Coronavirus job retention scheme announced

Law and Labour — Sun, 22 Mar 2020 12:27:04 +0000

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access financial support to continue paying part of their employees’ salaries for those employees who would otherwise have been laid off or made redundant during the coronavirus pandemic. The Government intends that the scheme will run for at least 3 months from 1 March 2020, but it may be extended if necessary.

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. This is broadly median national salary. Employers can choose to fund the difference between this amount and an employee’s full salary, but there is no need to do so.

All UK businesses will be eligible to participate in the scheme. This includes not only limited companies but also LLPs, partnerships and charities.

Employers will need to:

Designate affected employees as ‘furloughed workers’, and notify employees of this change. Changing the status of employees remains subject to existing employment law. This means an employer will need to agree with an employee that they’re going to become a furloughed worker and also decide upon the appropriate pay. It’s likely employees will agree to this if the alternatives are being made redundant or being sent home without pay. Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC is working urgently to set up a system for reimbursement as its existing systems are not set up to facilitate payments to employers. When the portal is set up, HMRC will set out further details on the information required.

Employees should not undertake any work for their employer while on furlough. The employee will still be eligible for additional forms of support, including Universal Credit.

We’ll update this page as further details about the scheme become available.

Photograph: “Computer on minimal desk” by Startup Stock Photos

When income tax is underpaid, who will pay?

Law and Labour — Sun, 20 Jan 2013 15:48:00 +0000

A worker’s thoughts often turn to tax in January. This is less of a consideration for those who are employed at companies that run a PAYE system as the assumption is that the employer will resolve all tax matters. However, as employees of JP Morgan recently learnt, if an employer’s tax calculations go wrong it is the employee who may feel the sting.

JP Morgan has been ordered by UK tax authorities to pay approximately £500m in underpaid taxes which it had avoided paying by using an offshore trust for employee bonuses. Thousands of current and former employees will be required to dip into their pockets to help the company pay back the vast amount owed.

The first an employee knows about an underpayment will be when he receives a tax bill from Her Majesty’s Revenue and Customs (HMRC) notifying him of an underpayment.

An underpayment of tax can occur if an employee’s income increases but he continues to pay tax at the wrong tax code. A common example is where the employee begins to receive a pension from one employer, but then starts work in a new job. An underpayment might also arise if an employee gets a company benefit, such as a car or medical insurance, and HMRC do not know about it right away.

If the underpayment is less than £3,000, then the employee can either pay back the amount owed through his tax code or make a voluntary direct payment. If it is likely the employee will struggle to pay back the underpayment, he can ask HMRC to let him spread the payments over a period of up to three years.

Of course, an employee might think that the underpayment was not his fault and feel that he should not be responsible for rectifying someone else’s mistake. If he can prove the underpayment was due to an error made by his employer, then he might avoid having to pay back the sum owed. The first step is to ask the employer to check their records to see whether they made a mistake in the handling of PAYE. Alternatively, the employee can ask HMRC to carry out an employer error enquiry.

An underpayment might also be due to HMRC failing to use information provided to it, such as details of a new job or receipt of a pension. If the employee thinks this is the reason for the underpayment, he will have to submit an Extra Statutory Concession to HMRC.

Photo: Egrien

Law and Labour » HMRC

Coronavirus job retention scheme announced

When income tax is underpaid, who will pay?