Special Tax Alert

Emergency Measure for Employers During this Current Crisis

Louise Jenkins, Senior Director

louise.jenkins@alvarezandmarsal.com

March 23, 2020 / UK

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…

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