U.K. taxpayers eligible for the self-employment income support scheme (SEISS) will be able to claim a second grant in August, while changes to the coronavirus job retention scheme (CJRS) will take effect in July.
HM Revenue & Customs published a technical consultation on draft legislation on the taxation of COVID-19 support payments on May 29, as Chancellor of the Exchequer Rishi Sunak outlined the changes during a Downing Street briefing. “We are introducing a new, more flexible furlough. This is a critical part of our plan to kickstart the economy,” he said.
CJRS to Support Part-Time Work
“The furlough and self-employment schemes have been a lifeline for millions of people and businesses,” Sunak said in an HM Treasury release.
The CJRS has helped 1 million employers across the United Kingdom to furlough 8.4 million jobs. It will remain open until the end of October, Sunak announced on May 12.
Employers will be able to bring employees furloughed under the CJRS back to work part time in July, but from August a new taper system will require employers to contribute to furloughed salaries. The scheme will close to new entrants on June 30, and claims from July onward will be restricted to employers currently using the scheme and previously furloughed employees. Firms will decide on hours and shift patterns for employees returning to work in July, and will be responsible for paying their wages while they are in work, Treasury said.
For June and July the government will continue to pay 80 percent of wages up to a cap of £2,500 a month, as well as employers’ National Insurance contributions (NICs) and pension contributions. In the following months, businesses will be asked to “contribute a modest share,” according to the release. Employees will continue to receive 80 percent of wages covering the time they are unable to work, Treasury added.
For August the government will still pay 80 percent of wages up to a cap of £2,500, but employers will pay the related NICs and pension contributions. For September the government will pay 70 percent of wages up to a cap of £2,190, while employers will pay the NICs, pension contributions, and 10 percent of wages “to make up [the] 80 percent total up to a cap of £2,500,” Treasury noted.
For October the government will pay 60 percent of wages up to a cap of £1,875, while employers will pay the NICs, pension contributions, and 20 percent of wages “to make up [the] 80 percent total up to a cap of £2,500,” Treasury said, adding that for many employers, the NICs will be covered by the employment allowance.
“Employers will be required to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked. Employees who believe they are not getting their 80 percent share can also report any concerns to the HMRC fraud hotline. HMRC will not hesitate to take action against those found to be abusing the scheme,” Treasury added.
Second and Final Grant for the Self-Employed
Those eligible for the SEISS will be able to claim a second and final grant in August, worth 70 percent of average monthly trading profits, and covering three months’ worth of profits calculated on that basis. The grant will be capped at £6,570 in total, Treasury said. The scheme has attracted 2.3 million claims, worth £6.8 billion, so far.
Eligible individuals who have not yet claimed the first grant — worth 80 percent of average monthly trading profits, covering three months’ worth of profits, and capped at £7,500 — may do so by July 13.
The conditions are “the same for both grants,” but further guidance on the second grant will be published on June 12, Treasury said. Claimants will need to confirm that their business “has been adversely affected” by the coronavirus, it said, adding that some businesses may only have been adversely affected in “this second phase.”
Treasury set out further details of the schemes in a new fact sheet. HMRC’s consultation on the draft legislation, which also sets out powers for HMRC to recover support payments, closes on June 12.
Publish the Evidence, Shadow Chancellor Says
“It is welcome that the government has heeded Labour’s calls for a more gradual introduction of the employer contribution to furlough, the introduction of flexibility within furlough to allow part-time working, and the extension of the self-employed scheme,” said Labour’s Shadow Chancellor of the Exchequer Anneliese Dodds.
But Dodds expressed concern that there is “no commitment” for support to be scaled back in line with the removal of lockdown. “Nor is there any analysis of the impact on unemployment of a ‘one size fits all’ approach being adopted across all sectors. The chancellor must publish the evidence behind these decisions to provide reassurance that his proposals won’t cause an additional spike in unemployment, and an even more difficult economic recovery from this crisis,” she said.
“The chancellor has given thousands of small business owners the certainty they need to plan for the coming months,” Mike Cherry, national chair of the Federation of Small Businesses, said in a statement. “We’ve always said that extending the CJRS and making it more flexible would be key to getting the economy back on its feet.”
Five million self-employed people will be “greatly relieved to know that the income cliff-edge they were facing” has been removed, and the hope is that more sole traders will be able to return to work safely as restrictions are eased, Cherry said. But he called for more to be done to help the newly self-employed and others, including limited company directors, who are “excluded from the SEISS.”
“At the moment, groups like freelancers working through limited companies and the newly self-employed have patently been forgotten. We urge the government to consider these groups and help them through the coming months,” said Andy Chamberlain, director of policy at IPSE, the Association of Independent Professionals and the Self-Employed.
The changes will help ensure that the schemes “stay effective as we begin a cautious recovery,” Carolyn Fairbairn, director general at the Confederation of British Industry, said in a statement. “Introducing part-time furloughing as more stores and factories start to open will help employees to return to work gradually and safely. Many more businesses will feel supported during this vital restart phase,” she said.
“Firms understand that the [CJRS] must close to new entrants at some point, and that those using it in future will need to make a contribution to help manage the costs. However, previously viable firms not able to open until later, particularly in leisure, hospitality, and the creative industries, may need further assistance in the coming months,” Fairbairn said.