively, just click HERE to contact us via our website and one of our friendly experts will be in touch.

And in the meantime, as we all try to negotiate our way through this crisis, please stay safe.