With the ongoing Coronavirus pandemic very much at the forefront of everyone’s attention right now, here at Dataplan we are working hard to stay abreast of legislation and updates so that we can keep you informed about the impact and any assistance that is available to your business.
In our recent post “Coronavirus Job Retention Scheme – What we know so far” we ran through what this scheme entailed, and highlighted some matters that were yet to be clarified. Since publishing more information has become available so this post will explain the clarifications in addition to further guidance outside of the scheme which has now been released.
The Coronavirus Job Retention Scheme (CJRS) is a significant aid package, and as the situation with Covid-19 continues to evolve in the UK and throughout the World it can be expected that further guidance on the scheme and other Covid-19 measures will be released.
Directors can be furloughed
In just one of the updates it has been announced that Directors can be furloughed. The furlough payment will be based on salary declared through the PAYE system, and dividends are not in the furlough calculation.
For a Director to be furloughed, that Director cannot undertake any work, except work relating to statutory duties. It is recommended that appropriate minutes are maintained to show the reasons and date of furlough.
Length of furlough period
For all furloughed employees furlough must last for a minimum of 3 weeks. An employee cannot return to work for any reason within the 3 week period. After 3 weeks an employee can return to work and subsequently be furloughed again, but each furlough must still be for a minimum of 3 weeks.
Furlough agreement must be signed
In an anti-fraud measure it has been announced that the furloughed employee must sign the furlough agreement to evidence their understanding of the scheme. The signed agreements must be retained for 5 years and may be checked retrospectively by HMRC.
What can be included in the furlough payment?
On the 4th of April 2020 an update from the Government confirmed that in addition to basic salary, contractual commission, contractual fees, and past overtime can be included in the calculation of the furlough payment.
Discretionary bonuses, tips, discretionary commission payments and benefits in kind are not included in the furlough payment.
Suspension of Direct Earning Attachments (DEAs)
The Department for Work and Pensions (DWP) have confirmed on their Debt Management telephone line that all collection of overpayments of benefits, tax credits and social funds have been suspended for a ‘temporary period’.
New collection orders will not be issued while the suspension period remains in place, and the DWP have advised all employers to suspend collection of DEAs with no requirement to speak to the helpline for authorisation.
How salary sacrifice works with furloughed employees
With regard to the impact of the Covid-19 outbreak and the CJRS scheme of salary sacrifice on furloughed employees HMRC have provided some guidance.
They have advised that Coronavirus is being classed as a lifestyle effect, and therefore a Salary Sacrifice arrangement can be changed subject to the relevant update to the contract of employment. In addition, if a Salary Sacrifice arrangement is postponed the resulting gross salary will be the reference salary for the furlough payment.
If the Salary Sacrifice payment is not postponed furlough will continue to be based on the net salary.
The impact on BIKs on people working from home
Van and Van Fuel Benefit
With regard to van and van fuel benefit, there should be no problems for employees furloughed under the CJRS as long as they continue to pay the full van benefit charge. If a worker cannot work but still has use of the van, the only use will be private. However, the home to work private element will not apply therefore a benefit in kind (BIK) will apply for the duration of the furlough.
The BIK is relatively small compared to car benefit, however, if there is no private use why pay the benefit charge and why put that employee in danger of the charge applying. Here are some of the options available to ensure that a benefit charge does not apply:
If the van has a tracker this will prove either way if there has been private use or not and evidence should HMRC challenge it.
As with the advice for car benefit, if the van is not available for private use there is no benefit. Return the van to the business premises and lock away all keys.
HMRC will allow the return of the keys to the business premises whilst the van remains at the employees address. In this case a van benefit will not apply.
There is no restriction on the number of days that a van benefit can be reduced (a car has to be unavailable for 30 days). The van benefit is reduced in proportion to the number of days it is not available.
Computers and Laptops
During this time it is likely that some employers have provided their employees with computers and laptops to allow them to carry out their work at home. Some employers may be concerned that a tax charge may be applicable (and employers NIC payable) and a BIK is reportable on the P11D under ‘Assets placed at the employee’s disposal’.
HMRC’s guidance is very clear on this point stating ‘You don’t have to report or pay anything to HMRC if the computer is provided for work purposes and the employee doesn’t make significant private use of it.’
Working from home expenses
Since many employees are now working from home in response to the Coronavirus crisis, they are incurring additional expenses that would not have been incurred where they working at the business premises. HMRC have issued guidance on what an employer can pay and what an employee can claim in tax relief as follows:
HMRC will allow the employer to pay up to £4 per week to cover the additional costs incurred by the employee for home working.
The payment is free of tax and NIC and no records are required to verify the payment. However, this is not mandatory for home workers.
If the employer does not make this payment, the employee can submit a claim to HMRC.
However, the employee will only receive the tax relief on the £4 per week at their marginal tax rate.
Claims can be made through Self-Assessment or through the personal tax account.
Guidance for Apprentices
The Government have issued a lengthy guidance document for employers, trainers and apprentices in an effort to make it easier for apprentices to continue with their training during the current Covid-19 pandemic. This document can be summarised in a few key points as follows:
If apprentices are furloughed they can still continue with their training. The terms for continuation are the same as for all employees, the training can continue as long as it does not provide services or generate revenue for the employer.
The guidance encourages training and assessment to take place remotely via e-learning as far as is possible.
Extensions will be granted where appropriate, depending on each of the apprentice’s and employers’ individual circumstances. For the apprentice this will be illness or self-isolation and for the employer disruption to the business requiring the need to redeploy the apprentice to other roles.
This guidance allows for breaks in the training. If the break is less than 4 weeks there is no requirement to report the break. For more than 4 weeks the break must be reported and funding will be suspended during the break.
For employers, the apprenticeship levy payments will continue to apply. The levy will remain payable subject to the apprenticeship allowance.
If an apprentice is made redundant, the guidance states that it is the ambition to find alternative employment and continue the apprenticeship within 12 weeks.
If apprentices are furloughed but continue their training, they must be paid the Apprenticeship National Minimum Wage for all time they spend training.
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