UK: 9 April update to HMRC guidance on Coronavirus Job Retention Scheme

HMRC published an update to its guidance on the Coronavirus Job Retention Scheme yesterday evening (9 April).  The changes do not include any text setting out HMRC's position on the interaction between holiday and furlough, suggesting that further changes may be expected next week.  Acas has also made minor updates to its holiday guidance once again.

Changes to HMRC Guidance for employers

• The guidance now expressly provides that an employer can furlough and claim for staff transferred to it under TUPE or PAYE business succession rules after 28 February (despite this meaning they do not satisfy the 28 February payroll cut-off).  The same applies where a group of companies have multiple PAYE schemes and the employees are transferred into a new consolidated PAYE scheme after 28 February.
• The position for those on statutory sick pay has changed.  The guidance makes clear that furlough should not be used specifically for the purpose of covering COVID-19 related sickness.  However, "if employers want to furlough employees for business reasons" they can choose to furlough employees (which will normally require employee agreement) even if they are currently off sick.  If they do so, the employees should be taken off sick pay and paid in the same way as other furloughed employees. The same applies to employees on long-term sick leave.  An employer can choose whether to keep employees on sick leave (and potentially reclaim SSP if a small employer, but no claim can be made under the furlough scheme) or offer to furlough them (and reclaim the capped 80% furlough pay). Of course, where an employee is entitled to full contractual sick pay but would be on a reduced salary if furloughed, obtaining employee consent to furlough may be an issue.  [The guidance suggests that shielding employees might be entitled to SSP.  This was incorrect at the time the guidance was published, but the omission has been made good by amendments to SSP legislation made on 15 April which came into force on 16 April.  These extend SSP to individuals defined in public health guidance as extremely vulnerable and at very high risk of severe illness from coronavirus because of an underlying health condition; and who have been advised, by notification sent to, or in respect of, that person in accordance with that guidance, to follow rigorously shielding measures for the period specified in the notification.]

The same applies to employees already on furlough who become sick: the employer can decide whether to move them onto SSP (and potentially reclaim this if a small employer) or keep them furloughed (on furlough pay or the same rate as SSP if greater) and reclaim the capped 80% furlough pay.  Contractual sick pay rights might also need to be considered, save as varied by the agreed furlough terms.

• The guidance is amended to provide that employees unable to work because they are shielding in line with government guidance, or staying home with someone shielding, can be furloughed, without needing to show that they would otherwise have been made redundant - this proviso has been removed.
• The prohibition during furlough of work for or on behalf of the employer has been expressly extended to prohibit work for or on behalf of any linked or associated organisation (this was already stated in the employee guidance).
• A new section notes that, for employees without variable pay who have returned from statutory family-related leave or sick leave after 28 February, the reference salary for furlough purposes should be their normal gross salary and not the pay they received while on leave.  For returning employees whose pay varies, the reference pay is to be calculated in the same way as for other employees with variable pay (using either the earnings from the same month the previous year or the average monthly earnings for the 2019-2020 tax year).
• There is clarification that scheme grants in respect of employer pension contributions in scope must be paid into a pension scheme for the relevant employee as an employer contribution.
• While on furlough, the employee’s wage will be subject to usual income tax and other deductions.  However, the updated guidance clarifies that the capped 80% furlough pay must be paid to the employee without deduction for administrative charges, fees or other costs in connection with the employment.
• There is clarification that where there is a salary sacrifice scheme, the grant (which will be based on the post-sacrifice salary) must be paid to the employee in money and cannot be used to pay for the provision of any benefits provided through salary sacrifice schemes (including pension contributions).  An employer would therefore need to continue to provide these benefits (including the increased pension contribution due to salary-sacrifice) at its own expense unless other arrangements are agreed as part of the furlough agreement.  The guidance already noted that salary sacrifice arrangements can be changed in recognition of COVID-19 being a 'life event'.

Also note that on 9 April the Pensions Regulator issued guidance for employers on Automatic enrolment and pension contributions. This notes that employers paying more than the statutory minimum employer contribution (which will be the case where they use salary sacrifice on pension contributions) may struggle in the current circumstances and sets out a list of issues to take into account when considering reducing employer contributions.  The Regulator will be adding to the guidance next week (beginning 14 April).

• The guidance now clarifies that grants under the scheme are not counted as "access to public funds" and that employees on all categories of visa can be furloughed.
• A new section deals with contractors with public sector engagements in scope of IR35
• Additions have been made to the list of information required to claim to include: National Insurance Numbers, names and payroll/works numbers for the furloughed employees, and the employer's Unique Taxpayer Reference or Company Registration Number.  The guidance also confirms that an agent authorised to act for an employer for PAYE purposes can made a claim under the scheme for the employer; a file only agent cannot.

Changes to HMRC Guidance for employees

Changes are made consistently with the employer guidance update.  In addition, the latest version of the employee guidance notes that, while employees can be furloughed by more than one employer, if an employee has had multiple employers over the past year and only worked for one at a time, they can only be furloughed by their current employer and not by any of the previous employers.

Acas guidance on holidays and furlough

Acas's view is that holiday can be taken during furlough but, if it is, it must be paid at the full (pre-furlough) pay rate.  The latest changes to the guidance are minor.  The guidance  notes that the new right to carry over 4 weeks' statutory holiday for two leave years may be used where the individual does not take their leave due to self-isolation or sickness or where they have had to continue working.  It no longer states that the same would apply where an employee "needs" to carry it over due to being furloughed, instead stating that furloughed employees "may be able" to carry it over if they cannot "reasonably use" their entitlement in the holiday year.  This is more consistent with the idea that holiday can in principle be taken during furlough.  The drafting on bank holidays has also been tightened to make clear that employers can require employees to take paid holiday on a bank holiday unless they are off sick, and employees can ask to take the bank holiday days as holiday.

Of course Acas's interpretation of the scheme does not bind the HMRC when it comes to determining how much it will reimburse.  It is hoped that HMRC will add a section on holidays in the next iteration of their guidance.