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Sunak Extends U.K. Furlough Scheme as Restrictions Continue

Posted on Apr. 20, 2020

The U.K. government will extend its coronavirus job retention scheme (CJRS) to the end of June, Chancellor of the Exchequer Rishi Sunak announced after social distancing measures were retained for at least a further three weeks.

HM Revenue & Customs expects to launch the CJRS on April 20. Employers can claim a grant covering 80 percent of a furloughed employee’s wages subject to a cap of £2,500 a month, Treasury noted in an April 17 release. The scheme was initially set to be open for three months to the end of May. HMRC published guidance on calculating CJRS grants later on April 17.

“It is the right decision to extend the furlough scheme for a month to the end of June to provide clarity” following the announcement that current public health measures must remain in place, Sunak said. “It is vital for people’s livelihoods that the U.K. economy gets up and running again when it is safe to do so, and I will continue to review the scheme so it is supporting our recovery.”

“The very clear advice we have received is that any change to our social distancing measures now would risk a significant increase in the spread of the virus. That would threaten a second peak of the virus, and substantially increase the number of deaths,” Foreign Secretary Dominic Raab said at an April 16 press conference. “It would undo the progress made to date, and as a result, would require an even longer period of the more restrictive social distancing measures. So early relaxation would do more damage to the economy over a longer period.”

HM Treasury said future decisions on the CJRS will take into account “further developments on the wider measures to reduce the spread of coronavirus, as well as the responsible management of the public finances.”

“This extension means that firms will no longer be forced to issue redundancy notices over the next few  days to comply with 45-day consultation requirements, and can instead return to focusing on protecting jobs and their businesses,” the Confederation of British Industry said in a statement.

“This common-sense move will provide many with the support they need to protect livelihoods as lockdown continues,” said Adam Marshall, director general of the British Chambers of Commerce. “With applications for the scheme opening on Monday, and April’s payday fast approaching, it is essential that payments are made as soon as possible. Any delay would exacerbate the cash crisis many firms are facing and could threaten jobs and businesses.”

“Extending the retention scheme will provide a real lifeline for small employers — giving them space to plan ahead in the knowledge that government support will be there for another month,” Mike Cherry, national chair of the Federation of Small Businesses, said.

“With revenues drying up completely over the past three weeks, thousands of small employers have had to pay March’s payroll out of their own pockets. With April’s payday fast approaching, it’s critical that the job retention scheme is firing on all cylinders when it launches on Monday,” Cherry added. “The retention scheme must pay out swiftly. Until now, the only means to easing the cash flow crunch for many small firms has been the, to date, lackluster coronavirus business interruption loan initiative. Small business all over the country are on the brink today. They need cash now.”

Revised Cutoff Date

A revised payroll cutoff date of March 19 — the day before the CJRS was announced — will benefit more than 200,000 employees, Treasury estimated in an April 15 release. Individuals originally had to be employed on February 28 to “protect against fraudulent claims,” it said.

The change makes the CJRS more generous while “keeping the substantial fraud risks under control,” Treasury said. HMRC updated its detailed guidance for employers and employees on April 15. Sunak made a direction under Coronavirus Act 2020 setting out the legal framework for the CJRS, Treasury announced.

But tax professionals pointed out that not all workers engaged before the new date will qualify. In an April 17 release, the Low Incomes Tax Reform Group (LITRG) pointed out that while more employees will receive support, the new requirement is that “the employee must have been notified to HMRC through a real-time information (RTI) submission notifying payment in respect of that employee on or before 19 March 2020.”

LITRG said there was concern that the February 28 cutoff would exclude people who started work in February but were not paid until after the end of the month. Those who started a new job in March were also excluded.

Employers use the RTI system to send pay and tax information to HMRC, and must usually do this on or before an employee’s pay date, LITRG noted. The change means that people who started work in March and are paid weekly are now likely to be covered by the CJRS, but some new employees who are paid monthly may be excluded, it said.

Other possible solutions include “asking your old employer (where you were still with them as at February 28) to put you back on their payroll and furlough you,” or claiming welfare benefits, LITRG added.

Newly Self-Employed Excluded

More than 150,000 people have become continuously self-employed since April 2019, meaning that they are not eligible for the self-employment income support scheme, according to the Office for National Statistics (ONS). The figure represents 3 percent of “all self-employed people in the United Kingdom,” it said in an April 17 release.

The ONS counts sole directors of limited companies as self-employed for this purpose, on the basis that “self-employed people are those who define themselves as working for themselves, rather than receiving a wage or salary from an employer.” Directors are excluded from the scheme because they are not self-employed, but they may be eligible for the furlough scheme.

The ONS said it may be underestimating the number of newly self-employed people because its figures cover the period January to December 2019.

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