On 15 April 2020, the Treasury, in exercise of the powers conferred by sections 71 and 76 of the Coronavirus Act 2020, gave a Direction to HMRC, setting out the mechanics of the Coronavirus Job Retention Scheme (CJRS). Note, the Direction does not replace the HMRC Guidance, but a valid Direction has the standing of an Act of Parliament and is therefore subject to the usual rules of statutory interpretation. By way of background, please refer to our recent insight piece with the previous details of the Scheme and guidance for employers and employees: read here
Agreement in writing: A MAJOR change has been introduced by the Direction without warning. For an employee to be furloughed, the employee now has to have been instructed by the employer to cease all work in relation to their employment and have agreed in writing (which may be in an electronic form such as an email) that they will cease all work in relation to their employment.
The use of 'agreed in writing' is a new requirement and different from 'providing confirmation' of furlough to the employee, which is what is contained in the Guidance.
We take the view that this is something you can address now and we would encourage everyone who has already placed employees on furlough, to write to them straight away and confirm that they were already instructed not to do any work for their employer and ask them to confirm that they have agreed to this, in writing, by return.
A new qualifying date: The Treasury have decided to broaden the net in respect of which employees can qualify for the CJRS. Employees who were on the payroll of their employer on or before 19 March 2020 can now qualify for the scheme. It was previously 28 February 2020. The rationale for this change is clear – it is to bring as many employees as possible within the scope of the CJRS, whilst minimising the opportunity for fraudulent claims. The CJRS was first announced on 20 March 2020 and so only those with the power to see the future could have fraudulently added employees to payroll on 19 March, in anticipation.
However, one potential problem is that the employer must have had a PAYE scheme registered with HMRC's real time information system for PAYE and must have made an RTI submission notifying payment in respect of that employee by 19 March 2020 for them to qualify for the scheme. This could be tricky timing for some who have taken on new employees and run their payroll later in the month, so we hope this will be amended.
Furlough and sick leave: There has been a hardening of the rules here following a progressive softening under the Guidance updates over the last few weeks. The Direction is slightly tortuous in this regard, but it looks like you can furlough employees who are currently on SSP, but the furlough period will only commence at the end of the SSP period. There is no mention of how that SSP period comes to end, only that the furlough can start at the end of the SSP period. We think this is therefore designed to address the 14-day self-isolation period during which employers can reclaim SSP from the Government and that furlough in respect of such employees, can only begin after this SSP period is over. It probably also means that if someone is off sick, you can furlough them at the end of that sickness period, regardless of how the end of their sickness period is notified to you.
We will continue to monitor any new updates on this point and do call us if you are confused on a particular case.
Sabbaticals/unpaid leave: The Direction states that an employee who was on unpaid leave on 28 February 2020, cannot be furloughed until the expiry of the unpaid leave as already agreed or contemplated at the beginning of the unpaid leave period.
Clarification on who can be furloughed: The Direction states that a condition to being furloughed is that the instruction from the employer to the employee to cease work for 21 days, is by reason of circumstances arising as a result of COVID-19. The Direction does not list the relevant circumstances and appears to be deliberately broad by design. This would fit the pattern of the updates, which over the past few weeks, have moved from furlough only being available 'where the employee would otherwise be redundant' to this new position where the furlough just has to arise because of COVID-19.
Employee transfers under TUPE and on a change in ownership: The Direction changes the previous HMRC guidance with respect to TUPE. Previously the relevant date was 28 February 2020, it is now 19 March 2020. HMRC have confirmed in their updated guidance that a new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 19 March 2020, if either the TUPE or PAYE business succession rules apply to the change in ownership.