Job Support Scheme? No thanks!
Our roving accountant takes a long hard look at the Job Support Scheme amd identifies problems galore for accountants and HMRC.
Who needs Rishi Sunak’s whizzy new Job Support Scheme (“JSS”)? Certainly not accountants. I’m also finding it hard to believe that anyone at HMRC will be filled with enthusiasm about a fiendishly complex arrangement that will be incredibly hard to administer and monitor.
The sad fact is that we have just about got the hang of both versions of the Job Retention Scheme (furlough to its friends) and a new alternative is a headache.
The furlough that got the Sunak spin worked on the basis that staff would sit at home watching Netflix and receive 80% of their pay, generously provided by the government. In some cases, their employers might even give them the extra 20%.
Almost as popular was what might become known as the Jim Harra version, having been highlighted by the HMRC supremo. In this arrangement, employees worked full-time, the government paid 80% of their salary and once again, the employer might or might not top up the balance but, as a bonus, managed to save the NIC.
In recent times, this has been pared down a little so that the amount paid by government drops to 70% and eventually 60% before completely phasing out.
To start with, it might be worth reviewing the practicalities of the JSS. In simple terms, if employers wish to retain employees to work one-third of the time, the plan might be worth a quick look.
The deal is that employers will payout 55% of salary, which the government will top up to 77%. Quite how the employees survive having lost 23% of pay is not explained. There is also an anomaly that anyone who passed their maths 11+ will swiftly be able to identify.
The cost of employing one full-time employee is 100% of salary, though these days I imagine that this might well have been negotiated down to 90% or even 80%. The cost of employing three Rishi part-timers is 165% (55% x 3). On a £20,000 annual salary, for the six months that the scheme is supposed to last, this will leave the employer £6,500 out of pocket for each trio of workers they choose to support.
It is painful to confess that that I have not delved into the intricacies of the NIC position, assuming that this has actually been announced. However, it seems safe to assume that NIC will be payable on either 33%, 55%, 77% or 100% of pay.
It may not be quite that simple, since there would be a reasonably good rationale for levying NIC on different bases for employers and employees.
If you take the cynical view that the Chancellor of the Exchequer wanted to come up with a scheme with a flashy name but zero take-up, ie protecting the Treasury, this is close to a perfect outcome.
On the other hand, if he was actually trying to support jobs, then it is almost certain to be an abject failure. I am struggling to conceive that any accountant will take advantage of this generous offer for their own employees.
The problem comes for those that provide payroll services, are asked to help with administration or required to audit the figures. Almost every accountant that I know is a big fan of tax simplification. The only ones with reservations are those who enjoy helping clients to slip through the loopholes.
What we have here is a complex new arrangement that changes on a constant basis. Ignoring the whim of employers, in a single tax year, there could be at least five different payment arrangements for each employee of many organisations i.e. standard pay, three versions of furlough and the new job support scheme.
This is a complete nightmare for payroll providers, who will be forced to change their software on a constant basis. If you have been stupid enough to offer clients assistance to administer the scheme and arrange repayments from the government, this is bound to be a big loss leader, which is the last thing that accountants need in these straitened times.
The only small comfort that I can offer is to highlight the plight that HMRC payroll auditors will face if they are obliged to audit “customers’” records for the 2020/21 tax year. If they have any sense at all, they will either resign or go on strike rather than facing a nervous breakdown waiting for this to happen.