Workplace pensions and Coronavirus

The current economic conditions are having a huge impact on us all, however it’s at times like this when we can support our clients and provide the guidance they need.

We have put together some Questions and Answers about what Employers or Employees may need to consider at this time in relation to meeting the Auto Enrolment Pension obligations.

Can the Furlough Grant be used to cover pension contributions?

Employers must pay at least the minimum AE employer pension contributions on behalf of their furloughed employees.  But they can only claim back the minimum AE employer pension contributions on the earnings paid.

The minimum mandatory employer contribution is 3% of income above the lower limit of qualifying earnings (which was £512 per month until 5th April and is £520 per month from 6th April 2020 onwards).

The employer will also need to consider their employment contracts, any scheme rules and communicate with their employees before they make any changes to the contribution levels

What if the employer’s scheme operates on a salary exchange basis?

Updated guidance from the Government makes it clear that the salary for calculating the grant should not include the cost of non-monetary benefits provided to employees, including taxable benefits in kind. Benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary.

HMRC has confirmed that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements if the relevant employment contracts are updated accordingly.

Can an Employer put their Pension on a “Contribution Holiday”?

The Pensions Regulator (TPR) have confirmed that they expect employers to continue making contributions into their scheme, and we would encourage any employers to do so if they can.

However, if the employer is concerned about whether they can meet their ongoing duties, we would suggest they speak to TPR but we are also here to help.

What should employers do if any members want to stop paying into their pension?

Members can stop their contributions at any time and should inform their scheme provider and Employer.

If an employee stops their contribution, automatic enrolment rules do allow employers to stop making their contributions.

If the member and/or the employer want to re-start the contributions, this can be done and again the member should inform the scheme provider and Employer of their intentions.

Getting in touch with TPR

If you need to get in touch with TPR here is a note of the website.


IMPORTANT : CJRS Claims, portal live on Monday 20 April

The latest guidance from HMRC was finally out last night & their portal opens 8am Monday. There are still some unanswered questions for HMRC, which the accountancy & tax professions are pushing for answers on, but the standard information is clearer now.

There are some fiddly bits, but most of the ‘we don’t know yets’ probably won’t affect most payrolls – but let us know if you have any employees on payroll with no NI number (eg from overseas or under 16yo), or any of zero hours contracts, or any new starters in late Feb/March, these are all trickier.

If we are preparing your claim, for example because we already operate your payroll, we will already have been in touch with you.

These are notes for those employers who are preparing their own grant claims. 

The process:

You will login through your employer’s Govt Gateway but you’ll need to also be registered for PAYE online and have an ePAYE number. Do this here: https://www.gov.uk/paye-online/enrol

It may be a struggle to get the claim uploaded, paid and into your account by 25th April, if you’re a ‘last Friday’ payday, but hopefully by 30th April, but this all depends on whether the portal is stable to cope with the millions of users!

If you don’t have funds to make the April payrolls, you should put a contingency plan in place.  Speak to us if you need further help with this.

You’ll make your first grant claim for March and April together, then one per pay period after that.  You can upload your grant claim from 14 days before the payday.

Get all your information ready for the claim – suggest you’ll need a spreadsheet! You’ll have to enter all furloughed employees individually if you have less than 100, you can bulk upload an excel spreadsheet if you have more than 100 employees to claim for.

There is no ‘save and return’ option and you’ll be kicked off after 30 mins of inactivity – so keep doing keystrokes to keep yourself on there, whilst you check information.  Try and be as prepared as you can be before you logon.  There will be a calculator on the portal if you are stuck but try and work it out yourself on spreadsheet first, as that will be quicker.

Common situations:

  1. Holiday Pay – you can allow holidays & it doesn’t break furlough (which otherwise needs to be a min of 3 weeks each time); but you have to claim just 80% for the grant amount & then top up to 100% for your payroll; same for bank holidays, if they’re normally taken as leave. Or you can just assume it’s a working-furlough-day, claim the furlough amount & add their extra holiday days onto entitlement for ‘post lockdown’.  Your decision probably depends on how much all these accrued holidays are going to cause you a problem later in the year. You need to remember that the holiday top up element is not just basic pay that you might have used to calculate the furlough grant element but should include commission, bonuses etc.
  2. If you normally claim £4k NI employment allowance (based on your business’ last year’s Class 1 Employers NIC being less than £100k) then you still have to take that in April, and until it’s used up. You will probably need to do some working out of this on a spreadsheet, as the Employers NIC element of your grant must be the lower amount.
  3. The worked examples on the HMRC handout show how to calculate pro-rata pay and NIC for furlough/non-furlough days –you include all dates in the month, 7 days a week.  If you are using average pay because they had uneven pay amounts, check what you can and cannot include (list on handout) and note that you need to average it for the tax year 2019/20 up to the date each employee was furloughed – using number of days from 6th April 2019 until the date they were furloughed (if before 6/4/20).  The worked examples in the handout are useful. HMRC HANDOUT

Suggestions:

  1. prepare a reconciliation sheet of your grant claim & eventual payrolls – there may be some adjustments to make such as topping up apprentices to App Min Wage, topping up holiday pay, or pension contributions, for example;
  2. if there is anything you’re not sure about, make a judgement and note why you considered that to be the correct treatment. Then you can check in the coming days/weeks when things are clearer & adjust either grant claims and/or payrolls next time.
  3. Make sure you write down the submission number or take a screen shot as HMRC are advising an email confirmation will not be sent!

Setting up an online PAYE account (Important to claim CJRS Grant)

In order to process your Coronavirus Job Retention Scheme (CJRS) grant you will need to be able to access your online PAYE. (If we don’t access it on your behalf). The following notes provide a guide as to how to set up your account.

You don’t already have an account

If you have not done this already, it is a very simple process to set up access to your online PAYE account with HMRC. Go to the following website https://www.gov.uk/log-in-register-hmrc-online-services and click on Sign In.

  1. Click on create sign in details and follow the onscreen instructions to create the online user access.
  2. You then need to link the PAYE account to your user.
  3. Click on “get online access to a tax, duty or scheme”.
  4. Select “Employers or intermediaries, for example PAYE for employers or CIS” and click continue.
  5. Select “PAYE for employers” and click continue.
  6. Then follow the onscreen instructions, you will need your;
    1. HMRC office number (3 digit number preceding your PAYE reference),
    2. your PAYE reference and your accounts office reference.

If you have all of the correct information you will have access to your online PAYE account straight away.

You can’r remember your log in details

If you have already set up access to your online PAYE account and have lost your user number you will need to contact HMRC to reset this before you can access your account.  If you have your user number but have forgotten your password you can reset the password from the sign in screen.


UPDATE : Coronavirus Job Retention Scheme

The Job Retention Scheme is a really important tactic for businesses looking to retain good employees and save cash. We’ve updated our notes on the scheme, which is copied below for reference.

Updates (including guidance 4/4/2020)

  1. HMRC will be the body that administers the grant scheme.
  2. Now confirmed that Charitable and not for profit organisations will be eligible.
  3. Whilst the scheme is backdated to the 1 March grants will only be available when employers have agreed furlough terms with their employees and they have stopped work, subject to employment law in the usual way.
  4. Available to all employees on the payroll at 29 February.
  5. The employer will pay the employee through payroll and as such RTI submissions will still be maintained. This actually makes a lot of sense as it is a system that already works well.
  6. Relevant employees must be designated as furloughed employees.
  7. The scheme will not cover dividends where directors/ shareholders of owner managed companies pay small salaries and the balance as dividends.
  8. The grant will cover all employment costs including; salary, employer pension contributions and employer NIC.
  9. The grant will be taxed and should be included in the profits computation for the relevant year.

Illustration

Illustration (taken from the ICAEW article) shows how the grant would be calculated. Note assumes no pension payments. If a pension was paid (i.e. Mr A was opted in) the grant would cover this too being 80% x (£2,000) + Ers NIC + Ers Pension subject to the £2,500 cap. Note that the Ers NIC and Pension will be calculated using the new 80% salary as reference.

The original ICAEW article can be found here

What you’ll need to make a claim

To make a claim you will need the following information:-

  • your ePAYE reference number
  • the number of employees being furloughed
  • the claim period (start and end date)
  • amount claimed (see note – how much can you claim)
  • your bank account number and sort code
  • your contact name
  • your phone number.

HMRC advise that business owners will need to calculate the amount you are claiming. However, HMRC will retain the right to retrospectively audit all aspects of a claim.

HMRC advise that claims can be made using payroll data either “shortly before or during running payroll.”

How much you can claim?

  • 80% of your employees’ wages up to a maximum of £2,500.
  • Minimum automatic enrolment employer pension contributions on the subsidised wage.
  • Grants will be prorated if your employee is only furloughed for part of a pay period.
  • Claims should be made from the date the employee finished work and starts on furlough leave, not when the decision is made or they were written to.
  • Employers National Insurance contributions.

Funding problems

One of the problems with the scheme is the delay in being able to make claims and receive funds. The grant covers a period of three weeks and could split a payroll period if it falls in between. If an employee was furloughed on 20 March there could be 11 days available for the March claim.

The employer would need to pay the employees net pay on 31 March and 30 April well before potentially being able to make a claim in early May for receipt sometime in mid to late May.

Whilst we can’t be sure this will apply for all businesses, Banks may be willing to extend or arrange overdrafts for a limited time for the amounts expected to be claimed.

For advice on how you can implement this scheme including HR, Payroll, support making claims and working through cash flow please contact our team dedicated to dealing with the Job Retention Scheme; Lucy Pitfield, Simon Hall and Steph Smith on 01522 81 5100. 

Original Article (published 21 March)

The Government has announced a new scheme to protect people’s jobs during the crisis. The scheme is open to all UK businesses and will see the Government pay part of the wages of employees that would otherwise have been laid off. The scheme will be open for an initial three months from 1 March however Rishi Sunak said “… and I will extend the scheme for longer if necessary”.

This is a grant from the Government, not a loan, so it will not need to be repaid.

To access the scheme employees, or certain employees, need to be designated as “furloughed workers”. You will need to notify these workers of the change, in writing (email will be fine) making sure you follow a fair selection process.

It’s worth noting that the Government is not changing employment law to allow this to change in status. Therefore, making this change to an employee’s status remains subject to employment law.

You have the option of topping up the remaining 20%, but it is not mandatory.

You must not make the employees redundant and guidance will most likely be issued, in due course, about the time frame the Government expects you to keep them employed after society and business can return to normal. If you have already laid staff off, you can reverse this decision if you wish, as this scheme is backdated to 1st March.

HMRC are developing a system that will allow employers to provide this information through an online portal and once processed they will issue reimbursement. At the time of writing this (21 March 2020) there was no method of reimbursing these costs and the system isn’t expected to be available until April.  Therefore, managing cash during this intervening period is still crucial (see our advice about cash flows).

There is a cap on the reimbursement of £2,500 of the employee’s wage costs per month, based on their regular salary. It should also be noted that the employee should be shown on the February pay run and that a claim will be possible for periods from 1 March 2020.

It is not clear yet how much those on zero hours’ contracts or fluctuating wages will be treated, but it is expected that it will be either the amount which was paid through last month’s payroll or an average of the past few months.

Careful planning and consideration of employee’s contracts of employment is required when considering this scheme but it is certainly a significant boost to companies in what are unprecedented times.


Payroll professionals confirmed as key workers

Our team are here and ready to support you

Payroll is a vitally important function within a business and never more so now that the Government has confirmed that it will be paying furloughed workers* up to 80% of their wages through reimbursement via HMRC.

During these uncertain times, businesses must know that they can rely on the support of their payroll advisers to keep employees paid and their records up to date in line with the Government’s latest measures.

As the Department for Education has confirmed that payroll professionals are classified as key workers, we wanted to assure you that our team are standing by to help you deal with the constantly changing complexities of payroll during this crisis.

If you need payroll advice during these challenging times our team are available and ready to help, so please contact us on 01522 815100.

*Under the new Coronavirus Job Retention scheme, government grants will cover up to 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis. The scheme, open to any employer in the country, will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April. It will continue for at least three months, and can include workers who were in employment on 29 February.   Employees still working, full time or part time or on shorter hours will not qualify.

To claim under the scheme employers will need to:

  • designate affected employees as ‘furloughed workers’, and notify employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation; and
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.
  • HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
  • While HMRC is working urgently to set up a system for reimbursement, we understand existing systems are not set up to facilitate payments to employers. Business that need short-term cash flow support, may benefit from the VAT deferral announced below and may also be eligible to apply for a Coronavirus Business Interruption Loan.

Review of Off-Payroll working rules

In January the government launched a four-week review of the changes to IR35 “off-payroll” working rules scheduled to come into force in April, as the result of mounting criticism about the way they will operate. The review is scheduled to conclude by mid-February and will see the government hold a series of meetings with stakeholders representative of those affected by the changes.

It is unlikely that there will be a significant U-turn, but there may be scope for the impact of the legislation to be reduced in terms of the range of contractors to whom it will apply, or the size of businesses who will be obliged to operate it. The new rules are currently scheduled to apply to large and medium-sized businesses as defined by the Companies Act.

The government will also carry out a further review of the enhanced CEST tool designed to assist businesses in checking employment status and public sector bodies’ experience of applying the rules since 2017.

https://www.gov.uk/topic/business-tax/ir35


Tax update – Finance Bill should now proceed

Now that the General Election is out of the way, the tax changes in the draft Finance Bill scheduled to take effect from April 2020 are now more likely to go ahead.

The key tax measures “in limbo” until legislated in Finance Act 2020 are:

– Extending the “off-payroll” working rules to the private sector

– Restricting R&D repayable credit for SMEs

– The proposed 2% reduction in P11d car benefits

– Limiting CGT private residence letting relief

If the changes to CGT private residence letting relief go ahead from 6 April 2020, it may be worth considering the disposal of a property that currently qualifies for this relief before 6 April 2020.  The “off-payroll” working rules will almost certainly proceed, even if not from 6 April 2020, and thus businesses and workers affected should prepare for the planned changes.

Contact us if you want to know how likely this is to impact on your business by calling 01522 815100