Important monthly changes to the Coronavirus Job Retention Scheme have been announced by HM Revenue & Customs. Our tax advisors RSM explain these in detail.
Since its launch in March 2020, the Coronavirus Job Retention Scheme has provided support to more than one million employers in the UK at a current cost of over £20bn. The scheme was extended, initially to 30 June and then, following an announcement by the Chancellor in May, to 31 October, when the scheme will end.
As a recap, under the scheme, employers can place staff on furlough leave, subject to various conditions, and can apply for a grant that covers 80% of an employee’s usual wage costs, up to £2,500 a month, plus the associated employer National Insurance (NI) and pension contributions.
The scheme is primarily designed to enable employers to retain employees despite the challenges of coronavirus. A separate Statutory Sick Pay rebate scheme is also available to certain employers, subject to eligibility criteria.
Claims for periods from the start of the scheme to 30 June must be submitted by 31 July. While the scheme is being extended to 31 October, important changes will apply monthly from July, details of which have just been published by HMRC:
Employers will have until 31 July to make claims for employees who have been placed on furlough leave in periods from start of the scheme in March up to 30 June 2020.
For periods of furlough on or after 1 July, employers will only be able to claim for staff that have already been placed on furlough leave for at least the minimum three-week period at some point prior to 30 June 2020. The exception to this will be employees on statutory maternity and paternity leave and other family leave who return to work after 1 July after 'a long period of absence', where their employer has made a previous claim.
From 1 July, employers will be given the flexibility to bring back furloughed staff for any amount of time while still being able to claim the scheme grant for their normal hours not worked. Employers will be responsible for paying their wages and tax and NI contributions as normal for hours worked.
It is important to note that, from 1 July, wage caps are proportional to the hours that an employee is on furlough leave. For example, an employee is entitled to 60% of the £2,500 cap if they are placed on furlough for 60% of their usual hours.
From August, the government will continue to pay 80% of wages up to a cap of £2,500 (prorated) for furloughed staff not working, but employers will no longer be able to claim for employer NI contributions or pension contributions.
From September, the government will pay 70% of wages up to a cap of £2,187.50 (prorated) for furloughed time. Employers will be required to pay 10% of wages to ensure furloughed staff still receive at least 80% in total up to a cap of £2,500 (prorated).
The government will pay 60% of wages up to a cap of £1,875 (prorated) for furloughed time. Employers will be required to pay 20% of wages to ensure employees on furlough leave still receive at least 80% in total up to a cap of £2,500 (prorated).
No claims will be permitted for periods after 31 October. The government has not yet announced a final deadline for claims under the scheme.
The government is regularly updating its guidance in relation to the scheme and it is important that employers keep up to date on the rules in relation to claims.
RSM has published a useful summary of all the latest developments.