The Chancellor unveiled a raft of measures to support jobs and the economy.
Job Support Scheme (JSS)
This will commence on 1 November for 6 months. All SMEs (less than 250 employees and £25 million turnover) are eligible to apply even if they have not furloughed staff before and regardless of whether lockdown has affected their business. Larger companies can apply later and will have to prove that Covid-19 has been detrimental to their business.
It is a scheme to support reduced hours working. To qualify employees must:
• be on payroll at 23 September,
• not under notice of redundancy,
• work at least 33% of their normal hours, for which they are paid in full by the employer.
The normal hours not worked will be paid for by the Government 1/3rd, employer 1/3rd and employees forgo 1/3rd. This means employers who retain staff for 33% of normal hours will pay 56% of normal pay, the Government 22% and the employee will lose 22%. Employees may be rotated on and off the scheme at one-week intervals. There is a cap on the government grant of £698 per month. This equates to a full-time equivalent salary of £38,000 pa, so employees earning over this will receive a lower % of their normal pay.
Additional support has been promised for businesses which are forced to shut down in those regions experiencing the highest rates of infection. Full details of how this works are yet to be released.
JSS and Pensions
Employers will have to pay the National Insurance and pension contributions arising from both the pay for hours worked and government grant. All the grant must be passed to employees and will be subject to deduction of income tax and National insurance, deductions for pension scheme membership cannot be made from it.
Employers are free to pay the full pension contributions payable under their contractual arrangements with employees or to reduce this to the minimum qualifying contributions required of 3% of eligible pay between £520 per month and £4,166 per month. Eligible pay will include the element paid from the Government grant.
Employers who pay pension contributions via salary sacrifice will need to consult their contracts of employment as they may be required to pay the whole pension contribution in respect of the grant element of the employee’s pay and will only be able to implement salary sacrifice on that part paid by the employer. If the pay funded by the employer (eg 56% of normal pay) is less than the National Minimum Wage, employees will not be able to sacrifice any salary below this level.
Where employees request to opt out of the pension scheme or reduce their contributions below the 5% of eligible earnings the employer is not obliged to continue making pension payments as the employee will have opted out of the auto enrolment scheme. They do not have to be readmitted for a further twelve months, but employers may use their discretion to do so.
As with the CJRS the calculation of pay for pension contributions will be complex and our Corporate Team will be providing further guidance on this once HMRC release the details of how the scheme will work. Guidance on the interaction of the CJRS and Pension deductions can be found on our webinar.
Deferral of tax due on 31 January 2021
The self-employed and others in the self-assessment tax regime may delay payment of tax due in January 2021 and pay this in 11 instalments over the following year. It is important to emphasise that this is a deferment not a cancellation of the tax due.
Those who have not yet calculated their 2019-20 liability should prioritise this. While payment of tax can be deferred, the deadline for submitting a return for 2019/20 remains 31 January 2021. Late filing will incur fines and penalties.
Some may be due a refund and may seek to reduce the payment on account element of any liability if their profits or income has fallen since. Funds can also be set aside in a low risk cash deposit-based environment so that money is available to pay the tax due over the longer period. LEBC’s Cash Management Service provides access to a range of deposits for both personal and business cash and can be managed online via one simple application process.
Director of Public Policy, LEBC
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