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Making a successful claim under the Coronavirus Job Retention Scheme
There are inconsistencies between the Government Guidance (updated on 17 April 2020) and the Treasury Direction dated 15 April 2020 additionally the guidance has been updated a number of times over the past few weeks which have clarified and changed the requirements.
We set out how to ensure your claim under the Coronavirus Job Retention Scheme is successful and in line with government rules.
How is a claim made?
- Employers are required to submit information to HMRC about employees that have been furloughed and their earnings through the new online portal. To access the system on GOV.UK employers (or their payroll agents) need a Government Gateway ID and password and an active PAYE enrolment.
- The online portal opened on 20 April 2020. The latest guidance confirms that payments will be received by employers via BACS into their nominated bank account six working days after submitting a claim.
- The Direction states that an employer and employee must have agreed in writing (which may be in electronic form such as email) that the employee will be furloughed and will cease all work. Employers need to ensure that they have written consent from all furloughed employees.
- The government has issued a guide for employers on how to make a claim.
- The government has also issues a guide explaining how to calculate the amount of the claim, although it is a fairly complicated.
Who can be included in a claim?
- Claims can be made by all UK employers that have created and started a PAYE payroll scheme on or before 19 March 2020, have enrolled for PAYE online and have a UK bank account.
- Claims can be made in respect of individuals who were on the PAYE payroll on or before 19 March 2020, and who were notified to HMRC on a real time information submission on or before 19 March 2020.
- This includes full-time and part-time employees and individuals on flexible or zero-hour contracts.
- In order to be eligible, individual employees must be furloughed for a minimum period of 3 consecutive weeks.
- Claims can only be made for employees who have been furloughed and who do not undertake any work for or on behalf of their employer or any associated or linked employer, but who have been kept on payroll.
- Employees who were on payroll (i.e. notified to HMRC on an RTI submission) on or before 19 March 2020.
- Employees who were employed as of 28 February 2020 and on payroll and made redundant or stopped working for the employer after that period and prior to 19 March 2020 can qualify for the scheme, if the employer re-employs them and puts them on furlough. This applies even if the individual is not re-employed until after 19 March 2020. It has not been made clear whether any redundancy payments or other termination payments will need to be repaid as a condition of the employee being re-hired and placed on furlough.
- Employees who started unpaid leave after 28 February 2020 can be put on furlough instead. They should then be paid at least 80% of their regular wages, up to the monthly cap of £2,500.
- Employees on sick leave or self-isolating in line with guidance will be able to get SSP (subject to eligibility). Short-term illness or self-isolation should not be a consideration in deciding whether to furlough an employee, however if an employer wants to furlough an employee for business reasons and they are currently off sick, they can do so. In that case, SSP should cease and the employee would be classed as furloughed according to the latest guidance. The guidance states, if an employee becomes sick whilst furloughed, it is up to the employer to decide whether to move them to SSP or keep them on furlough at their furloughed rate. If the employee is moved to SSP, employers can no longer claim for the furloughed salary but may qualify for the separate rebate of up to 2 weeks SSP. If they remain furloughed, employers will remain eligible for salary costs under the furlough scheme.
- Employees who are shielding (or are required to stay at home because a person in their household is shielding) in line with public health guidance can be placed on furlough.
- Employees who are unable to work because they have caring responsibilities resulting from coronavirus can be furloughed.
- Employees on maternity, paternity, adoption or shared parental leave will receive the normal statutory payments if eligible, and will not ordinarily be eligible for furlough during the period of such payments. However, if they also have an enhanced contractual entitlement, they can be furloughed and the employer can claim the enhancement back under the scheme.
- Foreign nationals working in the UK on all categories of visas can be included
- Employees who TUPE to a new employer after 19 March 2020 can be furloughed and claimed for under the scheme.
- Employees on fixed term contacts can be furloughed; their contracts can be renewed or extended during the furlough period without breaking the terms of the scheme.
- In addition to employees, the following can be furloughed, provided they are paid via PAYE:
- office holders (including company directors and salaried individuals who are directors of their own personal service company)
- salaried members of limited liability partnerships
- agency workers; and
- "limb (b) workers"
- Agency workers will need to be furloughed by the agency (or umbrella company) they are engaged by, but the guidance suggests that it would be advisable for the agency to discuss the need to furlough with any end clients involved.
- Apprentices can also be furloughed and can continue to train whilst furloughed, subject to meeting appropriate minimum wage requirements.
- Employees who were not on PAYE payroll on 19 March 2020 and who were not notified to HMRC on an RTI submission prior to that date.
- Employees who started unpaid leave on or before 28 February 2020 cannot be furloughed until the date on which it was agreed they would return from unpaid leave.
- Employees who are working on reduced hours or for reduced pay. Practically, an employer who has already introduced short-time working may wish to bring that arrangement to an end and seek to furlough a proportion of the workforce instead, thereby bringing them within the ambit of the scheme.
What costs can be claimed?
Employers can claim the lower of 80% of a furloughed employee's gross regular wage, or £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions (i.e. 3%) on that subsidised wage.
For salaried employees:
The employee’s actual salary before tax in their last pay period prior to 19 March 2020 should be used to calculate the 80%.
For employees whose pay varies:
If the employee has been employed for a full twelve months prior to the claim, the employer can claim for the higher of either:
- the same month’s earning from the previous year; or
- average monthly earnings from the 2019- 20 tax year
If the employee has been employed for less than a year, the employer can claim for an average of their monthly earnings since they started work until the date they are furloughed. If the employee has been employed for less than a month, a pro- rata for their earnings so far can be used to claim.
What information will be required to make a claim?
The guidance states that in order to claim, employers will need:
- The number of employees being furloughed
- The dates employees have been furloughed to and from
- Details of employees – the name and National Insurance Number of each furloughed employee
- Your employer PAYE scheme reference number
- Your Corporation Tax Unique Taxpayer Reference, Self-Assessment Unique Taxpayer Reference or Company Registration Number as appropriate for your entity
- Your UK bank account details
- Your organisation’s registered name
- Your organisation’s address
How to maximise the prospects of a successful claim?
Employers must ensure that they do not make fraudulent or erroneous claims. HMRC can ask employers to provide any such information as it may require at any time to establish entitlement to payment under the scheme.
The Government has indicated there will be certain safeguards, including a whistleblowing hotline for employees if they are being made to work during furlough. In such instances, claims would not be paid. The employees' guidance expressly encourages employees to report their employers if they suspect they are abusing the scheme.
The Government can retrospectively audit all aspects of the scheme with scope to claw back fraudulent or erroneous claims. Unofficial reports suggest that they could do this for up to five years. This suggests that the Government does intend to undertake some form of checks made by at least some employers, which could result in repayment on the basis of fraud or error. Fraudulent claims may even carry criminal sanctions depending on their severity.
Although there is currently no guidance on this and no mention of a financial means test, in order to verify that claims have not been made fraudulently or erroneously, the Government may request evidence that a particular business has been adversely affected by the coronavirus outbreak, that it has faced a reduction in demand and therefore work, that some of its employees have been unable to work because of matters associated with the coronavirus outbreak (such as those who are shielding, living with someone shielding or those who have caring responsibilities) if applicable, and/or that its ability to continue meeting salary costs has been compromised.
Employers should therefore keep written records of the following to be prepared in the event that their claim is selected for further scrutiny by the Government, and start collating such evidence now:
- Evidence that their business, or part of their business, had to close due to the pandemic;
- Their financial situation for the period preceding and during any period of furlough leave, and evidence that any downturn in finances is linked to the coronavirus outbreak;
- The business case for furloughing (such as a downturn in work / particular types of work)
- If applicable, evidence that certain staff were unable to work due to shielding, living with someone who is shielding or due to caring responsibilities;
- The criteria applied to the selection of particular individuals for furlough and determining the length of the furlough
- Details of how they have calculated each claim made under the scheme.
If you have further questions about furlough or the Coronavirus Job Protection Scheme contact Highfield HR on 01656 336097.