Coronavirus Job Retention Scheme

Grant to furlough employees

The main financial support for businesses is a grant to pay towards the cost of employees who you continue to pay even though they have been sent home without work. The HMRC portal to make claims is now open

Furlough

Background to Furloughing

The immediate effect of the lockdown was that many employees were unable to work and employers faced laying them off. As an alternative employers can claim a grant towards the salary of those who cannot work. The salary you pay is not capped but the amount reimbursed is limited to 80% of former salary or £2,500 per month - whichever is higher. Such employees are described as having been furloughed. The scheme has now been extended to end October 2020.

Furlough is a term more usual in the US. When an individual is furloughed it means that they remain an employee with all the rights and obligations attached to that under UK employment law – except that the employer will not give them any work to do and without special measures they would not receive any pay.

You can claim the grant for all employees "on your payroll" on or before 19 March 2020 - whether full-time or part-time. They must have been included on your RTI PAYE returns to HMRC made before 19 March to qualify. If they ceased to be employed after 28 February then you can take them back and furlough them and claim their salary. Staff on sickness can still be furloughed provided that the sickness was not the sole reason for the furlough. An employee who has been furloughed can be moved to Statutory Sick Pay if they become unwell. Employees who started between 1 and 19 March and who were first notified under RTI at the end of March will not qualify to be furloughed.

Latest Updates

Employers can already bring furloughed employees back to work, for either full or part time while still being able to claim for any standard hours not worked.  It has now been announced that the Coronavirus Job Retention Scheme, which supports the furloughing of staff, will be phased out and will close on 31 October 2020.  It still applies that for employers to be eligible for the grant they must pay furloughed employees at least 80% of their wages, up to a cap of £2,500 per month for the time they are being furloughed.

Where employees are only furloughed part time, then this cap is reduced in proportion.  For example, where an employee is furloughed for 40% of their normal hours, then the cap on the wages received whilst furloughed becomes £1,000 (being 40% of £2,500).

 The phased changes will happen on a monthly basis and these can be summarised as follows: 

  1. August - the only change will be that employers will pay ALL of the Employer National Insurance Contributions and Employer Pension Contributions for their employees, irrelevant of whether the employees are working or furloughed.
  2. September - the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough, with the Employers to top up the remaining 10% up to the cap of £2,500, for time they are furloughed.
  3. October - the government will pay 60% of wages up to a cap of £1,875 for the hours the employee is on furlough, with the Employers to top up the remaining 20% up to the cap of £2,500, for time they are furloughed.

 The employer can still choose to pay full salary to the employee during the furlough even though they can only claim 80% in the grant application.

 Agents will be able to process these claims on your behalf and our payroll team will be happy to undertake this on your behalf. It is likely to be more cost effective to make the claims at the same time as the payroll is being run.  

 All claims can be audited - and we anticipate that the first people to be investigated will be those where the payroll returns to HMRC differs significantly from the claims being made.

Employment Law

All employers should be aware that normal employment law applies - so any change in salary or terms must be agreed with the employee - although in practice their only alternative would be to accept redundancy. If you choose to furlough some, but not all employees then your reasons must be clear and not descriminatory. You can rotate employees onto and off furlough provided that each period of working and of furloughing is at least 3 weeks long.

The employer can choose to pay full salary to the employee during the furlough even though they can only claim 80% in the grant application.

The employer should not ask the employee to undertake any work. Better guidance has now been issued on what “should not work” means.  Any training or volunteering whilst being furloughed does not count as doing work. Using the time to acquire or expand a skill or knowledge would seem a productive way of using some of the time – but it does not seem that employers can make it a requirement. 

If the employer reduces hours or the salary of all its staff as an alternative to furloughing then no grant is payable. So many will choose to furlough people in rotation to achieve the same end result but with a higher grant claim.

It has been confirmed that time spent on furlough does accrue holiday.  The employer can require the employee to take their holiday during the period of furlough.  Any employees who have not taken all of their statutory annual leave entitlement due to COVID-19 will now be able to carry it over into the next two leave years.

Job Retention Bonus

Employers will be able to apply for a one-off bonus of £1,000 for each previously furloughed employee and company director who is still in their employment on January 31, 2021, providing that:

  • The employee was furloughed in accordance with Coronavirus Job Retention Scheme (CJRS) rules.
  •          A CJRS claim was correctly submitted for the employee.
  •         The employee has remained continuously employed by you until at least January 31, 2021.
  •          The employee has been paid an average of at least £520 per month between November 1, 2020 and January 31, 2021.
  •          The employer has accurate and up to date RTI records for the period to January 31, 2020.

 If the employee is serving our contractual notice the bonus cannot be claimed.  If a redundancy consultation is in process but no formal notice has been served, then the bonus may be claimed if the other conditions are met.

 You will be able to apply online for each £1,000 bonus.  The process will comment in February 2021.  Full details on how to submit a claim will be published at the end of September 2020.  Bonus payments can only be paid into a UK bank account.

 There is no limit on the number of job retention claims, but they must be declared as income for corporation tax or self-assessment purposes. 

Coronavirus Job Retention Scheme (CJRS) Grant Errors

The CJRS will fully close on October 31, 2020.  HMRC has confirmed that as well as seeking to recover wrongly claimed monies and imposing stiff financial penalties on employers they will also name shame deliberate defrauders.

HMRC also acknowledges that honest mistakes may have been made due to the complexity and repeated changes to CJRS.  If you have made an error and are still claiming CJRS due to employees being either fully or flexible furloughed any earlier mistakes can be corrected when you submit your next claim. You do not have to contact HMRS.

If you are no longer claiming and have previously made an error, you must notify HMRC within the notification period.  The notification period ends on the latest of:

  • 90 days after you receive the CJRS grants you were not entitled to
  • 90 days after the day circumstances changed so that you were no longer entitled to keep the CJRS grant; or
  • October 20, 2020

 It is better to act now and liaise with HMRC if necessary, to rectify errors – do not leave until the last minute.

 If a third party has been making claims on your behalf (i.e. accountant or payroll provider) you should instruct them to rectify any known errors immediately.  Ultimately, the responsibility lies with you.

 Even if you don’t think you have made any errors if it worth conducting a check of claims made.  If HMRC audits your business, you can show that you double check claims before the cut-off date.

Keep a record of your original claims (including all correspondence), your review checks and the actual calculations that were applied during the initial and review processes for a minimum of 6 years.

Directors

Initially it seemed unlikely that directors of a company - and in particular sole directors of a company could legitimately be furloughed. It is now clear that they can. Carrying out statutory duries e.g. working on the accounts will not be regarded as breaking the furlough - but any work for which an invoice might be sent will disqualify the person. The majority of Directors, who take very little salary and top up with dividends are none-the-less likely to receive very little money because of the way the rules are calculated. An annual salary of around £37,000 would be required in order for £2,500 pcm to be less than 80% of salary.

Calculation of the grant

  1. 80% of the persons stated annual salary at 28 February 2020    or
  2. Same months salary from last year    or
  3. Average so far for the 2019/20 tax year     or
  4. If only started in February 2020 - pro rata their salary paid to give a monthly equivalent and claim 80%

Include any regular payments e.g. overtime and compulsory commission but not discretionary bonus, tips or commission. Do not include benefits in kind nor any salary sacrificed.

IR35 type companies

Guidance suggests that directors of companies affected by IR35 are likely to be eligible for grants.

How to claim

HMRC released its new Portal through which a claim will be made on time on 20 April. You will need

  • your employer PAYE reference number
  • the number of employees being furloughed
  • National Insurance Numbers for the employees you want to furlough
  • Names of the employees you want to furlough
  • Payroll/works number for the employees you want to furlough
  • your Self Assessment UTR or Corporation Tax UTR or Company Registration Number
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
  • your bank account number and sort code
  • your contact name your phone number

Agents will be able to process these claims on your behalf and our payroll team will be happy to undertake this on your behalf. It is likely to be more cost effective to make the claims at the same time as the payroll is being run. 

All claims can be audited - and we anticipate that the first people to be investigated will be those where the payroll returns to HMRC differs significantly from the claims being made 

Other employments

An employee on furlough can work for another employer without affecting the employer's claim. There could be restrictions about working for a related business.

Individuals with two employments could be furloughed from both - and both employers would qualify for grant.

If you are in any doubt - please check the official government guidelines