UK: 17 April updated HMRC guidance on Coronavirus Job Retention Scheme

HMRC has this evening published a fifth update to their guidance for employers and the guidance for employees on the Coronavirus Job Retention Scheme (CJRS), as well as a Step-by-step guide for employers on making a claim.  There is also a new guide on making a claim under the Coronavirus Statutory Sick Pay Rebate Scheme (only available to employers with fewer than 250 employees on 28 February 2020).

Parts of the CJRS employer guidance have now been relocated to a new guide entitled Work out 80% of your employees' wages to claim through the Coronavirus Job Retention Scheme.  These include the guidance on what amounts can be included in the "reference salary" (80% of which can be claimed, subject to the cap, under the scheme), what happens after the claim is made, and the tax treatment of the grant. The new guide also contains information on how to treat grant payments in Real Time Information, lots of examples showing how to calculate the claim in various scenarios, and information on how much can be claimed for National Insurance and pension contributions.  A calculator will be available from 20 April to assist employers.  A key point to note is that employers must claim for all employees in each claim period at one time – they cannot make changes to the claim once submitted

This new guide finally includes some guidance on the interplay between furlough and annual leave (which is mirrored in the employee guidance).  This confirms HMRC's view that annual leave continues to accrue during furlough, including any contractual enhancement on top of the statutory entitlement (unless there is agreement to vary the contract to remove this enhancement during furlough).  The guidance states that holiday (including bank holidays) can be taken during furlough, and that the employer should pay 100% of usual (ie, pre-furlough) pay for days of annual leave (but is only able to reclaim 80%, subject to the cap, under the CJRS).  HMRC notes that "during this unprecedented time, we are keeping the policy on holiday pay during furlough under review".

The new guide also makes clear that, when calculating furlough pay for salaried employees returning from unpaid parental leave, sick leave, unpaid sabbatical or other unpaid leave, the reference salary should be based on the normal salary before that leave (in the same way as for those returning from paid family-related statutory leave).

The key changes to the employer guidance on the CJRS include:

• The extension of the scheme until the end of June is confirmed.
• New text emphasises that HMRC will check claims made through the scheme and that payments may be withheld or need to be repaid in full to HMRC if the claim is based on dishonest or inaccurate information or found to be fraudulent.  The guidance stresses that dishonest or deliberately fraudulent claims "put our essential public services and the protection of livelihoods at risk during these challenging times". It also notes that an online portal has been created for employees and the public to report suspected fraud.  Similar additions have been made to the employee guidance, which states that the scheme is part of a collective effort to protect people's jobs and urges employees to report abuses (such as the employer not paying monies claimed under the scheme to the employee, asking employees to work whilst on furlough, or making a backdated claim to include periods when an employee was working).
• The guidance clarifies that claims for employees who have been rehired following ceasing work after 28 February can only be made for the period from the date on which they are furloughed through the scheme (ie, this cannot be backdated to cover the period when they were not employed by the employer).
• Where fixed-term employees are furloughed, their contracts can be renewed or extended without breaking the terms of the scheme.  The guidance emphasises that this can only be done before the contract would otherwise have ended (although immediately before would suffice).
• Where agency workers are furloughed, the prohibition on working for the employer during furlough is clarified to prohibit work for the agency's clients where this is through or on behalf of the agency.
• The guidance on recording the terms of furlough has been amended seemingly in response to concerns over a new requirement set out in the Schedule to the 15 April Treasury Direction (which provides the legal framework for the scheme) but not reflected in earlier versions of the guidance. The Schedule provides that for claims to be paid under the CJRS, there needs to be a written agreement between employer and employee that the employee will cease all work in relation to their employment during furlough (see our blog post here).  Earlier versions of the guidance only required employers to confirm in writing to their employees that they have been furloughed. The latest version has been updated to provide: "To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS. There needs to be a written record, but the employee does not have to provide a written response."  This would mean that a written agreement is not needed for the CJRS if placing the employee on furlough was not a variation of the employment contract (perhaps where the furlough was on 100% salary and benefits, or where the employer is exercising a pre-existing contractual right not to provide the employee with work and pay).  However, employers who unilaterally notified employees that they were being furloughed, possibly obtaining an acknowledgement of receipt, or asking for agreement to a reduction to 80% salary but not obtaining agreement that the employee will cease all work, remain at risk of the HMRC requiring repayment of grants made for those employees. Commentators have suggested that those employers may have a credible judicial review claim against the Treasury and/or HMRC on the basis that they should be entitled to rely on the earlier versions of the guidance, at least in relation to those already put on furlough and up to the point of the Schedule being released. It would, however, seem prudent to now put in place furlough agreements as soon as reasonably practicable given the revised guidance.
• There is clarification that the records employers are required to keep should include records of the amount claimed for each furloughed employee and the period for which each employee is furloughed and a claim made under the scheme.

Our briefing on the CJRS will be updated to reflect the latest guidance shortly.