On Friday 20th March 2020 the U.K. government made various announcements to support employers and their employees during the current COVID -19 crisis. We expect further announcements to be made imminently.   

What does this mean for U.K. employers?

The Coronavirus Job Retention Scheme is available to all UK employers to enable them to access support to pay part of their employees’ salaries if those employees would otherwise be made redundant as a result of this crisis.  The scheme is available from 1 March 2020.

Although the Government did not formally announce a three-month payment holiday for PAYE and NIC as it did for VAT, we are experiencing HMRC agreeing to time to pay arrangement for payroll taxes. For those companies with a Customer Compliance Manager (“CCM”), they were granted powers last week to authorise time to pay arrangements. Time to Pay is where the PAYE, NIC and Apprenticeship Levy remittances due to be made to HMRC can be deferred, essentially recognising the amounts due as a debt, and agreeing repayment terms. RTI submissions still need to be made as normal, especially so that employees who need to make any contributory benefit claims from the Government, their National Insurance records are up to date, along with pay data if having to claim universal credit or similar means-tested benefits. 

In addition, there is support for small and medium sized employers (defined as those with less than 250 employees as at 28 February 2020) who are paying sick pay to their employees to enable them to reclaim Statutory Sick Pay (SSP) paid for absence due to COVID-19. Further details of this are set out below.

How do employers access the Coronavirus Job Retention Scheme?

Employers must take two steps:

• Designate affected employees as ‘furloughed workers’, (which hasn’t been statutorily defined yet, but that we understand are workers who would otherwise have been laid off, but instead will be stood down from working),  and notify your employees of this change – please note that this change is still subject to normal employment law and depending on the contract employers have in place with their employers, may be subject to negotiation;
• Submit information to HMRC about the employees that have been furloughed through a new HMRC portal (further information will be provided in due course).

What level of financial support is available?

HMRC will reimburse up to 80% of furloughed employees’ wage costs, up to an earnings limit of £2,500 month. Please note that this is based on gross pay and will therefore be subject to PAYE and NIC (both employers and employees) in the normal way. There is no requirement for the 20% to be paid, although the opposition parties are calling for this. This may therefore require funding from also seeking time to pay arrangements to ease cash flow. 
What is not clear yet (but we hope that clarity will be provided shortly):

• How do employers calculate furloughed employees’ wage costs for zero hours or fluctuating earnings contracts?
• When will the financial support be available and how will this be delivered?  The most straightforward way would be via some form of reverse delivery of the money via the PAYE system.  We await further details
• How to differentiate between furloughed employees and those on reduced or working from home or other flexible working arrangements (as it seems support is only proposed to target those that would otherwise be laid off) 
• Those already on SSP, SMP, SAP or SPP from their employers, will they be able to qualify as “furloughed” workers
• If furloughed workers take up alternative employment or volunteer to help the emergency services etc, will this jeopardise their job retention scheme payments

Support for businesses paying sick pay

Legislation is being brought forward to enable businesses with less than 250 employees to be able to claim a refund of 2 weeks SSP per employee who has been off sick due to COVID-19. Employees will need to maintain records of staff absences and payment of SSP, but employees will not be required to provide a GP fit note.

We do not yet know the timing of this legislation and await further information. In the meantime, companies should process SSP via payroll, as a separate payment to occupational sick pay, to ease with identification at a later date, when this can be recovered from PAYE remittances, or offset against the PAYE debt, if time to pay arrangements are entered into. 

What if I need additional extensions to pay my PAYE and NIC to HMRC?

The three-month suspension of VAT that was announced on 20 March, does not automatically apply to PAYE and NIC, so there is the expectation that other than under time to pay arrangements, these are withheld and remitted as normal. However, we are aware that HMRC are agreeing to three-month extensions for PAYE/NIC under their time to pay arrangement.  

HMRC have expanded the team on their designated helpline (0800 0159 559) for those struggling to make payments of taxes. The helpline has been inundated with calls particularly in the run up the payroll taxes payment which was due on Friday 20 March. The staff have different financial authorisation levels but have generally permitted 3 months extensions on payroll taxes.  

However, as this crisis progresses you may need to have a more structured payment plan agreed with HMRC over a longer period of time. It is anticipated that HMRC will require a presentation of financial and commercial information in order to approve extended high value time to pay arrangements for taxes, especially for those falling due after 30 June 2020.  

We, at A&M Taxand U.K. LLP are liaising with HMRC, industries heavily impacted by this crisis and R3 (the Restructuring and Turnaround practitioners’ body) to establish clear guidelines on what companies will be required to present to HMRC and also what they can reasonably expect so that everyone is on a level playing field.

What if I have companies in other countries?

Tax authorities in other countries are offering delayed tax payment arrangements – this varies from country to country and is changing on a daily basis. HMRC has also issued guidance on the impact of tax residency and employees residing in a country accidentally as a result of the Coronavirus. We can provide you with specific country advice via our international Taxand network.

If you have any questions about any of the topics above, please do not hesitate to contact the contacts here or your regular A&M Taxand U.K. LLP contact. We also have a team of turnaround and distressed business advisors – if you need any support with business continuity planning, we can help.