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Covid-19: guidance on furlough job retention bonus

HMRC has published guidance on how businesses can claim the government’s £1,000 job retention bonus, available to employers who keep furloughed workers on the payroll for the next three months

The bonus is a £1,000 one-off taxable payment to the employer, for each eligible employee that was furloughed and kept continuously employed until 31 January 2021.

Employers will still be able to claim under the scheme, set to cost the Treasury £9bn, even if they are also receiving support from the recently announced job support scheme which will launch on 1 November.

The bonus is available to any employer who has furloughed employees and made an eligible claim for them through the coronavirus job retention scheme (CJRS).

The employee must have been eligible for the CRJS grant for the employer to be eligible for the bonus, and it is not payable to any employer who repaid a CJRS grant.

The guidance details the arrangements for employees who have been transferred from another employer, and those who are not employees but classified as office holders or agency workers.

There is a minimum income threshold the employer must pay the employee.

This is a total of at least £1,560 (gross) throughout the tax months 6 November to 5 December 2020; 6 December 2020 to 5 January 2021; and 6 January to 5 February 2021.

Before employers can claim the bonus, they will to need to have reported all payments made to employees between 6 November 2020 and 5 February 2021 to HMRC through full payment submissions via real time information (RTI).

Businesses must include payments they receive under the scheme as income when calculating their taxable profits for income tax and corporation tax purposes, but can deduct employment costs as normal.

Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) will not have to pay tax on grants received under the scheme.

The scheme will not open for claims until 15 February 2021, and employers will have until 31 March 2021 to make a claim after which the scheme will close. No further claims will be accepted after this date.

The guidance will be updated by the end of January 2021 with details on how to access the online claim service.

Rishi Sunak, Chancellor of the Exchequer, said: ‘The job retention bonus is an additional boost employers can receive on top of the extensive support we’ve already put in place for businesses, including loans, grants and our new job support scheme.

‘I know how hard employers have worked to bring furloughed staff back, and this bonus, equal to a 20% wage subsidy, will help ensure they continue to retain them.’

The bonus guidance is being published ahead of the launch of the new job support scheme, announced as part of Sunak’s winter economy plan.

This will run for six months and will see the government contribute towards the wages of employees who are working fewer than normal hours due to decreased demand. The scheme will be open to employers across the UK even if they have not previously used the furlough scheme.

Guidance on its operation is due out shortly.

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Job Support Scheme (JSS)

The Job Support Scheme (JSS) will replace the Job Retention Scheme (JRS).

The JRS has been in place since March 2020 to provide wage assistance to employers who were unable to provide work to their employees because of the impact of the coronavirus, and to avoid redundancies. This will end on 31st October 2020 and the JSS will begin on 1st November 2020.

The JSS will only support those who are working fewer hours than normal; not those who are working no hours. For the first three months of the JSS, employees must work for at least one third of their normal working hours after which this minimum threshold will be reviewed by the Government (at the three-month point). Importantly, the employer must agree reduced working hours with their employees and ensure that the employees are notified in writing.

The employer will need to pay employees for the hours they work, which must be at least one third of their normal working hours. They must also pay the employee for one third of the amount of ‘lost hours’ i.e. the hours the employee would normally work but is not working.

The Government will provide pay for one third of the number of lost hours up to a maximum cap of £697.92 per month. The employer’s contribution of one third of pay for hours not worked is, however, not subject to a monetary cap. This means that all employees on the JSS will continue to earn at least 77% of their normal wages, where it hasn’t been affected by the Government’s cap.

Employers of any size with a UK bank account and UK PAYE schemes will be able to use the JSS but large businesses will have to meet a financial assessment test to show that their turnover is lower now than before experiencing difficulties from the pandemic. The Government expects that large businesses using the JSS will not be making capital distributions e.g. dividend payments or share buybacks, whilst accessing the JSS grant.

The scheme will be open to all employers regardless of if they previously used the JRS to furlough employees before or not. Equally, an employee being placed into the JSS does not need to have been furloughed before but they must have been on the employer’s PAYE payroll on or before 23rd September 2020 – meaning that a Real Time Information (RTI) submission notifying payment to the employee to HMRC must have been made on or before 23rd September 2020.

Claims can be made online from December 2020 but before then the Government are set to release further information on this soon which should answer employer’s queries in more detail.

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