Whiting & Partners
Payroll Newsletter - September 2020
Changes to the Coronavirus Job Retention Scheme (CJRS)
As of 1st September 2020 the government contributions for furloughed pay will be cut to 70% with a cap of £2,187.50. Employers will be required to pay 10% of furloughed pay to be capped at £2,500.
From 1st October 2020 Government contributions will fall to 60% capped at £1,875. Employers will be required to make up the additional 20% to a cap of £2,500.
For both September and October employers will have to pay employer NI and pension contributions as normal. The CJRS will come to an end on 31st October 2020.
Job Retention Bonus Scheme
This is a one-off payment of £1000 for every previously furloughed employee if they are still employed at the end of January next year. As announced by Chancellor Rishi Sunak, in order to continue to support jobs by encouraging and helping employers to retain as many employees who were previously furloughed.
Eligible employees must earn at least £520 a month on average between 1st November 2020 and 31st January 2021.
Employers will be able to claim the bonus after they have filed PAYE for January and payments will be made to employers from February 2021.
We will update you nearer the time, once HMRC have confirmed the process for claiming the bonus.
Redundancy Pay & Payment in lieu of notice (PILON)
With Covid-19 showing no real signs of disappearing from our shores and the likelihood of furlough payments coming to an end for the majority of companies, an increase in the number of redundancies is to be expected
An employee is entitled to redundancy pay if they have been working for their current employer for 2 years or more. If an employee has been paid less due to being on furlough, ensure the redundancy pay is calculated on what they would have earned before this. Redundancy pay is calculated based on an employee’s normal weekly pay capped at £538.00 & the maximum statutory redundancy pay you can get is £16,140. As an employer you can enhance this payment up to a maximum of £30,000 before tax is applied.
Payment in lieu of notice (PILON)
Along with redundancy pay, your employer should either:
Pay you as normal through your notice period
Make a payment in lieu of notice (PILON)
A payment in lieu of notice is made if employment is ended without notice and is included in your contract. This means your employer will pay you instead of giving you a notice period. You will receive the normal pay you would have during the notice period, including benefits such as pension contributions.
An employer can still offer a payment in lieu of notice if it is not in the employee’s contract, but should be agreed, in writing, between the employer and employee.
The following are the minimum notice periods for the length of employment:
1 month to 2 years – 1 week
2 years to 12 years – 1 week for each year you have worked
12 years or more – 12 weeks
Please note that an employee’s contract may specify a different amount of notice to the statutory minimums. This is known as “contractual notice”. An employer cannot give the employee less than the statutory minimum but can give more.
Changes to Off-Payroll working for intermediaries
Intermediaries (normally limited companies) tend to be a worker’s personal service company, quite often termed a contractor. From April 2021 all public sector client & medium to large-sized private sector clients will be responsible for deciding a worker’s employment status as opposed to the contractor stipulating the basis for their employment. The changes were meant to be introduced in April 2020 but were deferred due to Covid-19. If a contractor is deemed an employee, then PAYE is raised in the usual way.
Student Loan Changes from April 2021
The repayment thresholds for Student Loan 1 & Student Loan 2 will increase by 3% & 2.7% respectively. There will be no changes to the threshold for Postgraduate loans. The repayment rate for both student loan types remains at 9% on earnings above the threshold. Whilst the repayment level for postgrad loans will remain at 6% on earnings above the threshold.
Student Loan 1 threshold increases from £19,390 to £19,895
Student Loan 2 threshold increases from £26,575 to £27,295
Postgraduate loan threshold remains at £21,000
April 2021 will also see the introduction of Student Loan 4 for students who take out a loan in Scotland. The threshold will be set at £25,000, but it has to be confirmed what the percentage repayment figure will be.
Changes to VAT in the CIS Scheme
HMRC originally wanted to introduce a “VAT reverse charge” for construction services, from 1 October 2019. However, this implementation has been delayed until 1 October 2020.
The reverse charge is a change to how VAT is collected within the building and construction industry. Any construction transactions made from 1 October 2020, where the reverse charge applies, customers (contractors) and not suppliers (subcontractors) account to HMRC for the VAT due. Essentially, customers will now pay the VAT directly to HMRC instead of their suppliers.
The reverse charge will only apply if both:-
The customer and supplier are registered for VAT
The payments have to be reported through CIS, whether gross or under deduction of tax
N.B. If either the customer or supplier are not registered for VAT the status quo remains.
Payrolling of benefits
If you want to payroll any employee benefits rather than record the information on a P11D, you need to register your request with the HMRC Payrolling Benefits in Kind online service before the start of the new tax year. The cash equivalent of the employees’ benefit will be added to your employees’ pay and the tax will be collected through the payroll. HMRC will make sure that the value of the benefit is not included in your employees’ tax codes. You can only payroll benefits once HMRC has given authorisation. HMRC must know in advance which benefits are being payrolled & which employees are affected.
Fuel Rates From September 2020
HMRC have updated the latest company car advisory fuel rates. These rates apply from 1 September 2020.
The guidance states that you can use either the previous or current rates, for up to one month from the date the new rules apply.
The new rates per mile are below:
1400cc or less
1401cc to 2000cc
1600cc or less
1601cc to 2000cc
The advisory electricity rate for fully electric cars is 4 pence per mile. Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates.