Job Retention Bonus comes with strings attached

ON 5 NOVEMBER 2020 THE JOB RETENTION BONUS WAS SCRAPPED

Further guidance has been published on the Job Retention Bonus (and its local lockdown extension) that is payable in February 2021 to employers who have retained their previously furloughed staff.

As the Coronavirus Job Retention Scheme, or Furlough scheme as it has become more commonly known, ends on 31 October 2020, the government is offering to pay employers a £1,000 bonus for every furloughed employee that is brought back into meaningful continuous employment until 31 January 2021.

The money is an incentive for employers and does not have to be paid to the employee, although some employers may choose to do so. Some larger companies have said they will not claim the bonus.

Eligible employers can claim the bonus between 15 February 2021 and 31 March 2021 via an online application, the details for which will be published by 31 January 2021.

Who can claim

Any employer can claim the bonus where they have furloughed employees and made an eligible claim for them through the furlough scheme.

A claim can still be made for the bonus if a claim is also made for that employee through the Job Support Scheme.

Furlough scheme grants repaid to HMRC

The bonus cannot be claimed for an employee where the furlough scheme grant was repaid, regardless of the reason for the repayment.

Employees that can be claimed for

Employees can be claimed for where:

• an eligible claim was made for them under the furlough scheme
• they were continuously employed from the end of the claim period of the last furlough scheme claim made for them until 31 January 2021
• they are not serving a contractual or statutory notice period for on 31 January 2021 (this includes people serving notice of retirement)
• they were paid enough in each relevant tax month and enough to meet the Job Retention Bonus minimum income threshold

Even if HMRC is in the process of checking an employer's furlough scheme claims, that employer can still claim the Job Retention Bonus, but the payment may be delayed until those checks are completed.

HMRC will not pay the bonus where an incorrect furlough scheme claim was made and the employee was not eligible for the scheme.

Employees who have been transferred under TUPE or due to a change in ownership

An employer may be able to claim the bonus for employees of a previous business which were transferred to it if::

• TUPE rules applied
• the PAYE business succession rules applied
• the employees were associated with the transfer of a business from the liquidator of a company in compulsory liquidation where TUPE would have applied if the company was not in compulsory liquidation

To claim the Job Retention Bonus for employees that have been transferred, the transferee employer must have furloughed and successfully claimed for them under the furlough scheme, as their new employer. The employees must also meet all the relevant eligibility criteria for the Job Retention Bonus.

This means that the employer will not be able to claim the bonus for any employees who were transferred after the furlough scheme ends on 31 October 2020.

Claiming for an individual who’s not an employee

The bonus can be claimed for individuals who are not employees, such as office holders or agency workers, as long as a grant was claimed for them under the furlough scheme and the other bonus eligibility criteria are met.

The minimum income threshold

To be eligible for the bonus the employer must make sure that the employees have been paid at least the minimum income threshold.

To meet the minimum income threshold, the employee must be paid a total of at least £1,560 (gross) throughout the tax months:

• 6 November to 5 December 2020
• 6 December 2020 to 5 January 2021
• 6 January to 5 February 2021

The employee must be paid at least one payment of taxable earnings (of any amount) in each of the relevant tax months.

The minimum income threshold criteria apply regardless of:

• how often the employees are paid
• any circumstances that may have reduced the employee’s pay in the relevant tax periods, such as being on statutory leave or unpaid leave

HMRC will check that employees have been paid at least the minimum income threshold by checking information submitted through Full Payment Submissions via Real Time Information (RTI).

What payments are included in the minimum income threshold

Only payments recorded as taxable pay will count towards the minimum income threshold. Taxable pay is reported to HMRC as a single figure through Full Payment Submissions via RTI.

HMRC has provided examples of employees and the minimum income threshold.

Redundancies

Where redundancies are being made, the employer must comply with the normal rules for redundancy, which include using fair redundancy criteria. These rules apply even if this means that fewer of the employees are eligible for the bonus.

Get ready to claim

The bonus cannot be claimed until 15 February 2021.

HMRC will provide guidance before the end of January 2021 on how to access the online claim service on GOV.UK.

Before the bonus can be claimed, the employer will need to have reported all payments made to the employee between 6 November 2020 and 5 February 2021 to HMRC through RTI.

Steps that can be taken to be ready to claim.

The employer must:

• still be enrolled for PAYE online
• comply with all PAYE obligations to file PAYE accurately and on time under RTI reporting for all employees between 6 April 2020 and 5 February 2021
• keep the payroll up to date and make sure a report is made of the leaving date for any employees that stop working before the end of the pay period in which they leave
• use the irregular payment pattern indicator in RTI for any employees not being paid regularly
• comply with all requests from HMRC to provide any employee data for past furlough scheme claims

Using an agent to do PAYE online and claim the Job Retention Bonus

Where an agent is used who is authorised to do PAYE online for the employer, they will be able to claim the bonus on the employer's behalf..

Tax treatment of the Job Retention Bonus

Payments received under the scheme must be included in the employer's calculation of taxable profits.

Businesses can deduct employment costs as normal when calculating those profits.

Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) will not have to pay tax on grants received under the scheme.

When the government ends the scheme

Employers will have until 31 March 2021 to make a bonus claim, after which the scheme will close. No further claims will be accepted by HMRC after this date.