There have now been 4 updates to HMRC’s guidance on the Coronavirus Job Retention Scheme (CJRS), first published on 26 March 2020.

Updates were published on:

Cintra recognises that this has caused significant confusion for employers, just as much as it has for us.  We have always advocated following HMRC’s original guidance in good faith, given that it was this guidance that led to mass furloughing of employees across the United Kingdom.

However, the latest guidance update was also accompanied by the legislation in the form of a ‘Direction’ made by the Chancellor of the Exchequer.  Whilst we cannot guarantee that there will not be any more changes to the guidance, the publication of the legislation indicates that there will not be.

Thankfully, the changes are small but important and, at this busy time, we will try to be as brief as possible explaining the changes:

 Which employers?

Previous guidance indicated that employers must have ‘created and started a PAYE payroll scheme on or before 28 February 2020’.  That has changed to:

‘Created and started a PAYE payroll scheme on or before 19 March 2020’

This is welcome news as it brings on board many new employers that may have set-up since the original date, only to face disruption when the Prime Minister Boris Johnson made a television address to the nation on 23 March 2020, announcing a ‘lockdown’ taking effect the next day.

Why the 19th of March?  Possibly because this is the day before the Chancellor of the Exchequer announced the creation of the CJRS to help employers.

Which employees?

Previous guidance said ‘You can only claim for furloughed employees that were on your PAYE payroll on or before 28 February 2020’.  That has changed to:

You can only claim for furloughed employees that were on your PAYE payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before 19 March 2020.This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020

There is also the changed wording about re-hiring ex-employees or those that may have been made redundant:

Employees that were employed as of 28 February 2020 and on payroll (i.e. notified to HMRC on an RTI submission on or before 28 February) and were made redundant or stopped working for the employer after that and prior to 19 March 2020, can also qualify for the scheme if the employer re-employs them and puts them on furlough

The 19 March 2020 date must reflect the fact that this is the day before the announcement of the CJRS to help employers and employees.

This is significant as it brings more employees into the group that can be furloughed and placed on furlough leave.  For example, new employees on a weekly, fortnightly or lunar payroll that would not have met the 28 February 2020 criterion but do meet the 19 March 2020 one such as:

The new starter on a payroll that pays in arrears, say the week 24 February to 01 March 2020 that paid on 06 March 2020.  This new starter would not have been on the FPS to create an employment record on or before 28 February 2020 but would have been on the FPS to create an employment record if it was submitted on or before 19 March 2020

The vitally important things to remember is that HMRC’s future compliance regime will rely on an employer grant reclaim matching with an employee that was on a RTI submission (the Full Payment Submission (FPS)) on or before 19 March 2020.  It is the FPS that establishes the employment record on HMRC’s systems.

If the employment record for an employee was not created via the FPS on or before 19 March 2020 and the employee was not paid, these employees can be furloughed but the employer cannot make a claim for a grant from HMRC for their employment costs.

Of course, whilst more employees become eligible for the scheme, there are still some that are missed and this is hugely regrettable.  We imagine that this will possibly fall more heavily on employers that pay monthly, for example:

The new starter on, say, 24 February 2020 who missed the payroll cut-off for that month – a common and frequent occurrence.  These would normally have been paid with backpay in March 2020.  If they were paid and a FPS sent on or before 19 March 2020, they can be furloughed and the employer can reclaim a grant from HMRC.  If they were paid after 19 March 2020 and furloughed (in good faith by the employer), no grant can be claimed from HMRC

Which salary?

Previous guidance said ‘Claim for the 80% of the employee’s salary, as of 28 February 2020, before tax’.  This has now changed to:

Claim for the 80% of the employee’s salary, as in their last pay period prior to 19 March 2020.

If, based on previous guidance, you have calculated your claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020) you can choose to still use this calculation for your first claim.

This potentially changes the salary that a furloughed employee can receive.  However, the salary that is actually paid will have been contractually-agreed between employee (now furloughed) and employer.  This does not have to change unless there is another contractual agreement to change it.

What can change is the rate of claim from HMRC.  If the change of reference period results in a higher salary reference period, the claim can be based on this.  However, employers need to be mindful of the legislation (‘Purpose of the scheme’ 2.2) which says:

Integral to the purpose of CJRS is that the amounts paid to an employer pursuant to a claim under CJRS are only made by way of reimbursement of the expenditure

Therefore, the employer cannot claim more than the costs they are incurring.

Reclaiming

The situation is, hopefully, finalised with the publication of legislation.  We are expecting revised calculation information from HMRC’s Software Developer Support Team (SDST).

Cintra will be developing a solution to be used by clients that will enable them to make the reclaim calculations as easy as possible.  It will be based on this latest guidance.

Once this is tried and tested, we will release to clients together with guidance notes advising how clients should use this.  Our aim is to release this to clients as soon as we are sure that it is compliant with guidance and, importantly, the legislation.

We fully recognise that employers will want to make reclaims as soon as possible.

 Finally

We still very much maintain the attitude that an employer needs to be able to justify, justify and justify what they have done and why they have done it.  This is to their employees they have furloughed and later HMRC compliance.  Employers have been furloughing ever since the publication of the first guidance on 26 March 2020, believing what they were doing was in accordance with the intentions of the CJRS.

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