Page last updated 2 November 2020
UPDATE 2 NOVEMBER 2020 - Following the Government's announcement of the second lockdown in England from 5 November 2020, the Coronavirus Job Retention Scheme has been extended until December. Details of the extended scheme can be found on a dedicated page. This page will be retained to cover the details of the scheme as it operated between 20 March and 31 October 2020.
On 20 March 2020, the Government announced the Coronavirus Job Retention Scheme ('the scheme') to provide support for employers to enable them to continue paying part of their employees’ salaries rather than lay them off. Initially running until the end of May and then June, on 12 May 2020, the Chancellor extended the scheme further. The scheme will now run for eight months until the end of October, with claims backdated to 1 March 2020.
On 29 May, further major changes to the scheme were announced. In effect there will be two schemes - the 'mark I' scheme which will run until 30 June 2020 and the 'mark II' scheme - or 'flexible furlough' - which will introduce more flexibility to help employees back into work and under which employers will be asked to contribute towards the cost of their furloughed employee's salaries to replace part of the contribution currently made by the Government.
Other related schemes
At the Summer Statement on 8 July, the Chancellor announced an incentive to retain furloughed workers in the form of the Job Retention Bonus.
Then, on 24 September, as part of the Winter Economy Plan, the Chancellor announced the Job Support Scheme. This scheme was originally scheduled to take effect from 1 November and run until 30 April 2021. The Scheme was then extended to provide different support to open and closed businesses. Following the announcements on 31 October, the start of the Job Support Scheme will be deferred until the Job Retention Scheme has closed.
When it takes effect, the Job Support Scheme will differ in a number of important ways from the Job Retention Scheme and is intended to support jobs which will be 'viable' in the long term but where demand is currently reduced such that the employee is not currently able to work their full-time hours.
Guidance on the Job Retention Scheme
To illustrate the scale of the Job Retention Scheme, the Government reported that by the end of the mark I version of the scheme on 30 June it had been used by over one million employers to protect the jobs of around 9.4 million workers at a cost of £26.5 billion.
This article covers the following topics relating to the versions of the Job Retention Scheme which ran between 20 March and 31 October 2020:
- Key Dates
- HMRC guidance and Treasury Directions
- Which employees are eligible?
- Who can be furloughed?
- For how long can staff be furloughed?
- How are employees furloughed?
- How will flexible furlough work?
- How are claims made?
- Claims under the Mark II scheme
- Can agents help their clients to claim?
- What are furloughed employees entitled to be paid?
- What do employers receive under the scheme?
- What must be reported under RTI?
- How will this be treated in the employer's business accounts?
- Checking claims
- What happens when the scheme ends?
- Working while furloughed
- Employing a furloughed worker
This scheme applies not just to employees but also to workers who are paid via PAYE. For consistency we have used the term employee throughout this note.
The key dates for changes to the scheme in the coming months are set out below.
- 10 June 2020 - In most circumstances this will be the last day on which an employee can be furloughed for the first time in order that they can complete the minimum three week period under the mark I scheme before the scheme closes to new entrants on 30 June.
- 30 June 2020 - The original 'mark I' scheme closed to new entrants.
- 1 July 2020 - The 'mark II' version of the scheme took effect. From this date, the scheme will only be available to cover the wages of employees who were furloughed at some point under the 'mark I' scheme. At the same time, employers will be able to bring back furloughed employees on a part time basis, with the furlough scheme contributing to 80% of their salary (subject to the relevant cap) for their normal hours not worked.
- 31 July 2020 - Employers claiming under the 'mark I' scheme must have completed and submitted all claims for the period to 30 June 2020.
- 1 August 2020 - From this date the scheme will no longer cover the costs of employers NIC and pension contributions on furloughed wages and employers must cover this element of the cost.
- 1 September 2020 - The Government contribution will be reduced to 70% of wages, up to a cap of £2,187.50 per month for the hours the employee does not work. Employers must make up the difference of 10% to bring furlough payments to 80% of wages (up to a cap of £2,500) for unworked hours, while continuing to meet NIC and pension contributions on furloughed wages.
- 1 October 2020 - The Government contribution will be reduced to 60% of wages, up to a cap of £1,875 per month for the hours the employee does not work. Employers must make up the difference of 20% to bring furlough payments to 80% of wages (up to a cap of £2,500) for unworked hours, while continuing to meet NIC and pension contributions for furloughed wages.
- 31 October 2020 - The scheme ends.
- 30 November 2020 - This is the deadline for claims under the scheme. After this date, employers will not be able to submit or add to any claims.
HMRC Guidance and Treasury Directions
Government guidance on the scheme is being updated regularly. There are a number of pages of guidance which can be accessed from the central landing page here.
On 3 August, the detailed guidance for the mark I version of the scheme was removed from the main collection of guidance. Details of how to access guidance for the mark I scheme in the UK Government Archive can be found here.
Specific guidance is also available on holiday entitlement and pay during coronavirus (COVID-19).
In addition to the above, a step by step guide to making a claim under the mark I scheme was published on 17 April. which was updated on 11 May 2020. Employers should always check that they are referring to the latest guidance before making a claim.
HMRC have also produced a Coronavirus Job Retention Scheme calculator which, while it does not address all situations, should help employers to calculate the amount they can claim under both versions of the scheme.
Detailed Treasury Directions for the mark I scheme were published on 15 April and 20 May. Claims made after 20 May must comply with the notes set out in the Direction of 20 May.
A further Direction covering both the mark I and mark II schemes was published on 26 June. The original scheme Directions continue to have effect but are modified by this latest Direction.
Prior to the Treasury Direction for the mark II scheme, HMRC had provided a summary factsheet of the intended policy.
If you have questions about the scheme HMRC are asking employers to look online or speak to their agent for advice and guidance in the first instance and only to contact HMRC if absolutely necessary as HMRC helplines are under a lot of pressure at the current time.
Scheme grants are not classed as state aid.
Which employers are eligible?
The scheme covers employers in business, in the public sector, Local Authorities and private individuals with staff. While designed for employers whose operations have been affected by COVID-19, it is open to all employers because all businesses will be impacted in some manner.
According to the Treasury Directions and HMRC guidance, any UK employer will be eligible if they have:
- a PAYE scheme that had been created and started by 19 March 2020,
- enrolled for PAYE online and
- a UK bank account
From 1 July there will be further restrictions on which employees can be furloughed (see below) and the number of employees that can be furloughed in any given claim period.
The number of employees on any given claim relating to periods after 1 July cannot exceed the maximum number of employees included on any claim made prior to 30 June - see below for more details.
Initially the cut-off date for having a PAYE scheme in place was 28 February 2020 - this was moved to 19 March when the first Treasury Direction was published on 15 April.
The Treasury Direction of 20 May also requires that the employer has a PAYE scheme registered with HMRC's RTI system at the time of making a claim. This suggests that if an employer lays off all their staff and winds up their payroll scheme, any scheme claims must be made before closing down their PAYE scheme.
We understand that the employer should provide details of a UK bank account which belongs to them and can accept BACs payments. As the account needs to belong to the employer it appears that employers who use a representative in the UK to make payments via the representative’s client account will not currently be able to claim.
Employers with more than one scheme must make separate claims for each scheme.
HMRC have confirmed that groups of companies who have consolidated their PAYE schemes after 28 February and transferred employees to a new PAYE scheme will be able to apply. Similarly, if an employee was transferred to a new PAYE scheme after 19 March and either the TUPE rules or business succession rules apply, then a claim should still be possible.
Who can be furloughed?
Employees under any type of contract can be furloughed as a result of circumstances relating to COVID-19 including full time and part-time employees, those on zero-hours or flexible contracts and those on agency contracts (including workers employed by umbrella companies) and limb (b) workers paid through PAYE.
To be furloughed under the mark I scheme, an employee must have been on the employer’s payroll at 19 March 2020. This is a change to earlier guidance which had set the cut-off date at 28 February 2020. In practice, this means that a payment in respect of earnings was made and notified to HMRC on a Real Time Information (RTI) submission on or before 19 March 2020. An employee or worker paid under PAYE who started after this date, or who had started but not been paid by that date, is not eligible for the scheme. This is to help reduce the risk of fraudulent claims, although it is appreciated by HMRC that some people will be adversely affected and miss out from inclusion in the scheme.
Mark II scheme
The mark I scheme closed to new entrants on 30 June 2020. From 1 July 2020, only employees who have already been furloughed under the mark I scheme can be included in the mark II scheme. Since an employee must be furloughed for a minimum of three weeks to be eligible for the scheme, this means that the final date on which an employee could be furloughed for the first time was 10 June 2020.
The only exceptions to the 10 June deadline will be employees returning from any form of parental leave (maternity, paternity, adoption or parental bereavement) after 10 June. Such individuals can be furloughed for the first time after 10 June provided that:
- The employer has previously claimed for at least one furloughed employee between 1 March and 30 June.
- The employee started their parental leave before 10 June and finished it after 10 June 2020.
- The employee was on the employer's payroll on or before 19 March and a RTI submission had been made in respect of them in 2019-20.
On 15 June the Chancellor confirmed a similar exception will also apply to reservists returning from active duty. It will be possible to furlough them for the first time after 10 June provided that their employer has already made a claim under the mark I scheme for another employee.
Even if the employee was not actually furloughed on 1 July 2020, as long as they have been furloughed at some point for the minimum three month period between 1 March and 30 June 2020, they can be re-furloughed after 1 July. This will be relevant where employers are furloughing groups of staff on rotation with one team in for three weeks before being furloughed and another team being brought back off furlough.
Foreign nationals are also eligible to be furloughed as well as all employees on all categories of visa as grants under the scheme are not counted as 'access to public funds'.
Employees recently made redundant
You can reemploy any ex-employees who had been made redundant after 28 February 2020 and put them on furlough instead. Such individuals can be reemployed after 19 March. This applies as long as the employee was on your payroll by 28 February 2020 and included in an RTI submission made on or before that date to HMRC. Once furloughed under mark I, they can continue to be furloughed under mark II.
HMRC have created a table showing to when an employee must have been employed and when an RTI submission must have been made to help determine which employees who have recently been made redundant can be included within the scheme.
Specific guidance is also available for employees on fixed term contracts which have come to an end.
Employees who are being made redundant
HMRC guidance now confirms that employers can continue to claim furlough payments for the wages of employees who are serving statutory notice periods. Grants cannot be used however to substitute redundancy payments. Where the employee is being made redundant because the employer is now insolvent, further guidance is available here.
When calculating an employee's statutory redundancy pay, employers should use their normal pay rather than the (potentially) reduced amount received under the furlough scheme. A statutory redundancy pay calculator is available on GOV.UK.
Employees on unpaid leave
If an employee started unpaid leave after 28 February 2020 then they can be furloughed instead and receive payments under the normal rules for any furloughed member of staff.
If they were on unpaid leave before 28 February 2020, then they can’t generally be furloughed until the date on which it was originally agreed or contemplated that they would return from unpaid leave. Where it was uncertain when the individual would return, but the date was dependent on a particular event or circumstance occurring, then furlough can start when that event has occurred.
Where it was agreed at some point between the start of the unpaid leave and 20 March to change the date when the unpaid leave would finish, based on the Treasury Direction of 20 May, this agreement can be taken into account when considering when the unpaid leave was intended to end.
The final date by which an employee returning from unpaid leave can be furloughed is 10 June.
Employees on sick leave, shielding or with family responsibilities
You can furlough the following employees (provided that for furlough to continue under the mark II scheme, the individual has been furloughed under the mark I scheme):
- Individuals on sick leave or isolating due to COVID-19.
- Individuals who are in a vulnerable group and who are shielding in line with Government guidance (including those who need to stay at home with an individual who is shielding).
- Employees who cannot work because they have to care for children or other family members.
There is no provision which would allow an employee who is required to shield for the first time after 10 June (for example if they receive diagnosis or start treatment after 10 June which then requires them to shield) and who has not previously been furloughed to be included in the mark II scheme.
In respect of employees on sick leave, provided that there has been a business reason to do so, HMRC guidance confirms that employees who are on sick leave are eligible to be placed on furlough (subject to the mark II rules from 1 July) - at which point they would cease to receive sick pay and receive furlough pay instead.
The Treasury Direction of 20 May says that in these circumstances, the employee and employer should agree when the period of sick leave is considered to end. If a furloughed employee becomes sick, then the employer can choose to move them to SSP and pay them according to their statutory SSP rights (in which case the employer will pay their SSP and may be entitled to a two-week rebate), or keep them on furlough at their furloughed rate. In the latter case, the employer can continue to claim support under the scheme. It is not permitted to make an SSP rebate claim and a scheme claim for the same employee for the same period of time.
Office holders and directors
We received a number of queries at the launch of the scheme from members wanting to know if company directors – particularly those running family businesses and those with personal service companies (PSCs) could be furloughed. These individuals often receive a modest salary and take the rest of their income as dividends. While some may consider themselves effectively self-employed, they are not actually self-employed from a legal perspective, and are not eligible for the Self-Employed Income Support Scheme.
On 4 April 2020, HMRC confirmed that office holders, including company directors could be furloughed and that support would be available for the PAYE (i.e. salary) element of their remuneration. There is no equivalent support for any loss of dividend income.
There are two key issues to consider before furloughing a director under the mark I scheme:
Firstly, many directors in small owner-managed businesses have their salary paid on an annual basis. The Treasury Direction of 15 April requires that, for an employee (including a director) to qualify for the scheme, they must have been on the payroll at 19 March 2020 and have received a payment in the 2019/20 tax year. This means that a payment to the director must have been notified to HMRC via RTI on or before 19 March 2020. In practice, many annual directors' salaries had not been run by that date, so these directors were unable to claim under the mark I scheme and, accordingly, could not access the mark II scheme.
Secondly, director(s) seeking furlough under the mark I scheme had to consider carefully what work they could do while on furlough, given that any company has ongoing statutory obligations with which it must comply.
Companies with two or more directors could choose to furlough some, but not all of their directors, leaving those remaining in work to carry out on their normal duties and ensure that the company’s statutory duties are complied with.
For companies with only one director (such as a PSC), or where all directors had been furloughed, the guidance permits a furloughed director to carry out particular duties to fulfil the statutory obligations they owe to their company. (In addition, the Treasury Direction of 20 May specifically allows directors to make CJRS claims and to pay salary/wages of their employees while on furlough.)
However, a furloughed director should not do more than would reasonably be judged necessary for that purpose and they shouldn’t do any work which generates a commercial revenue or provides services to their company during their furlough time. This means that furloughed directors were limited in terms of what they could do under the mark I scheme. This was challenging for some owner managed businesses who were hopeful of continuing to be able to do some work during the coming months in order to keep their business going. In this case, they had to choose between furlough pay or keeping the business going on a smaller scale.
If a director was furloughed under the mark I scheme this should have been documented. HMRC’s guidance recommends that, in addition to confirming in writing to the director concerned, that the decision was formally adopted as a decision of the company and noted in the company records.
Directors and Mark II furlough
We have requested further detailed guidance on how flexible furloughing will work for company directors from 1 July 2020 but have been advised that no further guidance for company directors will be provided and that members should use their own judgement.
While directors should be able to carry out some work for the company while also claiming some furlough support under the mark II scheme, there are likely to be significant challenges evidencing both the usual and actual hours for directors, who will not typically have been recording this sort of information.
If a director's furlough continues under mark II, further documentation will be required to confirm this decision.
An article on the mark II scheme and directors highlighting these issues was published in Accountancy Age on 14 July. (For more discussion on self-furloughing as a director under the mark I scheme, please see this article originally written for Accountancy Age.)
You can furlough apprentices in the same way as other employees. They can continue to train while on furlough, though you must make sure that they receive at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for the time they spend training. Separate guidance covers how apprenticeship learning arrangements are affected by COVID-19.
Maternity leave and other parental leave
The normal rules for maternity leave, adoption leave, paternity leave or shared parental leave will continue to apply and it will be possible claim back through the scheme for any enhanced (earnings related) payments to furloughed employees.
Care should be taken however in calculating the pay due to employees under these leave provisions. A statutory instrument was published on 25 April together with an explanatory memorandum setting out amendments to how these allowances should be calculated for employees on furlough who become eligible for one of these payments on or after 25 April 2020. The changes to the calculations are intended to ensure those on furlough who may be receiving reduced earnings do not lose out. Further clarification on some aspects is likely to be needed.
HMRC has updated its guidance as follows:
- 'Statutory Adoption Pay: employee circumstances that affect payment
- Statutory Adoption Pay: manually calculate your employee's payments
- Manually calculate your employee’s Statutory Parental Bereavement Pay
- Employee circumstances that affect payment of Statutory Parental Bereavement Pay
- Statutory Paternity Pay: manually calculate your employee’s payments
- Statutory Paternity Pay: employee circumstances that affect payment
- Work out your employee's payments for Statutory Maternity Pay
- Statutory Maternity Pay: employee circumstances that affect payment
The guidance confirms that individuals who employ staff such as nannies are also able to access the scheme and we presume this would apply to all domestic staff (cooks, cleaners, etc.) provided that the employer is operating a payroll and the furloughed worker was on the payroll by 19 March 2020 for the mark I scheme. (Again, access to the mark II scheme will depend on the employee being furloughed under the mark I scheme.
On 9 April, it was confirmed that any grant received by an employer who is an individual and not employing staff in the course of a business will not be taxable.
For how long can staff be furloughed?
Under the mark I scheme, employees must be furloughed for a minimum period of three weeks. They can be furloughed for longer periods if required and the furlough period can be extended whist the employee is on furlough.
Staff can be furloughed, return to work and then be furloughed again, but each furlough period must be for a minimum of three consecutive weeks (21 consecutive days).
As employees can be flexibly furloughed from 1 July, from that date the three week period will no longer be relevant and workers can be furloughed for any required period under the mark II scheme.
Transitioning from mark I to mark II
Where an employee is furloughed under the mark I scheme, but the three-week period required under mark I crosses the 30 June deadline and extends into July, they cannot be flexibly furloughed until they have completed their three-week period. So if they are furloughed on 22 June while still under the mark I scheme, they must stay on furlough for three continuous weeks until 12 July. They can be flexibly furloughed from that date under the mark II scheme.
(NB Any employee furloughed on 22 June must either have been furloughed previously as this is past the 10 June cut-off, or be returning from parental leave if this is the first time that they have been furloughed.)
How are employees furloughed?
Affected employees must consent to being furloughed. They must be notified in writing that they are now furloughed, and a copy of the notification should be kept for five years. HMRC guidance from 12 June now confirms that agreement from the employee does not need to be in writing. A further agreement is needed if the employee is to move from full furlough to flexible furlough.
HMRC's guidance was updated on 12 June to add that the employer must also keep records of how many hours employees work and the number of hours they are furloughed (i.e. not working). We presume this applies for the mark II flexible scheme only, although the guidance does not make this clear.
Any changes in an employee's status relating to full or flexible furlough is subject to existing employment law (including equality and discrimination law) and depending on the employment contract, may be subject to negotiation. If sufficient numbers of employees are involved, it may be necessary to engage collective consultation processes to procure agreement to changes in terms of employment. A collective agreement between an employer and a trade union is an acceptable way of confirming furlough arrangements for the scheme.
Up to 30 June 2020, while on furlough an employee must not do any work for their employer or any linked or associated organisations. If an employee is still working, even on reduced pay or hours, then the employer cannot furlough them or make a claim for their wages under the mark I scheme. HMRC will take any abuse of the scheme, such as requesting furloughed employees continue to work, very seriously. Employees can though continue to carry out training, providing such training does not make money or provide services to the employer, or any company linked or associated to their employer.
From 1 July 2020, new flexibility was introduced to allow employees to return to work on a part-time basis. Under the 'mark II' version of the scheme which applies from that date, employees will be allowed to return to work for any amount of time and on any shift patterns. While the employer must pay them their usual rate for actual hours worked, the furlough scheme can be used to provide support for the hours that they would usually have worked but are not doing.
Under the flexible scheme, during the time that they are recorded as being on furlough an employee must not do any work for their employer. Care will be needed where the employee is salaried and may be used to working beyond contracted hours in order to get work finished. For example, it may have been agreed to bring an employee back to work 3 days a week on a 7hr day. If they actually work 8 hours a day, while usually this overtime might not be paid, it appears from the guidance that the actual 8 x 3 = 24hrs worked should be taken into account in determining how many hours are furloughed.
During both mark I and mark II phases of the scheme, employees are permitted to carry out union or non-union representative duties for the purpose of individual or collective representation of employees or other workers, provided that the work done does not result in the provision of services to, or generation of revenue for, their employer or anyone associated with their employer.
It is important to note that employees retain their usual rights to Statutory Sick Pay, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments during the furlough period.
How will flexible furlough work?
Under the new scheme, employees can be brought back, with their agreement, for any pattern of part-time working. This agreement must be confirmed in writing. The employee should be paid their usual wages for hours worked (and National Minimum Wage requirements will apply) while remaining eligible for the scheme for any of their normal hours not worked.
How are claims made?
HMRC has designed a new, online portal for employers to claim under the scheme. Testing of the portal commenced on 8 April 2020 and the portal opened on 20 April.
Employers or agents making a claim need to be aware that only one claim can be made for each claim period. Claims cannot be made for overlapping periods. All employees who have been furloughed in that period must be included in the claim. These requirements apply to both mark I and mark II schemes.
Records of claims (including the amount claimed, claim period, claim reference numbers, any calculations and details of usual and actual hours worked for flexibly furloughed employees) should be kept for six years.
Claims can be made in anticipation of a payroll run, during a run or after it. If a claim is made before the payroll is run because the employer needs the monies to make the payments to employees, the employer should make the claim at least six working days before they are due to pay their employees to allow time for the funds to clear. A claim can be made up to 14 days in advance of a payment date.
There is no email confirmation of claims made so it is necessary to print the confirmation screen as proof of submission. Users also need to know that the system will 'time out' after 15 minutes of inactivity (not the 30 minutes suggested in HMRC guidance) which means that they may lose data and have to start again.
If you are missing National Insurance numbers for any of your staff, HMRC provided a further update on 22 April setting out how to deal with this issue.
There are around 600 employers who are unable to file online (either for religious reasons or disability) and are unable to claim for the scheme online who HMRC are supporting through their usual Assisted Digital channels.
Claims will be audited retrospectively and HMRC may contact employers - including by phone - to request further information about claims or any misleading information. Abuse of the scheme will be taken seriously by HMRC and HMRC can either withhold payments or seek to recover payments made outside the terms of the scheme at a later date if there is evidence of abuse.
Mark I claims
Claims for the period 1 March 2020 to 30 June 2020 under the mark I scheme must be submitted by 31 July 2020. Claims can be backdated to 1 March 2020 and will be paid by BACs into a UK bank account.
For mark I claims there is no limit on how long a claim period can be. A claim period starts on the date that the first employee was furloughed and can continue to 30 June, or be broken into multiple claims of at least three weeks. (A claim period cannot run beyond 30 June on the mark I scheme even if employees remain on furlough.)
Amending a claim
If you have made an error in a scheme claim that means you received too much money, you must pay this back to HMRC. The application system now enables claimants to tell HMRC if they have over-claimed in a previous claim, enabling HMRC to reduce the current claim to take account of a previous error. You should then keep a record of this adjustment for six years.
If you have made an error in a scheme claim and do not plan to submit further claims, you will need to contact HMRC for a payment reference number in order to pay back the overpayment. Further details available here.
The deadlines to notify HMRC and repay any over-claims are the latest of whichever date applies below:
- 90 days of receiving the CJRS money that the employer was not entitled to
- 90 days of when circumstances changed so that the employer was no longer entitled to keep the CJRS grant
- 20 October 2020 if the employer received CJRS money they were not entitled to, or if their circumstances changed, on or before 20 July.
HMRC may charge penalties if over-claims are not corrected in time. HMRC has provided a factsheet with further details.
On 3 July, new functionality was added to allow employers to delete a claim within 72 hours of submitting it, which might be helpful where an employer has spotted a mistake and needs to resubmit.
If you have under-claimed from the scheme, this cannot be corrected online and it will be necessary to contact HMRC's helpline on 0800 024 1222. The deadline for correcting under-claims for the mark I scheme was 31 July 2020.
Claims under the 'Mark II' scheme
Claims under the mark II scheme will be permitted from 1 July 2020. From that date, claims can be made for a minimum period of one week (7 calendar days) - unless claiming for the first few or last few days in a month and you have already claimed for the previous period - and claims must not overlap calendar months. This is necessary because the amount of support reduced on a monthly basis from 1 August 2020.
Claims must include all furloughed employees - whether full or flexibly furloughed - and employers should not claim for flexibly furloughed employees until their hours worked are known, otherwise the claim may have to be corrected at a later date. This may delay when an employer makes a claim in some cases so consideration needs to be given to the cash flow implications. HMRC is also asking employers to align, if possible, their claim and pay periods.
Employers will need to report both the hours worked and the usual hours that an employee would be expected to work in a claim period. The employer will be responsible for paying the wages due (plus Employers pension contributions and National Insurance contributions) for hours worked.
From 1 July, the number of employees that can be claimed in any one claim period must not exceed the maximum number of employees that were claimed for in any previous claim period. So if the employer has made three claims for the period prior to 30 June with 15, 21 and 14 employees respectively, the maximum number of employees they can include on a single claim after 1 July will be 21.
This means that if an employer has 20 staff and has been furloughing in rotation with 10 working, and 10 on furlough at any point and has made a claim every three weeks, the maximum number of previously furloughed staff on a claim is likely to have been 10. It will not be possible therefore to bring back all 20 staff on reduced hours from 1 July as only 10 staff can be included on any subsequent claim. Some form of rotation pattern (not necessarily three weekly) will therefore need to continue if there is not enough work for all 20 staff to return at once.
However, if the employer has made monthly claims instead - which would have included all 20 staff at some point - then their maximum number of furloughed staff will have been 20 and it should be possible to put all 20 staff onto flexible furlough at once, provided they agree to it.
Can agents help their clients to claim?
Agents that are authorised to act on behalf of clients for PAYE matters are able to file claims on behalf of their clients. However, file only agents (who submit RTI returns only), including Payroll Bureaus, will not be able access the service for data protection reasons.
How do agents obtain authorisation to complete a claim?
Agents who are authorised to act on behalf of clients for PAYE matters online are able to make claims. That means that they:
- are registered as an agent with HMRC and have a PAYE agent code
- have enrolled for PAYE online Services for Agents
- have been authorised to act online for their client in PAYE. This could be via an existing FBI2 form or the Online Agent Authorisation process.
If an agent is unsure of the level of authorisation they have, they should check the list of payroll clients in their agent portal. If the client is listed as 'confirmed' they can make a claim on their client's behalf. However, if they are not listed, or listed as 'limited authorisation' then the agent cannot currently claim on behalf of the client.
If an agent is registered with HMRC, but has not been authorised to act online for their clients in PAYE, they can seek authorisation to be able to act for the client.
Rather than using paper form FBI2 or the online agent authorisation process, agents can ask their clients to authorise them to act for PAYE through the client's Business Tax Account. This is a faster route to ensure the right permissions are in place.
Prior steps required:
- The client will need to have enrolled for PAYE online for employers (the issue of activation codes has now been temporarily suspended to this is instantaneous)
- The agent must also be enrolled for PAYE online services for Agents
- The agent needs to give their Agent Government Gateway ID to the client
Steps for client to authorise agent:
- The client signs into HMRC online services (their Business Tax Account)
- In their Business Tax Account, select 'Manage Account' and select the 'Add, view or change tax agent' option under the heading Tax Agents
- Select 'PAYE for employers' and click continue
- On the 'Manage who can access your taxes and schemes' page, click the 'Add an agent' link next to the service that you want to assign an agent for (e.g. PAYE)
- Enter the Agent Government Gateway ID provided to you by your agent and click continue
- Click on 'Add Agent' to confirm you want to add the selected agent
- You will receive confirmation the agent has been added on the screen
Putting in place the authorisation will enable an agent to act for the client in all PAYE matters online, not just for this scheme. So if this authorisation is intended to be specific to the scheme claim, you should advise your client to remove the agent access via the BTA once the claim is made.
HMRC is looking at ways to make third party authorisations simpler and we are awaiting further guidance.
File only agents
File only agents can help support their clients to make a claim by supplying information that they hold on employees to those clients. Businesses will need the following information on each of their furloughed employees in order to identify furloughed employees and calculate the claim amount:
- National Insurance number
- Salary, National Insurance and pension contribution information.
HMRC are anticipating that the demands for support by phone will exceed their capacity, and agents (including file only agents) are asked to help support businesses directly.
What are furloughed employees entitled to?
For each month that an employee is fully furloughed, you must pay the lower of:
- 80% of their regular wage
You can choose to pay your employee their full wage, but you are not obliged to do so.
If an employee takes leave during their furlough period, they are entitled to be paid 100% of their usual pay for that period. A claim can be made for up to 80% of the pay under the scheme but the balance must be topped up by the employer.
Where the employee is furloughed for less than a month, or is working part time, the £2,500 cap must be pro-rated accordingly.
As the employee is not working, then the amount paid under the rules above can fall below the NLW or NMW if the payment was averaged over the hours that they would have worked. However, if the employee undertakes any training during their furloughed period then they are entitled to the NLW/NMW for the time spent training. The amount paid must therefore be enough to ensure than when looking at the hours they spent training the employee has received NLW/NMW for those hours. If this is not the case, the employer should increase the payment accordingly.
From 1 July 2020, as employees can start to return to work under flexible furlough, they must be paid their usual wage for any hours that they work. For any period that they would normally work, but are instead part-furloughed and not working, they will be entitled to 80% of their wages subject to a scaled version of the monthly cap of £2,500 which will be proportional to the hours not worked.
Guidance on how to calculate the 'usual' hours worked for employees with fixed and variable hours is available on GOV.UK. For variable hours, reference will be made to hours worked in the same period in 2019-20, or the average hours worked in 2019-20.
From 1 August, the support that the scheme will provide towards that cost will reduce in stages, and employers will also need to contribute towards the cost of wages for unworked hours.
What do employers receive under the scheme?
Until the end of July 2020, employers who furlough workers will be able to claim a grant of up to £2,500 per month for the regular wage of each furloughed worker, plus the associated costs of Employer’s National Insurance contributions and the minimum employer contributions under automatic enrolment.
HMRC have published full guidance on calculating a claim under the mark I scheme and a calculator here.
From August 2020, furloughed workers should continue to receive 80% of their current salary (up to the cap of £2,500 per month if fully furloughed, or the relevant proportion of that cap if partly furloughed) for furloughed time, but employers will be asked to pay a percentage towards the salaries of furloughed staff.
Where staff remain completely furloughed, the monthly cap shown below applies. Where they are part-furloughed and partly working, the monthly cap on the furlough claim must be reduced accordingly.
|Employer NICs and pension contributions (on furloughed wages)||Yes||No||No||No|
|Furloughed wages for the fully furlouged employee||80% up to £2,500 per month||80% up to £2,500 per month||70% up to £2,187.50 per month||60% up to £1,875 per month|
|Employer NICs and pension contributions (on furloughed wages)||No||Yes||Yes||Yes|
|Furloughed wages for fully furloughed employee||No||No||10% up to £312.50||20% up to £625|
|Employee receives (if fully furloughed)||80% up to £2,500 per month||80% up to £2,500 per month||80% up to £2,500 per month||80% up to £2,500 per month|
What must be reported under RTI?
On 23 April, HMRC issued guidance on what payments to report under RTI in respect of payments made to employees under the scheme.
How will this be treated in the employers’ business accounts?
The grant received should be treated as taxable income in the business accounts. However, as it is designed to offset the allowable expenses of keeping staff on the books (who would otherwise not have been paid), the end result should be that there is no profit on which to pay tax.
For employers (such as those with domestic staff) who are not in business, it was confirmed on 9 April that the grant monies received under the scheme will not be taxable.
Draft legislation on the taxation of all coronavirus support payments, including the Coronavirus Job Retention Scheme, was published on 29 May 2020. The legislation has now been enacted and can be found in Finance Act 2020. The legislation will also allow HMRC to recover payments under the scheme which employers were not entitled to or where funds have not been used to pay furloughed employee costs.
HMRC will check claims made through the scheme. 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. HMRC issued the first batch of compliance letters to employers on 18 August.
Employees and the public have been asked to report suspected fraud in the Coronavirus Job Retention Scheme to HMRC in order to ensure that Government funds are not misused and are available to support the NHS and other Government priorities.
What happens when the scheme ends?
The scheme will run for eight months from 1 March to 31 October, with increased flexibility being introduced from 1 July. When the scheme ends - or sooner if employers cannot afford to contribute towards furlough costs - employers will need to decide whether to re-employ their furloughed workers, or consider termination at that point. The usual redundancy processes should be followed.
Working while furloughed
It was made very clear by Government and HMRC that any employees who were furloughed during the mark I version of the scheme were not allowed to undertake any work for their employer. The GOV.UK website says:
“You cannot ask your employee to do any work that:
- makes money for your organisation or any organisation linked or associated with your organisation
- provides services for your organisation or any organisation linked or associated with your organisation
They can take part in volunteer work or training.”
This position changed from 1 July 2020, when the scheme was amended to allow more flexibility. Under the mark II scheme, workers were allowed to return part-time to do some work, for which their employer would pay their usual rate while receiving support from the furlough scheme for hours not worked.
Whether the employee has been furloughed on a full or flexible basis, they should not work during furloughed hours. If they still have access to work emails, texts or phone calls, they must ensure they do not answer these. As a precautionary measure, employers should consider instructing employees to include an out of office message on emails and phones explaining they will not be carrying out any work during furloughed hours.
For employees to continue working for their employer while furloughed raises the risk of the employer being suspected of fraud and being reported to the HMRC fraud line or to the National Crime Agency. The employee may however undertake other paid work for another employer unrelated to the employer who has furloughed them.
As noted above, employees can still carry out union or non-union representative duties for the purpose of individual or collective representation of employees or other workers during their furloughed hours, provided that the work done does not result in the provision of services to, or generation of revenue for, their employer or anyone associated with their employer.
Employing a furloughed worker
Provided their existing contract allows, furloughed employees are allowed to take work with another employer during their furlough period as the Government do not wish to restrict the availability of labour during this period.
What an employee must not do, is any work that makes money for the employer who has put them on furlough or any person connected with that employer during their furloughed hours.