The Coronavirus Job Retention Scheme (CJRS) has been used by many employers to help support their organisation through this period of disruption, and has allowed employees to retain their jobs when they may have otherwise been made redundant.
Over nine million employees have now been supported by the scheme which terminates on 31 October, with employers having been encouraged to transition the workforce back to work and share the cost burden of the CJRS since the beginning of August.
While the UK has experienced a period of economic recovery in the period to the end of September 2020, that position is fragile in the face of a second wave of COVID-19. Therefore in addition to the CJRS, and the Job Retention Bonus (JRB), the government have also announced the Jobs Support Scheme (JSS). Details of the JRB and JSS can be found in our insights.
It is still crucial for employers to control costs. The good news is that there are a number of options and sources of funding, which could provide significant savings.
Time to Pay arrangements are agreements with HMRC to defer a payment of tax liabilities or spread the payment out in instalments over a longer time period. Most taxes can be covered by a Time to Pay arrangement, including PAYE and National Insurance Contributions (NICs).
These arrangements have always existed, but amid the COVID-19 crisis, HMRC are more willing to agree an arrangement. Depending on the circumstance, employers can call HMRC’s helpline and agree an arrangement with HMRC there and then.
Clearly, a Time to Pay arrangement will not save money. In fact, HMRC still charge late payment interest (currently at 2.6%) on the liability paid late. Therefore, this option should only be used where liabilities cannot be paid now, but will be able to be paid in the future. More information is available in our insight on PAYE deadlines.
While the CJRS and other virus-related support measures have attracted more attention, employers should also be aware of the changes to SSP as a result of COVID-19.
The government have widened the scope for eligibility for SSP during the pandemic. Employees are now eligible for SSP for two weeks, starting from the first day of absence if they cannot work because they have coronavirus, are self-isolating at home or are shielding in line with public health guidance. Employees do not need a note from a doctor for a claim to be made.
The good news for employers is that, unlike SSP for non-virus-related reasons, employers are able to claim back the SSP that is paid for the reasons outlined above. The government have promised a SSP Rebate Scheme: an online portal through which the virus-related SSP can be claimed. However, this is yet to be launched.
An employer cannot claim through the CJRS and claim for SSP for the same employee for the same period of time. However, the widening of scope may be useful for employers who have employees that are still working or for when they start to bring some of their employees back from furlough status. Read our insight on holiday and sick pay updates for more information.
The disruption to businesses and employers caused by COVID-19 may have resulted in company directors and/or employees accepting pay reductions or waiving bonuses. This can be a good way of keeping costs reduced if the employees and directors are willing to do so, due to the saving of the reduced pay and associated employer NICs.
However, as explained in our recent article, any reductions in pay or waiving of bonuses must be agreed by way of a contact variation before the employee or director is entitled to the original amount of pay. If this is not done, the income tax and NICs due will still be based on the unreduced amount of pay, eliminating any tax saving of reducing the pay. For more information, read our insight on tax warnings for company directors.
During the COVID-19 lockdown, if employees have access to another car, their company car may be gathering dust on their driveways, with income tax and NICs costs continuing to accrue to both the employee and employer.
If the car is not needed for any private use during this period, there may be an opportunity to save tax. The benefit is not charged for periods where a car is not available to the employee for private use. As long as the period of unavailability lasts for 30 or more consecutive days, the car benefit is reduced in proportion to the number of days that the car is unavailable.
As an example, a vehicle with a list price of £49,000 could give rise to a taxable benefit of £1,500 per month, resulting in monthly tax and national insurance costs of up to £675 and £207 for the employee and employer, respectively. Where a business has a number of vehicles the savings could be significant.
However, making the car unavailable is not as straightforward as agreeing with the employee that they can’t use it, or even declaring the car SORN. You can find more information about the correct ways of making a car unavailable in this article.
During the lockdown periods, many employees will be required to work from home. Working from home can be convenient for employees, but it can also attract additional costs that they would not otherwise have to pay, such as additional electricity or gas bills, or business phone calls.
HMRC allow employers to make payments to employees of up to £6 per week/£26 per month, without needing to justify the amounts paid, provided that certain conditions are met. Whereas any amounts paid above this amount have to be justified, through receipts and evidence. Employers who are feeling under pressure to reimburse employees for higher costs may instead choose to restrict the payments to £6/£26 to save costs and reduce administrative burden.
If employers are looking to save even further, there are rules that allow employees to claim tax relief themselves for the costs of working from home that aren’t covered by any employer reimbursement (including if the employer chooses not to reimburse the costs), provided certain conditions are met. As a result, employers could decide to not reimburse employees for the costs of working from home during the COVID-19 period and point the employees towards claiming their own tax relief for these costs.
A recent change in HMRC’s web form has provided guidance saying that you can now apply for tax relief for the whole of this tax year via a P87, even if you do not know how much longer you will be working from home, and you go back to your workplace before 6 April 2021. HMRC confirmed that at the end of the tax year, the tax relief will stop and any further relief will need to be claimed in the new tax year.
We expect that HMRC will release further details on this subject soon including advice for the periods that can be claimed for those who claim relief via their self-assessment tax returns.
More details, including the conditions that need to be met, are set out in this article.
In addition to making a company car unavailable, employers may wish to consider the new rates for calculating the tax due on the provision of a company car or van. From 6 April 2020 and 6 April 2021, the rates for zero-emission cars and van, respectively, can reduce the amount of the benefit to nil, which could result in a significant saving for both employers and employees.
The government has announced a temporary tax and National Insurance exemption to ensure that home office equipment purchases by employees will not attract tax and NICs liabilities where they have been reimbursed by the employer.
Two conditions must be met, namely that equipment is obtained for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak, and the provision of the equipment would have been exempt from income tax if it had been provided directly to the employee by or on behalf of the employer (under section 316 of ITEPA).
The easement is backdated to 16 March 2020 and will run until 5 April 2021. Further guidance has been released by HMRC, see our working from home page for more details.
Many employers will have provided their employees with an interest free loan to cover the cost of a season ticket in order to travel to work. These loans are typically tax-free up to £10,000 and so are tax efficient.
Employers’ usual loan policies could be to only loan these amounts to employees to cover the cost of season tickets and include rules whereby the employee must repay the loan if they receive a refund on their season ticket. Given that many employees will have sought refunds on their season tickets due to COVID-19, employees may be required to pay back part of the loan to their employer.
Requesting that employees pay back amounts in these circumstances may provide some much-needed cashflow. However, it is unlikely to be received well by employees and further loans may have to made to cover the cost of season tickets once employees return to travelling to work as normal.
Unfortunately, during these difficult times, employers might be considering redundancies to reduce their employment costs, especially as the CJRS phases out. If employers are considering this option, they should be aware of the new rules regarding termination payments from April 2020.
As many will know, the rules for calculating income tax on termination payments changed in April 2018. From April 2020, any payments over £30,000 that are subject to income tax will also attract a 13.8% Class 1A NIC charge on the employer. This charge is collected through PAYE in real time, unlike other Class 1A NIC payments, so will still impact on the cashflow of employers.
In addition, HMRC have set out draft legislation to tweak the tax rules for termination payments in certain circumstances.
Employers should carefully consider the tax and NICs implications of these rules if deciding to make employees redundant. Some of the key considerations are set out in our article on redundancies due to COVID-19. In addition, employers may wish to consider how putting employees on their notice period for redundancy will impact on any potential claims for the Job Retention Bonus and Jobs Support Scheme.
If you have any questions or would like more information, please get in contact with your usual Crowe contact and we will be happy to assist you.
COVID-19 related webinars