Welcome to our June 2020 newsletter and it’s another bumper edition.
On 16 June the Government published the latest furlough update confirming that approximately 9.1 million workers from 1.1 million employers are covered at a cost to date of £20.8 billion. In addition the Self-employed Income Support Scheme has seen 2.6 million claims made, at a cost of £7.6 billion. That works out at £2,285 per worker and £2,923 per self-employed person. The discrepancy is accountable to self-employed claims being made on a three-monthly basis as opposed to the monthly claims for PAYE staff. 251,000 VAT payments have been deferred with a cumulative value of £22.4 billion.
As at 14 June 49,257 CBILS loans had been approved (from 96,492 applications), with an overall value of £10.11 billion. 279 of 661 large company CBILS loans have been approved with a value of £1.77 billion and there have been 863,584 bounce back loans approved with a value of £26.34 billion.
Changes to the furlough scheme
Perhaps the biggest change which is pending for SME employers is in connection with the furlough scheme. I have written here about the key changes to the scheme.
Getting staff back to work
The Law Society has issued detailed guidance about helping law firms to get staff back to work, whether in the office or at home and there is a word of warning! As mentioned in an earlier newsletter the Employment Rights Act 1996 provides protection for employees if they refuse to return to work for health and safety reasons. This is a protected right under section 100(1) of the Act so there is no qualifying period of employment for protection under the Act and the potential compensation is uncapped. An added complication is that any complaint on this basis would be a “protected disclosure” under the whistleblowing legislation, so that an affected employee could claim interim relief. Significantly:
“It does not matter what the employer’s view is, nor whether the working environment complied with health and safety standards. The fact that one employee is willing to work does not negate the belief of another that there is imminent danger. Employees do not have to consult before deciding that a workplace is unsafe to gain protection.”
Government guidance has made clear that there is a serious and imminent threat unless employers take appropriate action. As the guidance says:
“The best way to minimise the risks of falling foul of sections 44 and 100 [of the Act] is to observe health and safety laws, including the government’s guidance on providing a safe workplace and communicate to your workforce how you’re doing this.”
COVID-19 workplace assessments
You will probably know by now that all workplaces need to conduct a comprehensive COVID-19 assessment and document the steps that they have taken to minimise the risks. As a minimum, to guard against such claims, employers will need to have a fully documented COVID-19 policy which demonstrates that appropriate steps have been taken. Just as I’ve been typing this letter, news has emerged of an outbreak at the 2 Sisters chicken factory in Llangefni on Anglesey in which 158 of the 400 tested employees have returned positive results. The processing plant supplies foods to KFC and supermarkets including Marks & Spencer, Aldi, Asda, Co-op, Morrisons, Sainsburys, Tesco and Waitrose. Other outbreaks at meat processing plants have been reported across the UK and a similar factory in Germany has now produced over 1500 positive results, contributing to a leap in the R rate to 2.88, which is close to an uncontrolled spread of the virus. Because these factories operate in a chilled air environment, experts have pointed out that this is an indicator that the virus thrives in cold and damp conditions and this could be an ominous warning for what is to come in the autumn and winter, unless progress is made with a vaccine in the meantime.
Here is guidance from the HSE which includes a very useful risk assessment template and here’s a sample workplace risk assessment document from HSE Northern Ireland. If you are looking for a more detailed version, this one has been issued by the Chartered Institute for Personnel and Development.
As linked above, the best guidance that I have found yet has been issued by The Law Society, but bear in mind that this is subject to the ever-changing overall Government advice.
You may also receive advice from your insurer. For example, this is the guidance that we have received from A J Gallagher.
Working from home
It’s also notable that 50% of lawyers and business services staff want to work permanently from home, according to research conducted by law blog RollOnFriday.
You may have been thinking, as I have, what are the tax implications of employees working from home. Here’s a summary:
- Mobiles and SIM cards If you provide a mobile and SIM without a restriction on private use and limited to one per employee, they are non-taxable
- Broadband If the employee already pays for broadband, no additional expenses can be claimed. However, if not already available, the broadband fee can be reimbursed and is non-taxable (as long as private use is limited).
- Laptops, tablets, computers and office supplies If they are used mainly for business purposes they are non-taxable.
- Office equipment If necessary and agreed in advance, this is non-taxable as long as there is no significant private use.
- Additional electricity, heating and broadband charges can be claimed for up to £6 per week.
As a reminder, the approved mileage rate for use of an employee’s own vehicle is 45p/mile up to 10,000 miles and 25p/mile thereafter.
You can also claim as an expense the cost of using your home as an office. The flat rates under the simplified scheme are:
- 25-50 hours per month – £10
- 51-100 hours per month – £18
- 101 and more hours per month – £26
Another issue which has emerged is that a survey has shown that 34% of furloughed employees have been asked by their employer to carry out what has become known as “furlough fraud” by carrying out normal duties while furloughed. This is a ticking bomb because although the scheme was set up very quickly, HMRC made clear from the start that records must be kept for six years and there’s no doubt that there will be a clawback. Just one infringement will result in all furlough payments to all employees becoming repayable, plus penalties, let alone the reputational damage. The message is clear: proceed with extreme caution and play by the rules! The Government position is similarly clear: this is a fraud and will be treated as such. In the last few days the Government has announced that there is a 30-day window to confess any transgressions. It’s reasonable to assume that, after that, the penalties will be severe.
The record keeping requirements are as follows. You must keep a copy of all records for six years, including:
- the amount claimed and the claim period for each employee
- the claim reference number for your records
- your calculations in case HMRC needs more information about your claim
- usual hours worked, including any calculations that were required, for employees who are flexibly furloughed
- actual hours worked for employees who are flexibly furloughed
Deferred VAT payments
For those of you who have deferred VAT payments the Government has confirmed that this option will close on 30 June. This means you can only defer quarterly and monthly VAT returns for February, March and April, payments on account due between 20 March and 30 June and annual accounting advance payments due between 20 March and 30 June. Any repayments will not be offset against any deferred VAT, but will be against existing debts. All VAT payments after the deferral period will need to be paid as normal.
The return of employment tribunal fees
In the midst of everything, the Government is considering the reintroduction of employment tribunal fees (reported in The Times on 15 June). The Law Commission has been asked to provide a “provide recommendations for creating a coherent system for charging and updating fees in the future”. Fees were abolished as the result of one of the most important Supreme Court decisions in recent years. A significant feature of the new proposals is that employers may also have to pay a fee when filing their response to claims. Meanwhile, it has been reported in the Financial Times that parties to employment tribunal proceedings are facing delays of up to two years, a backlog that is only likely to increase with the expected surge in claims related to redundancies as the furlough scheme is wound down.
IR35 rollout coming in 2021
From 6 April 2021 medium and large private sector businesses will become responsible for administering the IR35 status of any contractors that they use. The off-payroll working rules can apply if a contractor provides their services through a limited company or another intermediary. The rules are intended to ensure that workers, who would have been an employee if they provided services directly to the client, pay broadly the same tax and National Insurance contributions as employees. As the law stands it is up to public sector clients to decide the employment status of such workers, while it is up to the intermediaries (e.g. the personal service company) in the private sector. From April 2021 it will be for all public sector and medium and large private sector clients to decide if the rules apply. Medium and large sector businesses are those which meet at least two of: £10.2 million turnover, £5.1 million balance sheet or more than 50 employees. The proposals have faced vigorous opposition in Parliament but were confirmed in the Committee stage of the Finance Bill on 18 June.