CJRS Guide for Non-Trading Companies

The Coronavirus Job Retention Scheme (CJRS) has been a critical support mechanism for businesses during the pandemic, including non-trading companies. These entities, which typically do not engage in regular trade or services, face unique challenges and opportunities under this scheme.

Understanding how CJRS can be leveraged by non-trading companies is essential for maintaining financial stability and compliance with regulatory requirements. This guide provides an overview of navigating these waters effectively.

Eligibility Criteria for Non-Trading Companies

Non-trading companies, which typically include entities such as holding companies or dormant companies, must meet specific criteria to qualify for the Coronavirus Job Retention Scheme (CJRS). First and foremost, these companies must have had a PAYE payroll scheme in place on or before a specified date, which is generally announced by the government in relation to the scheme’s application deadlines. This requirement ensures that the non-trading company was operational in a certain capacity before the onset of the pandemic.

Additionally, non-trading companies must have employees who were on their PAYE payroll on the specified date. These employees must have received earnings that were reported through the Real Time Information (RTI) reporting system of HMRC. This stipulation is designed to verify that the employees were legitimate hires and not added posthumously to exploit the financial aid provided by the CJRS.

The company must also demonstrate that the employees have been furloughed, meaning they have been asked to stop working but are kept on payroll. The furlough agreements must align with local employment law standards, ensuring that the rights of the employees are preserved during this period of non-activity. This includes formalizing the furlough status in a written agreement that is retained for a minimum period, as stipulated by HMRC guidelines.

Application Process for CJRS

The process to apply for the Coronavirus Job Retention Scheme begins with ensuring that all eligibility criteria are met. Non-trading companies must then gather pertinent employee data, including National Insurance numbers and payroll information. This data is necessary to complete the online claim form available through the Government Gateway. It is advisable for companies to use the latest payroll software that is compatible with HMRC systems to streamline this process. Examples of such software include Sage, QuickBooks, and Xero, which can help manage payroll and ensure accurate reporting.

Once the necessary information is compiled, the authorized representative of the non-trading company must log in to the HMRC online services portal. Here, they will navigate to the section dedicated to the CJRS and fill out the claim form. It is important to double-check all entries for accuracy to avoid delays or rejections. The form requires details about the furloughed employees, the claim period, and the amount being claimed. The use of HMRC’s online calculator is recommended to ascertain the correct figures for the claim, as it takes into account various factors such as salary, National Insurance contributions, and pension contributions.

After submitting the claim, the company should receive a claim reference number. It is imperative to keep a record of this number along with all other documentation related to the claim for at least six years, as per HMRC guidelines. The funds are typically paid into the nominated bank account within six working days. It is prudent for companies to monitor their bank accounts and be prepared to provide additional information to HMRC if contacted for a compliance check.

Calculation of CJRS Claims

The computation of claims under the Coronavirus Job Retention Scheme is a process that hinges on precise payroll data and adherence to the guidelines set forth by HMRC. Non-trading companies must calculate the total wage amount that can be claimed for each furloughed employee, which is subject to a cap set by the government. The calculation involves determining the employee’s usual hours and pay, along with the proportion of these that can be reclaimed through the scheme. For salaried employees, this typically involves referencing their last pay period before 19 March 2020. For those with variable pay, it is based on the higher of the same month’s earnings from the previous year or the average monthly earnings from the 2019-2020 tax year.

The CJRS allows for a portion of the employer National Insurance contributions and minimum automatic enrolment employer pension contributions to be claimed. However, these must be calculated separately from the wages. The scheme provides a maximum amount that can be claimed per employee, which has been subject to change over the course of the scheme’s existence, reflecting the evolving nature of the government’s response to the economic impact of the pandemic. Employers must subtract any amounts that they have received as a grant under the scheme from their deductible employment costs.

The intricacies of the calculation process necessitate a meticulous approach. Employers must factor in the type of contract, the length of the furlough period, and any working hours for which the employee was paid during the claim period. The use of HMRC’s CJRS calculator is highly recommended for this purpose, as it is designed to accommodate the various scenarios that may arise. This tool helps to ensure that the claim amount is accurate and compliant with the scheme’s requirements.

Tax Implications of CJRS Funds

Navigating the tax implications of the Coronavirus Job Retention Scheme (CJRS) funds is necessary for non-trading companies to maintain compliance and fiscal responsibility. The funds received from the CJRS are considered part of taxable income, and as such, they must be included in the company’s calculations for Corporation Tax. This inclusion impacts the overall tax profile of the company and requires careful accounting to ensure that all financial statements accurately reflect this additional income.

The treatment of CJRS funds extends to the preparation of financial statements. These funds should be recognized as other income or government grants depending on the accounting policies adopted by the company. It is important to consult with an accountant or financial advisor to determine the most appropriate classification according to the applicable financial reporting framework. This classification affects how the funds are presented in the financial statements and could influence financial ratios and indicators critical for stakeholders’ analysis.

For non-trading companies, the interaction between CJRS funds and other tax reliefs or allowances also warrants attention. For instance, the receipt of CJRS funds could potentially affect the eligibility for other government grants or reliefs aimed at mitigating financial distress caused by the pandemic. Companies must evaluate all potential interactions to optimize their tax position and ensure they do not inadvertently forfeit other benefits.