Expansion of Job Support Scheme: Business closures due to COVID-19 restrictions
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On the tails of the recent announcement of the new Job Support Scheme, 9 October 2020 saw Chancellor Rishi Sunak unveil an extension to his winter scheme, specifically for those businesses required to close their doors a result of COVID-19 restrictions. With a number of local lockdowns currently in force, and the new COVID alert levels presenting potential temporary closures of pubs and bars, the new extension may be a lifeline for such businesses and their employees.
Once again, we bring you the key need-to-knows. To try and simplify things, we will call the principal Job Support Scheme, which was announced a couple of weeks ago, and for which employees must work at least 33% of their normal hours, the "Principal Scheme". The recently announced extension to the Principal Scheme will be called the "Extended Scheme".
What does the Extended Scheme entail?
Businesses whose premises are legally required to shut as part of local or national restrictions will receive grants to pay a proportion of the wages of staff who cannot work as a result. The aim is to protect jobs and enable businesses to reopen quickly once restrictions are lifted.
When does the Extended Scheme begin?
In line with the Principal Scheme, it will begin on 1 November 2020 and be available for 6 months. However, there will be a review of the Extended Scheme in January 2021.
How do I know if my business is eligible?
Your business will only be eligible if it is required to shut temporarily as a result of local or national restrictions. Importantly, it seems that 'closure' includes those businesses which can remain open for, but are restricted to, delivery or collection services only.
It appears that the Extended Scheme will only apply to closures from 1 November 2020 onwards as, prior to this, the Government expects the Coronavirus Job Retention Scheme (CJRS) to be utilised.
In addition, your business must have a UK bank account and a UK PAYE scheme registered on or before 23 September 2020. The guidance states that there is an expectation that large employers using the Extended Scheme will not be making capital distributions, such as dividend payments or share buybacks, whilst accessing the scheme. At present, there doesn't seem to be any mandatory requirement for employers to cease such making payments. That being said, the further expected guidance may provide some clarity on this, and it is likely that the Government's intention is that businesses which can afford to be making such payments should not be utilising the Extended Scheme in the first place.
Assuming that my business is eligible, will the Extended Scheme apply to all my employees?
To be eligible, employees must:
- be employed, and an RTI submission notifying payment to HMRC must have been made, on or before 23 September 2020;
- have ceased work, as a result of the closure, for a minimum of seven consecutive days;
- not be made redundant or put on notice of redundancy during the period for which you are claiming their wages under the scheme.
Neither your business, nor the employees concerned, needs to have previously accessed the CJRS.
What financial support will the Government provide?
The Government will pay two thirds (or 67%) of each eligible employee's normal salary, up to a maximum of £2,100 per month. These payments will be taxable.
We are awaiting detail from the Government as to how "normal salary" will be calculated.
Will I need to agree with my employees that they will temporarily cease to work?
Yes. Employers must agree the use of the Extended Scheme with the relevant members of staff and notify them in writing of the temporary changes to their terms and conditions of employment. HMRC has the authority to request a copy of this agreement.
Will I need to contribute a proportion of wages, as under the Principal Scheme?
No; however, employers will be asked to cover National Insurance and pension contributions.
There is no obligation on employers to "top-up" employees' salaries to 100% of wages, but they can do so if they wish.
If my business is required to close because someone has tested positive for COVID-19 within my workplace / venue, can I still claim under the Extended Scheme?
No. The scheme is only designed to provide assistance for those businesses affected by local or national restrictions.
How do I go about claiming under the Extended Scheme?
In line with the Principal Scheme, payments will be made monthly in arrears, via an HMRC claims service which will be available from early December 2020. This means that employers will still have to incur the upfront costs of employee wages, which will be an obvious challenge given that their businesses will have temporarily ceased to or reduced trade.
Will HMRC audit claims under the Extended Scheme?
Yes. Payments may be withheld or required to be repaid if a claim is found to be fraudulent or based on incorrect information.
In addition, HMRC will publish the names of employers who have used the Extended Scheme, and employees will be able to find out if their employer has made a claim for them under the scheme. The Government hopes that this will help to identify any fraudulent claims.
What don't we know?
It is not yet clear whether there will be a financial assessment test for use of the Extended Scheme by large businesses, as has already been announced for the Principal Scheme. It is likely that this will not be applicable, given that the business closure has been Government enforced, but this subject has not been broached by the current guidance.
The Government has stated that further guidance will be provided by HMRC in due course, and we will update you when more information has been published.
This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact James Baker or Rachael Lloyd to discuss any issues you are facing.