COVID-19
Knowledgebase

Duncan & Toplis is here to help and support you through the ongoing challenges presented by the coronavirus pandemic. Whilst this is an anxious time for many, it’s important to know that there is help available.

We are summarising the measures, including eligibility requirements, as they are announced and all details can be found here in our COVID-19 Knowledgebase.

Coronavirus Job Retention Scheme and annual payroll schemes: An open letter to Rishi Sunak

Nicholas Smith, director and head of tax

Dear Chancellor of the Exchequer

Coronavirus Job Retention Scheme
Annual payroll schemes

The Coronavirus Job Retention Scheme (CJRS) has proved to be a useful and effective measure to enable employers to protect the jobs of their workers while reducing their cost during a time of worldwide crisis. We, on behalf of our clients are impressed with the speed at which this was introduced and the successful handling of claims by HM Revenue & Customs (HMRC).

However, we would like to draw your attention to an issue which we consider to be manifestly unfair.

To date, we have helped approximately 500 of the companies we support across the East Midlands and elsewhere in the UK to access the CJRS support, with over £8m having been received to support their employees. Sadly, a small proportion of our clients are unable to access this grant funding due to circumstances which are beyond their control.

In order to make a claim under CJRS, there needs to have been a payroll Full Payment Submission (FPS) under Real Time Information (RTI) for an employee between 6 April 2019 and 19 March 2020. For some of our clients, employees are paid on an annual basis and if this happens to be paid after 19 March each year, it means they cannot access the CJRS grant funding.

Meanwhile where workers have annual payments made prior to that date (for instance, 18 March), companies can access the funding.

We consider this anomaly to be unjust and we would urge you to take action to rectify this situation.

While we can see that the legislation has been written to prevent small businesses from manipulating an annual payment by making it higher than would normally be the case, we suggest changing this with anti-avoidance measures in place taking an average of, for example, the previous two years to prevent this. This would be similar to the rules for the Self-Employment Income Support Scheme (SEISS).

We believe that this change would resolve the issue and give a fairer outcome. It would be just as effective in preventing manipulation and it would allow CJRS claims for all annual payroll schemes where employees were employed prior to 19 March 2020.

Indeed, in spite of the legislation, this was the guidance that HMRC was originally giving in respect of annual payroll schemes. This guidance remained unchanged until mid-May, one month after the legislation had been issued.

When the HMRC portal for claims was opened, we found our claims were being rejected but on two separate occasions we were assured by senior HMRC officers that it was a ‘glitch’ within the system and annual payroll schemes would be permitted to claim with the provision of a workaround solution.

When the HMRC guidance was changed in mid-May, it meant that those for whom their annual 2019/20 payroll submissions were not made before 19 March were excluded from the furlough grant scheme. This affected many of our clients as we process most of our annual payrolls on 31 March each year.

While we approve of measures which aim to prevent fraud, it is our view that this is manifestly unfair and was a retrospective change. The change has unfairly disadvantaged a considerable number of businesses which have complied with their legislative requirements within the correct timescales and which have done nothing untoward. We have raised this with HMRC but so far to no avail.

We urge you to address this matter urgently to ensure that businesses which have been unfairly affected by this may receive the support to which they should be entitled.

As you are aware, the impact of the coronavirus pandemic has been devastating for many businesses, making governmental support essential and we would be happy to assist you in this matter.

Yours sincerely,

Nicholas Smith
Head of Tax
For, and on behalf of, Duncan & Toplis

 

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Payroll, COVID-19