Owner Kate Upcraft Consultancy Ltd
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Job Retention Bonus: Get the details right

Kate Upcraft explains the details of the job retention bonus as the law in the form of a Treasury direction has been published alongside  HMRC guidance on the income threshold and examples.

6th Oct 2020
Owner Kate Upcraft Consultancy Ltd
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The Chancellor visits Emma Bridgewater to promote his plan for jobs.
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The Chancellor visits Emma Bridgewater to promote his plan for jobs.

Claims for the £1,000 bonus per eligible employee, agency worker or office holder must be made between 15 February 2021 and 31 March 2021. This is a change of approach which will also be reflected in the job support scheme.

Under CJRS it was a case of ‘pay now, check later’ to ensure businesses had sufficient cashflow to make salary payments. But with the job support scheme (JSS) and the bonus scheme, HMRC will move to a ‘check first, pay later’ model, with RTI data validating claims. Where a CJRS claim is still being investigated this can delay the bonus payment being made by HMRC.

Eligibility

Employers will be eligible to claim the bonus for an employee, if that individual was included in a claim under the CJRS and they remain continuously employed until 31 January 2021. Employers can claim for the same employees under the JSS and receive the £1,000 bonus.

If an employee was transferred under a TUPE arrangement to the employer’s payroll, that new employer must have made at least one CJRS claim for them before that finishes on 31 October.

An employee must have received taxable pay in each of the three tax months:

  • 6 November – 5 December
  • 6 December – 5 January
  • 6 January – 5 February

And

  • The employee must have received at least £1,560 as taxable pay across those three tax months, any tax free allowance or adjustment as driven by their tax code is not deducted/added to the taxable pay. 

And

  • The full payment submission for each of those three months has been sent under RTI to HMRC on time and is accurate.

It follows then that an employee who is paid £2,000 in November and December and then offered no work in January would not be eligible for the bonus. Although that employee meets the minimum income threshold, as they had not received a payment in each tax month, they would not qualify.

Exclusions

An employee ceases to be eligible for the bonus scheme if:

  • The employer has repaid all CJRS grant claimed in respect of that employee.
  • They are not paid at least once in each of the three tax months.
  • Their total taxable pay does not reach £1,560 across the three months.
  • A leaving date has been reported on or before 31 January 2021.
  • They are placed on contractual or statutory notice of termination of their employment at any point before 31 January 2021.

The contractual notice of termination of employment applies to all reasons for leaving including retirement, not just redundancy. It follows that it would be an abuse of the scheme to delay reporting a leaving date, and this of course could be validated by RTI data.

Minimum income threshold

There are some particular points to note about the minimum income threshold of £1,560.

  • The threshold relates to total taxable pay in a tax month regardless of how many times the employee is paid in the tax month.
  • Periods of family related or sick leave do not lead to any reduction in the minimum income threshold.
  • Employers who are payrolling benefits in kind will have a higher gross taxable pay figure as it will include the notional amount for the benefits in kind as well as their cash earnings. There is no indication in the guidance that HMRC requires payrolled benefits to be deducted from taxable pay.
  • There is no reference to tronc schemes in the guidance. If a tronc is set up as a separate PAYE scheme it will have taxable pay which could reach the minimum income threshold. But as the tronc master is not the employer and therefore cannot be said to have made a claim on behalf of the employee, one would expect that such PAYE schemes would not be eligible. Conversely if tips are being paid through the employer’s PAYE scheme as taxable pay then they would be included in the minimum income threshold.

The guidance refers to gross taxable pay but then requires net taxable pay to be used where there are tax relieved amounts. If you look at the example of Charlotte as she is in a net pay arrangement pension her contributions reduce her gross taxable pay and only the net amount is used to assess if the threshold is reached. If Charlotte had been in a relief at source pension scheme, pension contributions come off net pay so she would have qualified for the job retention bonus based on the minimum income threshold.

I assume that charitable giving and share incentive plan contributions will similarly reduce gross taxable pay for the minimum income threshold.

Compliance and preparation

In preparation for making a claim HMRC requires the employer to file all their RTI returns accurately and on or before the contractual payment date for the whole of the 2020/21 tax year. It is not clear if the employer has used the three day late reporting easement, or has a first late reporting default, if this would invalidate the employer from using the bonus scheme.

HMRC asks that the employer use the ‘irregular payment pattern indicator’ in the full payment submission (FPS) if the employee is not paid regularly. Any requests for information from HMRC in respect to CJRS claims must be dealt with promptly as these can delay payment of the bonus or lead to a claim being rejected.

Agents who are authorised for PAYE online can make claims on behalf of clients.

Taxable income

The bonus is taxable income for both corporation tax and income tax purposes. However, where it is payable to an individual who is also happens to be an employer of a nanny or a member of domestic staff, the bonus is not classed as part of the individual’s taxable income for the year.

Replies (25)

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By SXGuy
06th Oct 2020 14:54

Can I clarify something you've said please.

So any employer who furloughed an employee and continues to be employed upto 31st Jan but falls slightly short of £1560 across the three months will not be eligible to claim the bonus?

I note that £1560 over three months is an average monthly pay of £520 per month which is below any taxable threshold, so when you refer to taxable pay, your simply saying a payment that could in theory be taxable but may not have had tax stopped?

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Replying to SXGuy:
By coops456
08th Oct 2020 10:35

£520 per month could be taxable; the tax threshold is dependent on the individual's tax code.

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By NYB
06th Oct 2020 16:30

Most depressing bit is that all RTI's have been submitted on time. I know I missed one of mine for some reason or other. As an agent with a fair few clients and the pressures of ever changing Furlough it is hardly a wonder that the odd one has slipped the net. And so we are punished despite having a near perfect compliance records since the introduction of RTI. As is the case with HMRC genuine mistakes are never allowable.

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Replying to NYB:
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By Paul Crowley
06th Oct 2020 20:00

That was the bit I noticed as well
I have a few who often argue some change after giving us the pay details 'just in time'
Result is a couple of 1 or 2 day lates because they fail to respond to 'OK to submit'
Will at least now have the opportunity to get a bit more fierce on timely info and replies

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Replying to NYB:
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By Mukkarram Ali
07th Oct 2020 09:51

I would think that an acceptable reason or a one-off delay would be understandable. And I would still attempt to submit the claim regardless and let HMRC come back to us whether they approve or not.

My position would be to still attempt the claim in good faith.

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Replying to NYB:
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By paul.benny
07th Oct 2020 10:13

It's the RTI submissions for the qualifying months that count. No penalty for historic misses.

Everyone has ample time to ensure they hit those dates. And it's a fairly strong incentive for clients who are tardy.

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Replying to NYB:
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By bendybod
07th Oct 2020 10:26

It is only those three RTIs that have to be on time.

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Replying to bendybod:
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By NYB
07th Oct 2020 10:45

Not according to this article which is word for word from the official HMRC wording is that the WHOLE of the 20/21 year must have been submitted on time. I can see no mention of just those three months.

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Replying to NYB:
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By John Wheeley
08th Oct 2020 08:17

I'm not sure if this is correct. Neither The Treasury Direction (para 5.1 and 5.2) nor the HMRC Guidance say that all RTI submissions since 6 April 2020 have to be on time.

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By kathyk0410
07th Oct 2020 09:19

Query how this impacts on maternity pay.

If someone is furloughed for the first time in September having previously received SMP will they qualify for this if they meet the 3 month pay criteria? Then conversely if someone goes on maternity leave in January 21 does the SMP counts towards taxable pay (otherwise not sufficient taxable pay) would they qualify for the bonus - even though they may not return afterwards? Both real situations so not hypothetical though in our case the employee will probably return to work.

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By NYB
07th Oct 2020 09:49

Example 1 - yes they would count.
Example 2. - cant see why not. SMP is always treated as taxable pay. So cant see the difference. And as to whether they "intend" to return or not doesn't come into it here as you can't base things on "perhaps in the future". They may not return indeed but then any employee may decide to leave.

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Replying to NYB:
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By kathyk0410
07th Oct 2020 17:05

Example 2 - the difference being that the SMP will not have cost the employer anything as it will all be recovered - hence I thought they may exclude it.

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Replying to kathyk0410:
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By NYB
07th Oct 2020 17:17

I can see your thought process. I suppose all this is in the fine detail that will spill out from HMRC overvpages and pages in due course

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By mikefwbray
07th Oct 2020 10:06

So annually paid directors are not eligible? If they were paid £9,500 in April 2020 for 2020/21.

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Replying to mikefwbray:
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By bendybod
07th Oct 2020 10:29

Yet again!!
I'm not sure retaining the director is what the retention bonus was really designed for though - if the director doesn't return then there is no employer (assuming they are an OMB).

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Replying to bendybod:
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By mikefwbray
07th Oct 2020 13:24

Well you have assumed wrong. Directors are still employees and this was a genuine query.

Don't appreciate, or see the need for, your initial remark, but thanks all the same.

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Replying to mikefwbray:
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By TalkSense
08th Oct 2020 02:25

mikefwbray wrote:

Well you have assumed wrong. Directors are still employees and this was a genuine query.

Don't appreciate, or see the need for, your initial remark, but thanks all the same.

Would be good to get clarification on this, given the sheer volume of OMBs who have received little/no support, where we've managed to get them in the CJRS scheme, albeit for a pittance, does anyone know if we can also claim the £1,000 bonus for these director clients ?

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Replying to TalkSense:
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By TalkSense
08th Oct 2020 12:17

I guess the lack of response means no-one knows if directors are entitled to claim the bonus for themselves as employees of their own limited company...anyone??

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Replying to TalkSense:
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By SXGuy
08th Oct 2020 13:01

It has been discussed before, with different opinions, I don't think there's been anything definitive yet.

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By LAURA BUTLER
07th Oct 2020 10:10

Can I just clarify, the £1560 is the total amount over 3 months, so say £520 per month?
so if an employee goes on sick leave (not virus related) and is on SSP during that time, the employer could if neccessary top up their pay to £520 per month and still qualify?

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Replying to LAURA BUTLER:
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By bendybod
07th Oct 2020 10:32

Looks like it - but beware of varying the terms of an employment contract if all employees' contracts say they receive SSP and one is given more than that just to ensure the company receives the bonus.
Unless the employee either only receives around £520 per month, or is sick for the whole period though, it is a total over the three months so they don't have to receive £520 every month.

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By Ashley Hughes
07th Oct 2020 11:26

Apologises, if this is a patently obvious answer to the forum contributors but best to clarify than be mildly uncertain.

Each scheme is taken on own merit with regards to bonus eligibility, that is to say

CJRS - based on RTI's ending 31st October and NOT subject to minimum income threshold

JSS - based on 3 months November to January and IS subject to minimum income threshold (MIT)

Therefore, it is possible for the same employee to be furloughed (qualify for £1 bonus under CJRS) and in addition (subject to meeting MIT), can receive a subsequent £1k bonus - totaling £2k grant bonus across both schemes for the same employee.

Is that correct, or please stand me corrected?

Thank you

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By Andrew Mitchell
07th Oct 2020 11:41

As I see it, the objective of the scheme is to keep people on the payroll. I have a couple of clients who engaged staff at the beginning of March and who therefore were ineligible for furlough. These employees are ineligible for this bonus as well - so yet again those particular employers seem to be being treated unfairly and the objective of the scheme partially fails.

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By Ian McTernan CTA
07th Oct 2020 13:34

Overall quite reasonable apart from the requirement to have filed every RTI on time during the Covid crisis- I expect a lot of appeals against HMRC decisions should that rule be applied strictly.

Also a bit of a shame on the TUPE arrangements which seem a little harsh (but sort of make sense I guess).

Now all we have to do is remember at the end of the busiest month of the year to ensure we claim or get all those that are due.

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Replying to Ian McTernan CTA:
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By John Wheeley
08th Oct 2020 08:32

Neither The Treasury Direction (para 5.1 and 5.2) nor the HMRC Guidance say that all RTI submissions since 6 April 2020 have to be on time.

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