The Government has released additional guidance on the Coronavirus Job Retention Scheme (JRS) in the form of a Direction to HMRC.
We have previously advised on the JRS and you can read our advice here. The full Direction can be found here but the major changes and clarifications are set out below.
The government claims portal opened on 20th April and a link can be found here. They have committed to making payments within 6 working days of a claim being submitted.
Duration of the scheme
The government announced on Friday 17th April that the JRS has been extended from the original end date of 31st May to 30th June. This will be welcome news for employers that might otherwise have had to start a 45 day consultation period if employees were to be made redundant with effect from 31st May.
Change to the 28 February date
- The qualifying date, which is the date when the employee has to have been on the employer’s payroll, has changed from 28 February 2020 to 19 March 2020. This will come as welcome news to a significant number of people who previously fell outside of the JRS because they had recently changed jobs.
Reason for Furlough
- The JRS is not limited to where the employer would otherwise have made redundancies but applies to anyone furloughed “…by reason of circumstances as a result of the coronavirus or coronavirus disease”.
- A director who has been furloughed will only be able to undertake work to fulfil a duty or other obligation arising by or under an Act of Parliament relating to the filing of company accounts or provision of other information relating to the administration of the director’s company.
Agreement in Writing
- To claim furlough, an employee must have been instructed by their employer to cease all work in relation to their employment and this must have been agreed in writing. This may be in an electronic form, such as an email. This may mean that employees who have already been furloughed without agreement may not currently be eligible for the JRS and employers that this affects should seek to put an agreement in place now; previous guidance suggested that the furlough period could be backdated to the date the employee stopped working (1st March 2020 at the earliest) and not when the agreement was reached, so we expect that if agreement is reached now the whole period spent on furlough will be covered by the JRS grant.
- An employer cannot claim for any salary or wages which are “conditional on any matter”. This may include salary payments which the parties have agreed are conditional on the JRS scheme paying out, however this is not completely clear. Regular salary or wages will also exclude any performance related bonus or discretionary payments, any conditional payments and any non-financial benefits.
- An employer can claim for earnings “reasonably expected to be paid” to the employee. This appears to cover deferred earnings, such as those deferred until the Scheme pays out (as distinct from being conditional).
- If an employee is on sick leave such that SSP is or could have been paid at the time that the employer decides to seek agreement to furlough, that employee cannot be furloughed until that period of receipt of SSP has ended. At that point they can be furloughed. If they become sick during furlough the Direction from HMRC states that “any subsequent entitlement to SSP by virtue of the employee becoming unfit for work again… must be disregarded”; this suggests that the employee would remain on furlough. If the employer decides to put them on SSP instead of furlough, that will ‘end’ that furlough period and care must be taken that this does not impact on the three week minimum period of furlough, resulting in the entitlement to the grant for that furlough period being lost.
- Employers can claim employer pension contributions that are paid on the subsidised furlough pay, up to the level of the minimum automatic enrolment employer contribution ‘amount allowable’. The ‘amount allowable’ will be the lower of (i) the contribution paid by the employer to the pension scheme during furlough and (ii) 3% of earnings which are more than the lower limit for qualified earnings under the Pensions Act 2008 but not more than the amount the employer can claim under the JRS for ‘wages’. This means that some employers may find that their minimum pension contributions cannot be reclaimed in full under the JRS.
Benefits in kind
- The reference salary on which the scheme grant value is calculated does not include the value of non-cash benefits in kind, including those received under salary sacrifice. Benefits in kind remain fully taxable whilst an employee is furloughed unless the benefit is no longer received by the employee. Consequently the cost of the benefit, along with the Class 1A employer’s national insurance, will continue to be a expense for the employer. In the case of company cars there may be an opportunity for the employer’s NIC cost to be reduced if the vehicle is no longer available to the employee. The tax rules in this area are extremely strict – please contact us if you are interested in details of how this could work in practice.
Should you want to discuss any of the above please get in-touch with your usual contact at Claritas Tax. Alternatively you can follow our updates on LinkedIn – Here