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Treasury Direction to HMRC regarding the Coronavirus Job Retention Scheme


Thursday, April 16, 2020

Yesterday (15th April 2020) the Treasury issued a Direction to HMRC regarding operation of the Coronavirus Job Retention Scheme (CJRS) under the auspices of the Coronavirus Act 2020. The Direction (perhaps) gives us the final guidance on how the scheme will operate and any changes are likely to be minimal (we hope).

Here is a brief summary of the Treasury Direction and how it is different from the previous Government guidance we have received so far.

Firstly employees are now eligible to be furloughed if they were on their employer’s payroll on or before 19th March 2020 (not 28 February 2020 as previously announced). This means therefore that those who started jobs between 28 February and 19 March now qualify for the scheme. It is anticipated that this applies to approximately 200,000 employees.

The scheme is open to those employees who furloughed by reason of circumstances of coronavirus or the coronavirus disease itself.

Directors, who wish to be furloughed, can only undertake duties or other obligations arising from an Act of Parliament relating to filing of company accounts or provision of other information relating to the administration of the company. They can do no other work than this. They must not provide services to the company and must not generate revenue for the company.

The Direction states that Employees must agree in writing that they will cease all work in relation to their employment (or employment with linked companies). This is why Furlough agreements are an absolute necessity. Implied consent is not enough. Employers, who have relied on implied consent so far, should write out again to their employees seeking written agreement that they will not perform any work for their employer during furlough leave and preferably also seek written confirmation that they have not done any work since being placed on furlough leave. This can and should be done by email as soon as possible. Records of the employees’ written agreement must then be kept for 5 years.

In terms of how employers calculate employees’ wages for recoupment under the CJRS, the Direction provides that the calculation is based on regular salary or wages but doesn’t include and performance-related or discretionary bonuses. So for example whilst a shift attendance allowance would be included in the calculation, a shift performance bonus would not be included.

The Direction provides that employers cannot claim for salary that is conditional on any matter but they can claim for any earnings they reasonably expect to be paid. This means that those employers who furloughed their employees and said we will only pay you furlough pay if we can recoup it from HMRC will be unable to claim. Their employees will be entitled to full pay from the employer but the employer will not be able to recoup that or a percentage of that from HMRC (and if it does so, it is likely that it will have to repay it and may possibly also face criminal sanctions if audited by HMRC at a later date). This is in contrast to those employers who simply deferred payment of salaries until they receive monies from HMRC under the scheme.

Unhelpfully the Direction is silent on annual leave.

The Direction can be found here.


Tomorrow at 2 pm (Friday 17th April 2020) sees Robert Gibson host a 1-hour webinar with NE1 in which attendees can ask questions. Do sign up!

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