Furlough Update

Furlough Update

This should hopefully be a final update, as at 15th April 2020, but we cannot rule out further changes or updates.

 

The government has issued their Direction to HMRC regarding the Coronavirus Job Retention Scheme, which should be the definitive document setting out the rules of the Scheme. However, it is possible that further guidance or an amended Direction is issued.

This article highlights what has been clarified or changed from previous guidance.

 

Who is eligible?

The biggest change is that those who were on payroll from 19 March 2020 onwards (as opposed to 28 February 2020) are eligible for furlough. Being “on payroll” means that they are registered on HMRC’s real time information system for PAYE.

Just as it was possible to back date claims for furlough to 1 March where employees had been sent home without work, it will be possible to back date claims for employees who started on or after 19 March, provided they have also been sent home without work.

 

Agreement to be furloughed

Whereas the guidance referred to written notification of furlough which must kept for 5 years, the Direction states that the employer and employee must have agreed in writing that the employee will cease all work.

If you have not sought agreement from employees to be furloughed but simply given them written notification of furlough, you should as a matter of urgency require their written consent.

 

What can be claimed?

The guidance had previously made clear that discretionary payments, such as discretionary bonuses or tips are not included. This is confirmed by the Direction, which states that when calculating what is claimed, employers must only take account of an employee’s “regular salary or wages”.

This means that any conditional payments are not included. This is likely to cause problems for any employer who has agreed to make payment to the employee, on the condition they receive payment from the Scheme.

However, if the employer has simply said that they will pay the employee when they receive payment from the Scheme, that is simply a deferred payment.

 

Directors

It remains the case that directors can be furloughed and can perform their statutory duties. The Direction defines those duties very narrowly as being either carrying out a legal duty in relation to the filing of company accounts, or providing information in connection with the administration of the company.

This means that, as per our previous update, checking the bank account and signing off auditor’s activities would be acceptable but carrying out any wider duties, such as contacting a client, would not.

 

Holidays

Unfortunately, the Direction does not mention holiday, meaning the position is no clearer. Therefore, it remains our view that there is a risk that holiday may break the 3 week furlough period.

 

End of the Scheme

When the Scheme was announced, the Government said that it would run from 1 March to 31 May. It is possible that it may be extended but the Direction confirms that, currently, this is the duration of the Scheme.

 

The actual Direction to HMRC can be read HERE. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/879484/200414_CJRS_DIRECTION_-_33_FINAL_Signed.pdf

 

 

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