Accountants welcome CJRS update

HMRC’s updated Coronavirus Job Retention Scheme (CJRS) has been welcomed by accountants as it offers a transparent brief on claimants’ eligibility – particularly furloughed workers and the amount employers can claim to cover.

“The CJRS is a positive measure allowing businesses to retain talent and reduce costs, while also guaranteeing a level of income for furloughed workers. Some smaller businesses are concerned that the scheme will cost them more than making redundancies, however HMRC will pay the employers’ NIC and minimum automatic employer pension contributions,” says Melissa Geiger, head of international tax at KPMG.

“It makes it a far better alternative to redundancy for all parties, but it is a huge task to implement, and it’s no surprise that there is some confusion over who can benefit.”

The government has aimed to provide further clarity through the guidance’s revised version in light of recent criticism.

Caroline Harwood, partner at Crowe, welcomes the detailed information provided by HMRC.

“As many employers look to the CJRS for support in keeping their workforce during the pandemic, many practical questions have arisen which were not addressed in the original guidance,” she says.

“The original guidance was issued very quickly and was, inevitably, high level. However, as businesses identified which employees they needed to furlough and tried to budget for the amount of their claims, difficulties arose when considering if particular workers qualified and which elements of differing pay structures could be included in a claim.”

Starting March 1, the scheme set will last three months – but could be extended.

HMRC states that any employee owning a UK bank account and on a PAYE payroll on or before February 28, 2020 on any type of employment contract, as well as fixed term, can be eligible for the claim. This includes:

• Apprentices – if paid at least Apprenticeship minimal wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW).
• Shielding employees – if shielding in line with public health guidance if unable to work from home or would be made redundant.
• Employees with caring responsibilities – if unable to work due to caring responsibilities caused by coronavirus

The revised guidance from HMRC particularly addresses detailed clarification on furlough workers who are not considered employees but can be eligible for the scheme, such as:

• Office holders – requires to be agreed between office holder and party who operates PAYE on income
• Salaried members of Limited Liability Partnerships (LLPs)
• Agency workers
• Limb workers
• Company directors

Foreign nationals are also eligible claimants.

HMRC offers separate guidance for contingent workers in the private sector impacted by the pandemic.

If employees are self-isolating or on sick leave, they must refer to the Statutory Sick Pay.

Additional rules

HMRC states that furloughed employees can pursue voluntary work under the condition that it does not, in any case, generate revenue on behalf of the organisation. An employee’s training can also be continued under the same rule.

For parental leave and pay, normal rules apply – meaning they can claim through the scheme for enhanced contractual pay.

Employees having more than one job are also eligible to be furloughed for both or one whilst continuing the other.

If an employee’s pay varies and has been employed for 12 months or more, the employer can claim the highest of the same month’s earning from the 2019-2020 tax year, or the average of the monthly earnings from that year. If employed for less than that period, employers need to claim 80 percent of their monthly earnings since their start date.

HMRC informs what employers cannot claim for, including:

• Additional NI or pension contributions due to topping up employee’s salary
• Any pensions contributions made above compulsory employer contribution

Harwood believes rules regarding pensions schemes remain unclear.

“Some areas which have been concerning employers remain unanswered, such as the impact on pension schemes if contributions are reduced.  It is clear the funding will not cover any amount over the mandatory minimum employer contribution and businesses are advised to discuss their concerns with their pensions advisers,” she says.

“More questions will arise as claims as are made but the revised guidance gives us a clear picture of what the government is trying to achieve which will help frame a pragmatic view on any areas which remain uncertain.”

To proceed the claim, HMRC stresses that employers must confirm to their employee that they have been furloughed, in writing. Any employee is required to be furloughed for a minimum of three consecutive weeks.

Once checked and accepted, the claim will be paid by BACS to a UK bank account.