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Chancellor Announces Major Changes to the Job Support Scheme, HMRC Release Operation Details

Chancellor announces major changes to the Job Support Scheme, HMRC release operation details

Please Note: All information was correct at time of writing on 23 October 2020, however, since 31 October the furlough scheme has been extended, in-line with government guidance. We do our very best to make sure our information is as up to date as possible, but we’d encourage you to check the government website for updates as they happen.

Following the announcement yesterday (Thursday 22 October) of changes to the Job Support Scheme, HMRC has now published a policy paper on the scheme. We’ve summarised the main points below. This is not the full guidance – we’re expecting this to be published next week.

The policy paper covers both support available to businesses legally required to close by COVID restrictions – Job Support Scheme Closed (JSS Closed) and businesses permitted to open but experiencing decreased demand – Job Support Scheme Open (JSS Open).

What will the scheme cover?

JSS Open

Employees will need to work a minimum of 20% of their usual working hours and will be paid as normal for the work they actually carry out.

The employee will receive 66.67% of their normal pay for the hours they do not work which will be made up as follows:

the employer pays 5% of normal pay for hours not worked (subject to a cap of £125 per month)
the government will pay 61.67% of normal pay for hours not worked (subject to a cap of £1541.75 per month)

The employer can choose to top up wage payments if they wish.

The employer will be responsible for Employer NICs and pension contributions.

This is a more generous provision than the current furlough scheme under which employers currently have to pay a 20% contribution to wages (although there is no requirement for employees to work a minimum number of hours under that scheme).

JSS Closed

This can be used by employers who have been legally required to close their premises as a direct result of coronavirus restrictions set by one or more of the four governments of the UK. This includes premises restricted to delivery or take- away only services and those restricted to the provision of food and/or drinks outdoors.

Claims can only be made for the period during which the business is required to close, and businesses required to close by local public health authorities as a result of specific workplace outbreaks are specifically excluded from the scheme.

Employees will receive 66.67% of their normal pay which will be fully funded by the government, subject to a cap of £2,083.33 per month. Again, this can be topped up by the employer if they wish.

When does the scheme start?: The scheme starts on 1 November 2020 and will run for 6 months, ending on 30 April 2021. The government will review the terms of the scheme in January.
When and how can you make a claim?: The policy paper offers little information on this but says that full guidance on this and other aspects of the scheme will be available next week. It does clarify that claims can be made from 8 December 2020, covering wages for pay periods ending and paid in November. Claims must be made in arrears i.e. the employer will be claiming reimbursement of wages already paid to the employee.

Agents who are authorised to do PAYE online for employers will be able to claim on their behalf.
Meaning of ‘employee’: ‘Employee’ for the purposes of the scheme includes anyone who is treated as an employee for tax purposes. This will therefore cover agency workers and other workers.

Employees must have been employed on 23 September and an RTI Full Payment Submission notifying payment in respect of that employee must have been made to HMRC at some point from 6 April 2019 up to 11:59pm on 23 September 2020. If an employee was employed on 23 September, subsequently dismissed and then rehired, the employer can claim for them under the scheme (which will cover cases where employers have reconsidered redundancies in light of the more generous nature of the scheme).

An employer can claim for different employees under the JJS Open and JSS Closed for the same period but can’t claim for the same employee under both schemes at the same time. For example, if a waiter is unable to work because a restaurant has been forced by COVID restrictions to operate only a take-away service, his lost wages can be claimed under JSS Closed and colleagues who are working reduced hours in the takeaway operation, can be claimed for under JSS Open.
Eligible employers: The scheme is potentially open to all employers who have enrolled for PAYE online and have a UK, Channel Island, or Isle of Man bank account.
Employers in receipt of public funds: The policy paper states that where employers have staff costs which are fully funded by public funds (even if they are not in the public sector) they should use that money to continue paying staff and not access the scheme.

If they are only partially funded by public funds, they can access the scheme “for the proportion of their revenue disrupted due to coronavirus”. The paper makes it clear that in these situations, employers should contact their “sponsor department or respective administration” for further guidance.
Written agreement: Both the JSS Open and JSS Closed require the employer to enter into a written agreement with the employee to enter into this temporary working arrangement. This agreement must cover at least 7 consecutive days. A copy of the agreement must be retained for at least 5 years and should be made available to HMRC upon request. Unhelpfully the paper states that HMRC will publish further guidance on what to include in the agreement by the end of October which does not give employers a lot of time to get agreements signed in readiness for the start of the scheme on 1 November. We have a number of template letters available to clients based on what we know of the scheme to date.
Discrimination: The paper warns that when determining who should be offered reduced hours (or who is told to cease work in the case of JSS Closed claims), the employer must comply with equality and discrimination laws in the usual way.
Training: Voluntary training is permitted in non-working hours (remember that additional monies will need to be paid if the JSS grant does not cover the NMW entitlement for time spent training).

Employees can do training at the request of their employer in working hours while being claimed for under the Job Support Scheme, but this will be treated as working hours (for which no claim can be made). These hours should be paid at their full rate of pay and will count towards the 20% of their usual hours.
Statutory family leave: New regulations will be introduced shortly to avoid employees losing out on their entitlement to parental pay (covering maternity allowance, statutory maternity/paternity, shared parental, adoption and parental bereavement pay) as a result of being put on the scheme.

JSS Open – specific eligibility requirements for employers and employees

The scheme is designed to support employers facing decreased demand and employees claimed for must be working at least 20% of their normal working hours.

Small and medium-sized businesses do not need to demonstrate the adverse impact of coronavirus on their business. However, large employers (being defined as employers with 250 or more employees as at 23 September 2020) are required to undertake a Financial Impact Test demonstrating that their turnover has “remained equal or fallen” compared to the previous year, to show they have been adversely affected by the pandemic. This test only needs to be taken once, before their first claim under the scheme.

The policy paper gives detailed guidance on how this can be demonstrated by referencing VAT returns. Any charity with 250 or more employees registered with a UK charity regulator (or exempt from such registration) will not be required to carry out this test. Further guidance will be given next week for other large businesses who are not VAT registered.

In summary:

if they submit quarterly VAT returns, they should compare the total sales figure recorded in box 6 of the VAT return which is due to be filed and paid between 31 August 2020 and 7 November 2020, with the total sales figure from the same quarter in 2019.
if they submit monthly VAT returns, they should compare the three consecutive months which are due to be filed and paid by 7 November 2020 with the same period in 2019
if they file VAT returns less frequently, they should compare the three consecutive months which are due to be filed and paid by 7 November 2020 with the same period in 2019 but they will need to have submitted a VAT return between 31 August 2020 and 7 November 2020 to be eligible

If a large employer is part of a VAT group, they should use the turnover figures for the VAT group for this calculation.

JSS Closed – specific eligibility requirements for employers and employees

Employers can claim the JSS Closed grant for employees:

whose primary workplace is at the premises that have been legally required to close as a direct result of coronavirus restrictions set by one or more of the four governments of the UK
that the employer has instructed to and who cease work for a minimum period of at least 7 consecutive calendar days

Conditions of claiming under the scheme (applies to both Open and Closed unless indicated otherwise)

Employers can’t claim for an employee who is “made redundant or is serving a contractual or statutory notice period during the claim period”.
Although not a contractual or legal requirement of the scheme, the government expects that large employers (250 or more employees) will not make capital distributions whilst using the scheme, including paying dividends etc and the policy paper encourages large employers to “reflect on their responsibilities and that taxpayers should be able to rely on public money only being claimed where it is clearly needed.”
Employers can’t recover NIC or pension contributions which remain payable by the employer. They must also deduct and pay to HMRC income tax and employee NICs on the full amount that is paid to the employee. Employers must report payments via a Full Payment Submission (FPS) to HMRC on or before the pay date in the usual way. Student loan deductions and the Apprenticeship Levy must still be paid.
Employers must have paid the full amount claimed to the employee before each claim is made. They are not permitted to enter into any agreement with the employee which would reduce wages below the amount claimed. Where an employee had authorised their employer to make deductions from their net salary, these deductions can continue while the employee is working reduced hours provided that these deductions are not administration charges, fees or other costs in connection with the employment. Employees will be able to check if their employer has made a JSS claim relating to them.
Employers can’t make any claim for wages for the hours the employee was actually working (the policy paper makes no reference to holidays but hopefully the guidance next week will clarify this).

Fraudulent claims

In the event that a claim is found to be fraudulent, in addition to repaying the full amount, penalties of up to 100% of the amount overclaimed may be applied. HMRC will consider publishing the details of employers who were charged a penalty because of deliberately incorrect claims.

HMRC intends to publish a list of all employers who have used the scheme and is encouraging employees to report abuses of the scheme.

Interaction between the JSS and other schemes

Employers can claim the Job Retention Bonus for employees covered by the JSS scheme and grants paid can be included in calculating the Lower Earnings Limit of the Bonus scheme.

If an employee’s pay period cuts across both the furlough scheme and the JSS, the amounts claimed from each scheme should be calculated separately in accordance with the relevant guidance which will take into account the number of days that fall within each of the scheme’s timelines. Care should be taken that no amount of gross pay should be included in more than one scheme.

What is the employee’s reference salary?

This will be made up of payments the employer is obliged to make, including:

regular wages
non-discretionary payments for hours worked, including overtime
non-discretionary fees
non-discretionary commission payments
piece rate payments

It should not include:

payments made at the discretion of the employer or a client, where the employer or client was under no contractual obligation to pay, including:
any tips, including those distributed through troncs
discretionary bonuses
discretionary commission payments
non-cash payments
non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay

For employees who are paid a fixed salary, the reference salary will be the greater of:

the wages payable to the employee in the last pay period ending on or before 23 September 2020
the wages payable to the employee in the last pay period ending on or before 19 March 2020

For employees whose pay is variable, the reference salary is the greater of:

the wages earned in the same calendar period in the tax year 2019 to 2020
the average wages payable in the tax year 2019 to 2020
the average wages payable from 1 February 2020 (or the employee’s start date if later) until 23 September 2020

What is ‘usual hours’?

Employees who work fixed hours

For employees contracted for a fixed number of hours and whose pay does not vary according to the number of hours they work, their usual hours will be the greater of:

the hours the employee was contracted for at the end of the last full pay period ending on or before 23 September 2020
the hours that the employee was contracted for at the end of the last full pay period ending on or before 19 March 2020, this may be the same number of hours calculated under the Coronavirus Job Retention scheme

This should include hours paid as annual leave and statutory leave.

Employees who work variable hours

The variable hours calculation applies if either:

the employee is not contracted to a fixed number of hours
the employee’s pay depends on the number of hours they work

For employees whose number of hours varies and/or whose pay depends on the number of hours they work, the number of usual hours is calculated based on the higher of:

the number of hours worked in the same calendar period in the tax year 2019 to 2020
the average number of hours worked in the tax year 2019 to 2020
the average number of hours worked from 1 February 2020 (or the employee’s start date if later) until 23 September 2020

This should include hours paid as annual leave and statutory leave.

The paper states that the calculation of usual hours is not and cannot be altered if the employee is expecting to work more or fewer hours than this in the future.

For employees who are part of a flexible work time arrangement, employers should:

not count as hours worked any hours that the employee worked but was not paid for because they accrued paid time off which they could take later
count as hours worked any hours that the employee took as paid time off (‘flexi-leave’), which they had accrued by working additional hours at some other time

For employees who are paid per task or per piece of work done whose hours cannot be calculated in this way, hours can be estimated based on the number of ‘pieces’ produced and the average rate of work per hour, as per National Minimum Wage rules.

The policy paper states that further clarification will be given in the full guidance next week but in the meantime, it sets out a number of example calculations for ascertaining usual working hours.

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