Coronavirus Job Retention Scheme top FAQs answered
Kate Upcraft and Rebecca Benneyworth tackle the most vexing questions from HMRC’s furlough scheme.
This week’s session of the Coronavirus Response Q&A webinar focused on payroll issues including the mechanics of furloughing and statutory sick pay.
Payroll expert Kate Upcraft provided a nuts and bolts practical summary of key payroll issues, including furloughing formulas and calculations, how to claim and National Insurance issues. Upcraft and Rebecca Benneyworth also revisited some of the most pressing CJRS questions, which we have compiled below.
Upcraft applauded the effort made by agents and large employers doing claims, taking into account the niggles they were seeing and the changes to the calculations brought by the new guidance that was published late on 17 April.
“I think the assumption is that this is all part of a payroll service. And it's not, it's making a claim for state aid, which is completely different from offering a payroll service. So people who are expecting us all to be experts in something that nobody is an expert in because it is new and not related at all to payroll.”
One of the challenges that, according to Upcraft, was never obvious in any of the previous versions of the guidance, is that the calculation of grant uses calendar days for the pay month, whereas many employers use working days in the month when calculating their own payroll.
“You can't just extract figures from the payroll and upload them. Because if you do that there is the potential your claim may be not rejected immediately, but if the discrepancy is uncovered down the line and you'll be asked for money back because it's a standalone calculation that doesn't work to any of the standard payroll formulas.”
Coronavirus Job Retention Scheme top FAQs
Where a director is paid annually at the end of March the CJRS claim was ineligible. How can you make this work?
Rebecca Benneyworth: If somebody who didn’t pay their annual salary before 19 March applies for furlough pay, the response from HMRC is that the person is ineligible. There isn't a way forward as the legislation says the payment of earnings in 2019/20 had to be made before 19 March.
The ICAEW has raised this issue with HMRC but it would appear that the system is working in accordance with the legislation and the annual payment must have been included in an RTI report filed by 19 March 2020.
How should a business with both weekly and monthly paid furloughed employees proceed if they’re only allowed to make a one claim for a period under the scheme? If the business claimed for 3 weeks in total for weekly paid staff, say from 02/04 to 23/04 does that then mean it cannot claim for monthly paid staff from 01/04/ to 30/04?
Kate Upcraft: There’s a bit of a date game here to work out how best to do it. You've got to amalgamate the weeklies and monthlies, because you are only permitted to make one claim per PAYE scheme every three weeks. So pick the furlough period that covers the all the monthly and as much of the weeklies as you can, and put through the rest of the weeklies in the next batch in three weeks.
The ICAEW advises that care should be taken to include all eligible employees for a claim period within a single claim, as a further claim is not possible for the same claim period. You can claim 14 days in advance, but claims cannot end more than 14 days ahead of the date of the claim.
If someone has claimed too much NI in April, can you correct it by claiming less for May?
Rebecca Benneyworth: I think commonsense will prevail and there appears to be an intention at HMRC that you will be able to correct - but we don’t know the details yet. If you have adjusted a later claim to compensate for an overpayment in the previous period, overall you're going to be right and you'll be fine. If you find that you've done something wrong, that's absolutely what I would recommend doing.
The ICAEW Tax Faculty asked HMRC how employers can correct mistakes made when making a claim. HMRC replied: “The ability to amend for future claims will be available, but we do not have a process in place at the moment.”
Can an employer opt NOT to claim the employer's allowance (EA) whilst furloughing is being accessed and switch the EA claim on once furloughing ends, as long in the remainder of the tax year when they will have built up £4,000 in employer’s NI to cover the allowance?
Kate Upcraft: It’s a very common question, but we still don't have clarity in the moment. I would suggest you put the employment allowance to one side at the moment and turn the EA claim off in your payroll software. All EA claims have to be remade for 2020/21, they do not carry over from 2019/20 as the conditions for the claim have changed.
If you're offsetting the employment allowance in your April payroll, then you should be doing the same thing in your CJRS claim because clearly you haven't paid that NI covered by the EA. We'll find out later in the year what HMRC wants to do about this. If you turn EA on again in September, it will backdate to April and give you that £4,000. Maybe HMRC will say that's okay, because this the employment allowance is a kind of de-minimis state aid and the CJRS is not.
Whose postcode should you enter on the CJRS claim system’s address screen?
One of the screens of HMRC’s portal, which immediately follows the bank account data, asks for a postcode associated with that account and presents a list of addresses for that postcode. Because of the screen sequence, you might assume it's the address of the bank. But that isn't what it's asking for - the postcode you enter should be the address of the employer or of the individual (if they’re employing a domestic worker like a nanny).
How do salary sacrifices work under furlough?
Kate Upcraft: Once you have agreed a salary sacrifice, somebody has given up their pay in exchange for a benefit in kind. In this case, it is particularly around pensions, but it could be for example; childcare vouchers, a bicycle, or a car. Once you have done that, they are earning less cash pay.
So that's the starting point for the furlough calculation, not their original pay, but you're still on the hook for paying over the pension or providing the benefits in kind because that's the deal you struck when you redrew the employee’s contract. Changing their contract going forward won't make any difference. Doing a change now to somebody's salary sacrifice doesn't mean you can go back and change history as to what was happening in February.
Employers with 100 or more employees can upload their data to the CJRS on a spreadsheet. This is unfair on smaller employers who need to spend hours inputting each employee’s details by hand. Will the system be changed to allow spreadsheets to be uploaded with fewer than 100 employees?
ICAEW has asked HMRC for a response, and HMRC indicated that it will consider reducing the 100-employee requirement and allow file uploads for smaller employers, but this may not be possible.
Hosted by AccountingWEB experts, Coronavirus Response Q&A brings together accountants to talk about the impact of the coronavirus, share what they’ve learned and the practical steps they’re taking to safeguard their practices and support their clients. Register to watch next week's event, where we will be joined once again by Rebecca Benneyworth and Kate Upcraft to answer your questions.
You can download a CJRS template here.