Coronavirus (COVID-19) – help and support for hospitality businesses
Major changes to the Job Retention Scheme coming from 1st July 2020
Details and guidance have now been published by HM Revenue & Customs regarding the Coronavirus Job Retention Scheme.
The changes which will be made with effect from 1st July to allow both flexible furlough working and, over the next few months, to introduce and increase employer contributions to the scheme. To all intents and purposes this is a completely new scheme as opposed to simply tweaking the current scheme introduced in March.
Who is eligible?
All employers eligible for the “old” scheme will remain entitled to use and claim under the new scheme and no new registration or similar process is required.
For employees, the requirement to have been included on an RTI return submitted on or before 19th March remains. Additionally, however, an employee must have completed a full 3-week furlough period at any point prior to 30th June to be eligible for the “new” flexible furlough scheme. This will in practice mean any employee not furloughed by 10th June is excluded unless they subsequently return from a period of statutory parental leave (such as maternity leave) which began before that date.
Flexible furlough will represent a change to an employee’s Terms & Conditions (as it is a completely new concept so not covered by the initial agreement to be fully furloughed) and needs to be both notified and agreed by the employee in writing. Employers who know that they will wish to take advantage of flexibly furloughing staff in July should therefore notify their staff without delay in order that agreement is obtained.
Finalising the “old” furlough scheme
Any furlough pay (and associated employer NI or pension) relating to periods up to 30th June must be reclaimed via the HMRC Portal no later than 31st July. Given that 30th June is a Tuesday employers with staff paid weekly, fortnightly or four-weekly will need to file a claim for the part of the pay period in which 30th June falls – it cannot be claimed as a part of the overall pay period.
Under flexible furlough an employer can agree with an employee that they will work a certain number of days, shifts or hours and remain on furlough for the rest of their normal working week. That agreement should be in writing. There is no minimum duration of work or furlough, and no need for the same amount or pattern of work to be carried out from week to week. The requirement not to carry out work during any furloughed period remains.
An employer must pay the employee their full rate of pay for worked time and this must not be lower than the new National Minimum Wage rates which took effect from 1st April (£8.72 per hour for employees aged 25 or over). No part of this pay, or the associated employer NI or pension contributions, can be reclaimed under the scheme.
The employer will continue to pay the employee at least 80% of their usual pay for the non-working furloughed time and there is no need to increase that furlough pay to the new Minimum Wage rates for non-worked time. An employer remains free to pay a top up to the employee to take their pay to 100% of their historic earnings but this remains voluntary.
Making claims under the new scheme
Employers are unable to submit claims in respect of periods commencing 1st July until after that date. This means that for staff due to be paid in the first week of July employers may not be able to submit a claim and receive funding from HMRC in advance of pay day.
Claims under the new scheme must be made in line with pay periods and must be for at least a week (subject to the exception below) and must also not be for multiple months. This will mean, for example, that when a pay period straddles the start of a new calendar month those employers will need to submit separate claims for the final few days of the preceding month and the first few days of the new month.
Employer contributions to furlough
For 1st to 31st July 2020 employers will continue to be able to claim all furlough pay (to 80% of historic pay and subject to a £2,500 monthly cap) together with associated employer NI and pension contributions.
From 1st August employers will no longer be able to reclaim any employer National Insurance or employer pension contributions but can continue to reclaim furlough pay at 80% as usual.
In September Government support falls to 70% with employers obliged to pay the other 10%.
From 1st October the employer contribution increases to 20% with only 60% reclaimable. The monthly cap of £2,500 will also be pro-rata’d in September and October based on the proportion of total average hours which are furloughed as opposed to worked, so if (for example) an employee works half of their standard hours and the other half are furloughed the monthly cap on the amount reclaimable will fall to £1,250.
Ending of the furlough scheme
The Chancellor has said that the furlough scheme will end on 31st October and no further support beyond that date has been announced.
Steps to take
Businesses will need to understand the cost implications of these changes and the impact of keeping staff on furlough as opposed to bringing them back to work. We can help with advising on the costs and impact; please get in touch for further details. In addition, advice should be taken from your HR or employment law partners regarding the change to employee status to flexibly furloughed, any other changes to Terms & Conditions and, potentially, issues arounds redundancies and notice.
Please contact us on 01727 838255, email email@example.com or contact your usual Client Partner.
Coronavirus Job Retention Scheme
Under the new Coronavirus Job Retention scheme, government grants will cover 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis to a maximum of £2,500 per month.
The scheme, open to any employer in the country, covers the cost of wages backdated to 1st March 2020 for staff unable to work due to Coronavirus pandemic.
The scheme is in place in its current form until 31st July 2020. The Chancellor has announced that the scheme will be amended from 1st August and that Employers will be expected to share some of the costs of the scheme from that date. No details of likely amendments are available yet.
To claim under the scheme employers will need to:
- Designate affected employees as ‘furloughed workers’ and notify employees in writing 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. This portal is now live and is working well. Most businesses are receiving funds within 6 working days of submission.
Other details include:
- HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. This means employers can pay staff and claim the money back or lodge a claim up to 14 days in advance of pay day to ensure that funding is received in time
- Employers do not need to pay the additional 20% of wages in order to qualify for the 80% reimbursement payment
- This is a grant, not a loan, so it does not have to be repaid to government
- The reimbursement will cover furloughed employees who were on the payroll and had been included on an RTI return received by HMRC no later than as at 19th March 2020 onwards
- New employees whose first pay day was later than 19th March are not eligible to have their costs reclaimed under the scheme
- Redundancies and lay-offs after 1st March can be ‘unwound’
- Employees on short time working (reduced hours) will not be eligible to have an element of salaries repaid, only those on furlough.
HMRC have stated that historic earnings from tips and tronc cannot be counted as earnings under the furlough scheme although the legislation itself is unclear and not definitive. WMT are working alongside industry leaders to help highlight the issue in the media and lobby MPs to ensure that these historic earnings, which have been taxed and declared to HMRC, can be included.
Businesses that need short-term cash flow support will benefit from the VAT deferral announced (see below) and may also be eligible to apply for a Coronavirus Business Interruption Loan (CBILS) or a Business Bounce Back Loan (BBLS).
The next quarter of VAT payments will be deferred, meaning businesses will not need to make VAT payments until the end of June 2020. Businesses will then have until the end of the 2020-21 tax year to settle any liabilities that have accumulated during the deferral period.
The deferral applies automatically, so businesses do not need to apply for it. VAT refunds and reclaims will be paid by the government as normal.
Income tax payments
Income tax payments due in July 2020 under the self-assessment system will be deferred to January 2021.
Income tax self-assessment payments due on the 31 July 2020 will be deferred until the 31 January 2021. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.
PAYE liabilities were not specifically mentioned in the Chancellor’s address. Our experience so far is that HMRC are readily granting deferral of this liability on a month by month basis on application to HMRC via their helpline.
Time to pay
HMRC have set up a dedicated Time to Pay helpline for businesses impacted by coronavirus – details at https://www.gov.uk/government/news/tax-helpline-to-support-businesses-affected-by-coronavirus-covid-19.
Early indications are that HMRC are being supportive and agreeing deferrals as well as suspending interest and late payment penalties. Whilst VAT and self-employed payments on account are to be automatic deferrals for other tax liabilities such as PAYE, corporation tax and other income tax payments due as but it is crucial that you contact them rather than simply not pay on time.
We would encourage all affected businesses to take advantage of this. However, the helpline is likely to be very busy and you may have a long wait to speak to an operator, so some persistence will be required.
Please make a note of the time, date and operator you speak to, or if you do not get through, the dates and times you attempted to call.
Coronavirus Business Interruption Loan Scheme (CBILS)
A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, to support businesses to access bank lending and overdrafts is now available.
The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence to continue to provide finance to SMEs.
The government will not charge businesses or banks for this guarantee, and the scheme will support loans of up to £5 million in value. The government will cover the interest on these loans for the first 12 months of interest payments (originally 6 months).
Applications for CBILS Loans are open for 6 months from 23rd March 2020.
Business Bounce Back Loans (BBLS)
BBLS Loans were announced by the Chancellor at the end of April and have been available since 4th May 2020. These loans are intended to support businesses that may not qualify for CBILS Loans and are limited to the lower of 25% of Turnover or £50,000.
Applications for BBLS Loans are made in most cases via online banking. Where the loan is agreed funds are normally available within 2-4 working days.
A new lending facility from the Bank of England will also help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans.
You can also find useful information and resources on the website of our regulatory body, the ICAEW at: https://www.icaew.com/insights/coronavirus/business-interruption. This includes resources offering practical advice on supply chain risks, travel and insurance.
Grants for retail, hospitality and leisure businesses
The Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property.
Businesses in these sectors will receive a grant of either:
- £10,000, if they have a rateable value of under £15,000; or
- £25,000, if they have a rateable value of between £15,001 and £51,000.
You are eligible for the grant if your business is based in England and it is in the retail, hospitality and/or leisure sector.
Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used:
- as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
- for assembly and leisure
- as hotels, guest and boarding premises and self-catering accommodation
You do not need to do anything to access the scheme. Your local authority will write to you if you are eligible for this grant.
Any enquiries on eligibility for, or provision of, the reliefs and grants should be directed to the relevant local authority.
Guidance on all the above grants will be provided to local authorities shortly.
Statutory Sick Pay
The government will bring forward legislation to allow small and medium sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility criteria for the scheme will be as follows:
- Employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people employed as of 28 February 2020.
- This refund will cover up to two weeks’ SSP per eligible employee who has been off work because of COVID-19
- Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
- Employers should maintain records of staff absences, but employees will not need to provide a GP fit note
- The eligible period for the scheme will commence the day after the regulations on the extension of Statutory Sick Pay to self-isolators comes into force
- The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible. Existing systems are not designed to facilitate employer refunds for SSP.
At the moment, there is no further detail on how you access this support, or how quickly it will become available to you. We will continue to monitor the situation and keep you informed.
The government will increase the Business Rates retail discount to 100% from 1st April 2020 t0 31st March 2021 and extend it to the leisure and hospitality sectors. They will also increase the planned rates discount for pubs to £5,000.
No application is required, so we recommend you cancel any business rates direct debits that will roll over automatically from the previous year.
Taken together with existing small business rate relief (which provides full relief for businesses using a single property with a rateable value of £12,000 or less), an estimated 900,000 properties, or 45% of all properties in England, will receive 100% business rates relief in 2020/21.
Businesses that received the retail discount in 2019-20 will be rebilled by their local authority as soon as possible.
Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority.
The government will provide an additional £2.2 billion funding for local authorities to support small businesses that already pay little or no Business Rates because of Small Business Rate Relief (SBBR).
This additional funding will provide a one-off grant of £3,000 to around 700,000 business currently eligible for SBRR or Rural Rate Relief. For a property with a rateable value of £12,000, this is one quarter of their rateable value, or comparable to 3 months of rent.
Landlords are very aware of the situation. There is no instruction or pressure from the government to forgive commercial rents. There is however considerable pressure from Hospitality industry groups for Landlords to forgive rents during the period of closure. Lobbying is ongoing.
Each landlord is unique in their response and it is a matter of negotiation. We advise that you speak to your landlord and ask for assistance
The next rent quarter day is Wednesday 24th June. If possible, take action before then and consider any direct debits that may be set up to pay rents.
Guidance for employers
If the situation is so severe that you need to take action to cut-costs, then the government has produced guidance and information regarding your obligations when it comes to laying-off staff or placing them on short-time working, this can be found at:
Our regulatory body, the ICAEW, has also provided some useful information and resources:
Other help for business
Including updates on the latest announcements and new measures of support, as well as useful helplines and ICAEW insights, this page is one to keep an eye on.
If you are a WMT tax client who subscribes to our fee protection service, you can also benefit from free advice from the business and employment law matters helplines included in the service package.
We understand how worrying the current situation. We will continue to keep you informed and seek ways to ensure the support you need is available. As the situation changes and develops we will of course keep you informed.
If you have any questions or queries, please direct them to your WMT client service partner in the first instance.