Government publishes detailed guidance on Coronavirus Job Retention Scheme and details of the Self-employment Income Support Scheme and announces relaxation of holiday carry-over rules

On 26 March the Government published more detailed guidance on the Coronavirus Job Retention Scheme (CJRS) originally announced on 20 March. The CJRS is designed to support employers whose operations have been severely affected by coronavirus (COVID-19). Under the CJRS, UK employers with a PAYE payroll scheme as at 28 February 2020 will be able to ‘furlough’ employees (ie place them on leave of absence) and claim from HMRC a grant of 80% of their monthly wage cost, up to a maximum of £2,500, plus the associated employer National Insurance Contributions and minimum automatic enrolment employer pension contributions. The guidance states that the CJRS will cover employees who have been on the payroll since 28 February 2020 on any type of contract, including full-time and part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts. The scheme will cover employees who have been made redundant since 28 February, provided they are re-hired and then furloughed.

Employers will need either a contractual right or the employee’s agreement in order to place an employee on furlough and pay them at the reduced rate or will risk claims from employees; however, lack of consent will not prevent the employer accessing the CJRS.

Employees who are still working but on reduced hours or pay are not covered by the scheme. However, subject to there being a minimum furlough period of 3 weeks, employers can place different groups of employees on furlough at different times; there is no requirement to place the whole workforce on furlough at the same time.

Employees who are on furlough can take part in volunteer work or training, as long as it does not provide services to or generate revenue for or on behalf of the employer.

Employers can opt to, but are not required to, top-up furloughed employees’ pay over and above the grant.

Furloughed workers’ pay can be reduced to 80%/£2,500 even if based on their normal working hours this would take them below the National Minimum Wage, but they must be paid NMW if they are required to carry out training during the furlough period.

HMRC anticipates that the scheme will be up and running by the end of April. Claims can be backdated to 1 March if applicable.

Self-employment Income Support Scheme

The Government also announced the outline of the Self-employment Income Support Scheme, which will allow self-employed people and members of partnerships to claim a taxable grant worth 80% of trading profits up to a maximum of £2,500 per month for the next 3 months.

The scheme applies to self-employed individuals or members of a partnership who:

  • have submitted an Income Tax Self-Assessment tax return for the tax year 2018-19;
  • traded in the tax year 2019-20;
  • are trading at the time of application, or would be except for COVID-19;
  • intend to continue to trade in the tax year 2020-21;
  • have lost trading/partnership trading profits due to COVID-19;
  • have trading profits of less than £50,000; and
  • receive more than half of their income from self-employment.

HMRC has extended the deadline to submit an Income Tax Self-Assessment tax return for the tax year 2018-19 to 23 April 2020.

HMRC will use data on 2018-19 returns already submitted to identify those eligible for the scheme.

Eligible individuals will receive a taxable grant which will be 80% of the average profits from the tax years (where applicable) 2016 to 2017, 2017 to 2018 and 2018 to 2019 up to a maximum of £2,500 per month for 3 months.

The grant will be paid directly in one instalment. HMRC will contact individuals who are eligible for the scheme.

In announcing the scheme, the Chancellor of the Exchequer also gave a strong indication that the Government will be revisiting the equalisation of NICs rates between the employed and self-employed, which the Government proposed but subsequently abandoned in 2018.

Relaxation of holiday carry-over rules

The Government has also announced that it will be changing the rules on carry-over of annual leave so that workers who have not taken all of their statutory annual leave entitlement due to COVID-19 will be able to carry it over into the next 2 leave years. Currently, workers are entitled to 28 days’ holiday including bank holidays each year but most of this entitlement cannot be carried between leave years, meaning workers lose their holiday if they do not take it. The Government will introduce regulations to allow up to 4 weeks of unused leave to be carried into the next 2 leave years.