Job Retention Bonus policy paper published

The government has published further guidance on how the forthcoming Job Retention Bonus Scheme will operate. The scheme will enable eligible employers to claim £1,000 for each eligible employee in respect of whom they have previously made a valid claim under the Coronavirus Job Retention Scheme (CJRS) and who remains in continuous employment until at least 31 January 2021 following the closure of the CJRS on 31 October 2020.

The policy paper indicates that the one-off bonus payment is intended to provide additional support to employers who keep on their furloughed employees in “meaningful employment” after the CJRS ends and it states that further detailed guidance on the operation of the scheme will be published in September 2020.

Employers will be able to claim the bonus via GOV.UK after they have filed PAYE for January 2021 and payments will be made from February 2021. 

Employers will be able to claim for employees who:

  • were furloughed and had a CJRS claim submitted for them that meets all relevant eligibility criteria for the scheme
  • have been continuously employed by the employer from the time of the employer’s most recent claim for that employee until at least 31 January 2021
  • have been paid an average of at least £520 a month between 1 November 2020 and 31 January 2021, i.e. a total of at least £1,560 across the three months – the employee does not have to be paid £520 in each month, but must have received some earnings in each of the three calendar months that have been paid and reported to HMRC via Real Time Information (RTI), and only earnings recorded through RTI records can count towards the average minimum earnings threshold
  • are not serving a contractual or statutory notice period that started before 1 February 2021
  • have up-to-date RTI records for the period to the end of January 2021.

HMRC will withhold payment of the bonus where it believes there is a risk that CJRS claims may have been fraudulent or inflated, until the enquiry is completed.

The bonus will be taxable, so employers must include the whole amount as income when calculating the taxable profits for Corporation Tax or Self-Assessment.

Employers should now ensure that their employee records are up-to-date, including accurately reporting their employee’s details and wages on the Full Payment Submission (FPS) through the RTI reporting system. They should also ensure all their CJRS claims have been accurately submitted and that any necessary amendments have been notified to HMRC.

£50m extra funding for Customs Intermediary Grant Scheme

Over the past few months, HMRC has unveiled a package of measures to accelerate the growth of the UK's customs intermediary sector. These announcements included £50 million of new funding to support businesses with recruitment, training and supplying IT equipment to handle customs declarations as the transition period comes to an end on 31 December 2020.

The application process for the £50 million of additional funding opened on 29 July 2020. HMRC, which is running the scheme, is encouraging customs intermediaries (including customs brokers, freight forwarders and express parcel operators) and traders who make their own declarations to take advantage of the funding now. Grants will be issued on a first come, first served basis. Applications will close on 30 June 2021, or earlier if all funding is allocated.

The grant can be used to cover salary costs for new or redeployed staff, up to a limit of £12,000 per person and £3,000 to meet recruitment costs for new employees. This will help businesses recruit new staff and train them ahead of July 2021, when all traders moving goods will have to make declarations.

Prior to the launch of this additional £50 million of funding, HMRC has already invested £34 million which has been used to fund more than 20,000 training courses, nearly 15,000 units of IT and the recruitment of almost 600 new customs agents.

The government also intends to change rules which will remove the financial liability from intermediaries operating on behalf of their clients and to allow parcel operators to continue declaring multiple consignments in a single customs declaration.

Renewing your MOT

Vehicle owners with a MOT expiry date between 30 March 2020 and 31 July 2020 were given a 6 month extension. This measure was designed to help motorists as the Coronavirus pandemic began to take hold. Mandatory MOT tests for car, motorcycle and van owners in England, Scotland and Wales were reintroduced from 1 August 2020. This means that any driver whose vehicle is due for an MOT test from 1 August 2020 is required to get a test certificate as normal in order to continue driving their vehicle.

The Driver and Vehicle Standards Agency (DVSA) has issued a timely press release encouraging drivers whose MOT is due this autumn to get their vehicle’s MOT done as soon as possible in order to beat the expected rush for tests. This is because vehicles that were given an extension and those that would normally be due their MOT will both need to be tested.

The DVSA is predicting that September, October and November 2020 are likely to be very busy months for MOT centres. If your MOT is due in September, you can get it done in August (up to a month minus a day before its due) and keep your renewal date. You cannot use your vehicle if your MOT runs out and there are fines of up to £1,000 for driving without a valid MOT.

It is also important to remember that vehicles must be kept roadworthy even if the MOT date has been extended. If you are not using your car, you can register your vehicle as off the road by obtaining a statutory off road notification (SORN). This will see any remaining full months of vehicle tax refunded and you could also look into cancelling your car insurance (with a SORN). The rules are different in Northern Ireland where a phased return to MOT testing is underway.

Advice for early years sector

The Competition and Markets Authority (CMA) launched a COVID-19 taskforce back in March 2020 to identify any commercial practices that adversely affect consumers and to consider appropriate responses to help businesses comply with the law and protect consumers' rights.

One of the areas where the CMA received reports of unfair practices concerned the early years sector (nurseries and childcare providers). The main areas of concern related to payments and cancellations in the context of COVID-19 lockdown restrictions. This prompted the publication of a statement by the CMA on 30 April 2020, on how the law applies to consumer contracts, refunds and cancellations. On 28 July 2020, the CMA published an open letter.

The letter does not introduce any new laws but does set out in detail how the current law applies in the present circumstances. The CMA was clear that the vast majority of providers were striving to reach fair arrangements.

However, the CMA identified the following three main problem areas:

  1. Providers requiring full or excessively large fees for services which are not being carried out due to the pandemic public health restrictions and government guidance.
  2. Providers relying on unfair cancellation terms, such as requiring unreasonable notice to be given, or high cancellation fees in cases where the business is unable to provide the service.
  3. Providers putting unfair pressure on consumers to agree to make payments by threatening that the child’s place will be lost or the provider will go out of business.

The CMA’s view is that consumers should not have to pay for services that cannot be provided and should also be offered a refund where services are paid for in advance but do not take place as agreed in the contract. In addition, contract terms requiring consumers to pay providers who are not providing the services agreed in the contract are likely to be unfair and unenforceable.

The letter confirms that the CMA will not be taking any action against the early years sector at this stage but will continue to monitor the sector. For the time being, the CMA is asking providers to consider their contracts and arrangements with consumers and take any necessary steps to ensure they comply with the law. Individual consumers will, of course, still have the option of pursuing a claim against businesses for alleged breaches of consumer law.

Breaking even

There are businesses that have benefitted from the current COVID disruption. Particularly, those that can deliver goods and services online.

There are far more that have not benefitted.

Before COVID-19 reared its disruptive head businesses were exhorted to make profits. This was the way most firms created surplus cash-flow and value in their businesses.

Since the initial, national lock-down – March 2020 – profitability has been the experience of the few rather than the many.

Government grants, and in particular the furlough scheme, have enabled businesses to mothball activity and keep some semblance of financial credibility. But for a significant number of firms, making profits has been replaced by strategies to minimise losses.

Government backed loan schemes with favourable interest and repayment terms have provided liquidity, but at some future date, borrowers will need to repay loans and absorb interest charges.

Presently, businesses will need to manage a sustained period of loss making to ensure they do not drift into insolvency. Realistically, they will need to plan to at least breakeven – cover their costs – in order to halt any decline in net assets.

Breakeven turnover – the level at which costs are covered – is a fairly easy figure to calculate, but unfortunately, this indicator will need to be exceeded if and when you have to make repayment of loans or create additional working capital.

Again, these options need to be considered in some detail. Planning is key. If you have concerns about your longer term ability to breakeven please call, we can help you crunch the numbers and consider your options.