[UPDATE: With the Prime Ministers announcement for a 2nd lockdown, starting Thursday 4th November, the Coronavirus Job Retention Scheme (Furlough scheme) has been extended.
The statement from the HM Treasury and the Chancellor also confirmed that the Job Support Scheme (JSS) which had been due to launch on 1 November, will not start until the CJRS has closed.
For the most up-to-date guidance please get in touch.]
Following the Prime Minister’s announcement on further restrictions, the UK-wide Coronavirus Job Retention Scheme will be extended until December covering 80% of employees’ wages. Read More: https://t.co/34ZO3Gi5Jw pic.twitter.com/UsUIjU5YCK
— HM Treasury (@hmtreasury) October 31, 2020
New changes are coming from the UK government to cope with the impact of the coronavirus pandemic on UK employers. On 22 October 2020, British Chancellor Rishi Sunak announced an expansion of the earlier furlough scheme.
The Job Support Scheme (JSS) divides eligible employers into those still open but suffering income loss and those forced by a jurisdiction to close. In both cases, the potential financial support from the government is increased. There are significant complexities that relate to eligibility, percentage of hours worked, and taxes that have implications for record-keeping, interpretation of the law, VAT compliance, and tax planning—to name but a few issues.
At DS Burge & Co chartered accountants, we’ve detailed below the main elements of the JSS, including eligibility. The introduction of the JSS now presents new opportunities for businesses to continue to support their employees—crucial for reopening or for returning to full operation when the situation makes that possible.
Let us look at the essential outline of JSS regulations and some complications that employers will face in getting all that is coming to them. Information about the “old system”, the Coronavirus Job Retention Scheme, can be found here.
The government announcement begins:
“To support individuals and businesses to deal with the challenges created by the coronavirus (COVID-19) during this winter (2020 to 2021), the government is providing additional support to help employers retain their employees through the Job Support Scheme (JSS). The Chancellor of the Exchequer first announced this on 24 September 2020.
“Whilst some businesses have managed to return to levels of demand near to what they experienced before the start of coronavirus, or have found creative and innovative ways to adapt to the new economic reality, others continue to face challenges.”
Note that the scheme is not for the support of business per se, but for sustaining employment and worker wages. The JSS now targets support so that companies can “get the right assistance, at the right time…”
Essentially, businesses are divided into two categories. Those still operating but with fewer customers and declining revenue can get support for wages from JSS Open. Businesses legally forced to close as “a direct result of coronavirus restrictions” by a UK government get support for wages from JSS Closed.
The distinction seems clear but is not entirely unambiguous. Of course, the concern of businesses will be about terms of eligibility for the money. Further guidance on that is promised for the end of October. Here is what we know right now.
The scheme will give employers support to keep their employees for shorter hours instead of making them redundant. An employee will have to work at least one-fifth of their usual hours. But the employee will be paid two-thirds of the normal pay for hours they do not work. The pay for not working will come from the employer and the government. The employer may pay just 5 per cent of usual pay for hours not worked (up to a maximum of £1,125 a month. The government will pay the rest up to £1,541.75 a month. Result: the employee will receive about 73% of normal wages up to £3,125 a month.
Some employers have been forced to close down by one or more of the four governments of the UK JSS Closed will help them through this period by supporting wages of their employees who have been required to stop work in the closed premises.
Each of these employees gets two-thirds of normal pay. The government fully funds that up to a cap of £2,083.33 a month. The intention is to protect employee incomes, reduce unemployment, and sustain employer-employee relationships so businesses can open rapidly when the crisis passes.
What are the next steps?
JSS, as described, opens 1 November 2020, and continues for six months until 30 April 2021. Employers who initiate claims under JSS, if successful, will receive arrears from 8 December 2020, if their claim is approved. After that, they run into the fact that the JSS terms will be reviewed in January.
Note that neither the employer nor the worker needs to have received money from the Coronavirus Job Retention Scheme to be eligible for money from the JSS.
Who can claim under either the JSS open or JSS closed?
An employer can claim under the Open or Closed category at the same time, but for different employees, not the same employee.
As for general access to the JSS, an employer must be enrolled in PAYE online and have a UK, Channel Island, or Isle of Man bank account.
Additional criteria apply depending on the application of JSS Open or JSS Closed.
An organization with staff publicly funded must use that support to pay their staff, not JSS money. If not fully funded by public grants, the organization must consult with its sponsor department or administration to see what to do. If such an organization does apply to JSS, they follow the standard guidelines.
Note: The self-employed are not covered in the JSS, but are eligible for the self-employed benefit from the SEISS Grant Extension, which replaces the Self-Employment Income Support Scheme (SEISS).
What employees can be claimed?
To be eligible for support through JSS, employees must have been on an employer’s PAYE payroll between 6 April 2019 and 23 September 2020. If employment ended after the final date, but the employee was rehired, an employer can claim JSS money for him.
An employee for purposes of JSS must have been an employee for Income Tax purposes. But they can be on any type of contract, even zero-hours or temporary contract.
The outline of the JSS is clear as we have tried to indicate. But the picture is rapidly changing, with the new announcements, a review in January, and uncertainty after that.
Moreover, the JSS requires consideration of employee training in non-working hours, the Working Tax Credit (and its childcare element), parental leave (look for coming pay legislation), a financial-impact test for larger (250-plus employees) companies to qualify for JSS (one test is VAT returns), calculation of very complex formulas for VAT returns, national minimum wage, and much more.
DS Burge & Co for financial expertise
Serving Businesses in Surrey and London since 1980, DS Burge & Co chartered accountants have gained four decades of experience helping both business and personal customers.
We welcome every client with a friendly professional service that focuses on individual needs. Our aim is to help you become more efficient, more profitable, and free your time from regulatory hassle. For example, we can help with:
- Preparation and filing of accounts for individuals, partnerships, and limited companies
- Tax planning
- Preparation of corporation tax returns for online submission to HMRC
- Advising business start-ups
- VAT returns
- Payroll and Pension Auto Enrolment
- Raising capital
We are experts on evolving UK government efforts to help businesses survive through the COVID-19 crisis. The potential benefits to employees, businesses, and our economy are important, but the financial implications and legal complexities of JSS must be carefully managed if a business is to receive the financial assistance to which it is entitled; and to avoid VAT and other complications.
Be sure to check back regularly for information, insights, and updates on emerging issues that every aspect of economic changes and financial accounting that affect your business.
The first step is to reach out to us. We can help you assess your individual situation and help you to obtain the full support that your employees need. We are ready to answer your questions and discuss how we can help.