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Last updated 24 March 2021


Section 1: Introduction: the CJRS from 1 November 2020

This note sets out information on key features of the CJRS to help organisations think about whether the scheme is right for them and their workforce. It doesn’t cover everything an employer needs to know to make a final decision or submit a claim. It’s based on HMRC’s published guidance – which can and does change.

1. The basics

The CJRS was introduced to help employers who cannot maintain their current workforce because their operations are affected by the COVID-19 outbreak.  Whilst this note refers to ‘employers’ and ‘employees’, the CJRS is also open to other workers who are treated as employees for income tax purposes.

Organisations will need to use their judgement in determining whether the CJRS is intended for their own specific circumstances.

Eligible employers can apply to HMRC for a grant towards the employment costs of eligible individuals who are temporarily not working, or not working their usual hours, due to the outbreak, and who agree to be ‘furloughed’.

At the Budget on 3 March 2021, the Chancellor announced that the scheme will now run until 30 September 2021.  

Key dates for submitting or correcting CJRS claims are set out below:

Claim periods:

Deadline to:

Submit claims (see 18 below)

Correct underclaims (see 21 below)

Repay or report overclaims (see 21 below)

Ended on or before 31 October 2020

30 November 2020

30 November 2020

 

 

 

Within 90 days of the date on which the overclaim arose or the claim became excessive

In November 2020

14 December 2020

29 December 2020

In December 2020

14 January 2021

28 January 2021

In January 2021

15 February 2021

1 March 2021

In February 2021

15 March 2021

29 March 2021

In March 2021

14 April 2021

28 April 2021

In April 2021 14 May 2021 28 May 2021

In May 2021

14 June 2021

28 June 2021

In June 2021

14 July 2021

28 July 2021

In July 2021

16 August 2021

31 August 2021

In August 2021

14 September 2021

28 September 2021

In September 2021

14 October 2021

28 October 2021

2. How has the CJRS changed since 1 November 2020?

In summary:

  • Grant funding, capped at £2,500 per month, will be available for up to 80% of a furloughed employee’s reference pay in relation to unworked hours until the end of June;
  • The grant will reduce to 70% of a furloughed employee’s reference pay from 1 July, and to 60% of reference pay from 1 August, subject to reduced monthly caps – during these months the employer must continue to pay the employees 80% of reference pay, subject to the £2,500 cap;
  • Employers do not have to have used the CJRS previously to be eligible to make a claim; and
  • Provided they were employed on 30 October 2020 or, for claim periods beginning on or after 1 May 2021,  on 2 March 2021, employees who meet the relevant criteria (see 4 below) can be furloughed from 1 November even if they were not included on a previous CJRS claim.

This note summarises key features of the scheme on and after 1 November 2020, but note that for claim periods that begin on or after 1 December 2020:

  •  It is no longer possible to make a CJRS claim for furloughed employees who are serving a notice period (see 12 below); and
  • HMRC will publish details of employers who use the scheme, including an indication of CJRS claims made.

3. Is my business eligible to participate?

From 1 November, the CJRS is open to all employers that operate a UK PAYE scheme registered on or before 30 October 2020, are enrolled for PAYE Online, and have a UK bank account.

It is not necessary to have made a previous claim under the CJRS in order to be eligible.

However, organisations whose staff costs are wholly met by public funds should not participate in the extended CJRS.  Employers whose staff costs are partially publicly funded may be able to participate and should approach their sponsoring department or administration for guidance.

4. Which employees can be furloughed?

For claim periods ending on or before 30 April 2021, employers can furlough any employees who were on their payroll on 30 October 2020 and included in a Real Time Information (RTI) PAYE submission filed between 20 March and 30 October 2020.

Employers can also rehire and then furlough any individuals who were made redundant after 23 September, provided they were included in an RTI submission filed between 20 March 2020 and 23 September 2020.  Rehired employees can only be furloughed from the date they were rehired (not from the date they were made redundant).

This gives employers who ran redundancy programmes timed to coincide with the previously expected closure of the CJRS on 31 October the flexibility to reassess their staffing model after considering the extension to the CJRS.

It would be prudent to document carefully the employment/HR/payroll steps taken to reemploy any relevant employees, and any conditions or time limits attached (such as that redundancy will follow when CJRS support ends).

For claim periods that begin on or after 1 December, employers are no longer able to make CJRS claims in respect of furloughed employees who are serving a statutory or contractual notice period (including for resignation or retirement, as well as for redundancy).

For claim periods beginning on or after 1 May‌‌‌ ‌2021, employees must have been employed on 2‌‌‌ ‌March 2021 and included in an RTI submission made between 20‌‌‌ ‌March 2020 and 2‌‌‌ ‌March 2021.

5. What are furloughed employees paid?

In the absence of any agreed change in terms and conditions, furloughed employees remain contractually entitled to their usual pay and benefits, including pension contributions.

Employers can either seek to agree a reduction with furloughed employees (see 10 below) or continue to provide them with their full contractual pay and benefits.

In all cases, for the duration of the scheme employers must pay furloughed employees:

  • Their full contractual rate of pay for any hours worked; and
  • At least 80% of their ‘reference salary’ for any of their ‘usual hours’ spent on furlough (note that an employee’s ‘usual hours’ will not necessarily be the same as their normal contracted working hours – see 13 below).

The minimum payment in respect of ‘usual hours’ spent on furlough is capped at £2,500 per month. This cap is reduced by reference to any hours worked during the claim period.

Employees who take holiday, or undertake compulsory training, whilst on furlough must be paid at their full contractual rate of pay for those days (i.e. at least the appropriate National Minimum Wage rate for the relevant hours).

The minimum furlough payment must be made in cash and cannot be:

  • Netted off against the cost of providing benefits (including under a salary sacrifice arrangement); or
  • Reduced by any administration charges, fees or other costs relating to the employment.

However, other deductions from salary that were authorised by the furloughed employee can continue, as can partnership share acquisitions under tax-advantaged Share Incentive Plans and contributions to savings contracts linked to SAYE options (for employees who hold tax-advantaged Enterprise Management Incentive share options, being furloughed will not prevent them satisfying the working time requirement).

All payments are made subject to normal payroll deductions, including student loan repayments, and are also subject to employer’s NIC and, where relevant, Apprenticeship Levy.

6. How does ‘flexible furlough’ work?

Flexibly-furloughed employees are permitted to work for their employers with any worked hours being deducted from their ‘usual hours’ to determine their furloughed hours for the period. Subject to certain limited exceptions, they cannot undertake any work for their employer or any linked or associated company during their furlough hours.

It was possible to enter into flexible furlough agreements on or before 13 November which had retrospective effect from 1 November. In all other circumstances, flexible furlough arrangements must be agreed between the employee and the employer before the start of the relevant claim period (see 10 below).

7. What support will employers get under the CJRS?

Employers can claim grants toward the cost of employing individuals during the usual working hours for which they are furloughed (i.e. not working) equal to a percentage of their reference salary. Grants for each employee are subject to a cap.

The level of support for each employee furloughed under the CJRS is summarised in the table below.

CJRS grant payment

Up to 30 June 2021

From 1 July 2021

From 1 August 2021

80% of reference pay, capped at £2,500 per month

70% of reference pay, capped at £2,187.50 per month

60% of reference pay, capped at £1,875 per month

 

The employer must continue to pay employees at least 80% of refence pay, subject to the £2,500 cap, for their non-working hours and therefore meet the difference between the minimum payments to furloughed employees in respect of their non-working hours (see 5 above) and the reducing CJRS grant.  The employer must also bear the cost of any ‘top up’ payments made in addition to an employee’s minimum furlough entitlement, as well as the full cost of any hours worked.

The employer must also fund the employer’s NIC and minimum pension contributions on payments made to employees

CJRS grants do not cover any Apprenticeship Levy due on payments made to furloughed employees.

8. Further support after the CJRS ends

The Chancellor previously announced that qualifying employers could claim a one-off Coronavirus Job Retention Bonus (CJRB) payment of £1,000 for each previously furloughed employee who was kept in employment until at least 31 January.

However, following the extension of the CJRS, the CJRB was withdrawn and will be replaced by an alternative retention incentive at an appropriate time.

Additionally, the  Coronavirus Job Support Scheme (CJSS), which was originally intended to replace the CJRS from 1 November,  has been postponed indefinitely. It appears possible the CJSS will now never come into operation.

9. Do employers need to repay CJRS grants?

Any excessive claims (i.e. amounts claimed to which the employer is not in fact entitled under the CJRS) must be repaid to HMRC. Since it is a requirement of the CJRS that the employee receives at least 80% of reference pay, this can include situations where an underclaim has resulted in the employee receiving less than that amount (see 21 below).

Amounts the employer is entitled to claim need not be repaid unless:

  • Circumstances change such that the employer is no longer entitled to retain them (e.g. where a furloughed employee returns to work sooner than expected); or
  • The grant is not used to meet relevant employment costs within a reasonable timeframe.

Section 2: Implementing flexible furlough

10. How does an employer flexibly furlough an employee?

An eligible employee will be ‘furloughed’ where, because of the COVID-19 outbreak:

  • The employer instructs the employee to work fewer than their usual hours (including ceasing work entirely);
  • The employee does in fact work fewer than their usual hours; and
  • Before the start of the period to be covered by the CJRS claim (or on or before 13 November where the employee was to be furloughed with effect from 1 November), the employee and employer enter into an agreement (including a collective agreement between the employer and a trade union) which in summary:
    • Records the agreed reduction in working time and its main terms and conditions (e.g. any reduction in pay and benefits; shift patterns or how these will be determined);
    • Is incorporated into the employee’s contract of employment;
    • Is made in writing (or confirmed in writing by the employer); and
    • Is retained by the employer for at least five years after it is made (or subsequently varied).

Employers must initiate the furlough process and, whilst employees can ask to be furloughed, the employer has the final say.

Employers should consider how they usually approach these matters with their workforce, and may have an obligation to discuss the matter with recognised Trade Unions or other representative bodies.

The usual employment law and anti-discrimination considerations will apply when going through this process.  Employers should therefore find a fair and objective way to decide who should be furloughed and brought back into the business, when and on what basis. 

11. What rights do furloughed employees have?

Furloughed employees have continuity of employment and retain the same employment rights they previously held.

That includes entitlement to statutory sick pay, maternity rights, rights against unfair dismissal and to redundancy payments.

Employees will continue to accrue holiday entitlement whilst furloughed.

Additionally, holiday (including bank holiday) can be taken by an employee whilst furloughed, although this would need to be paid at the employees’ normal rate of pay.

12. Can furloughed employees be made redundant?

Yes, furloughed employees can be made redundant, either during or after the furlough period.

For claim periods that began prior to 1 December 2020, CJRS grants can be claimed in respect of furloughed employees during their notice period but cannot be used to cover redundancy payments.

For claim periods that begin on or after 1 December 2020, employers are no longer  able to claim CJRS grants in respect of furloughed employees who are serving a statutory or contractual notice period (including for resignation or retirement, as well as for redundancy).

Under regulations that came into force on 31 July for Great Britain, and on 14 August for Northern Ireland, statutory redundancy payments, statutory notice pay, and certain other statutory payments must be based on the employee’s normal rate of pay, not the lower amounts they may have received whilst furloughed.

13. How are CJRS grants calculated?

Each furloughed employee’s ‘reference salary’ and – unless they are fully furloughed and carry out no work at all for their employer during the relevant claim period – ‘usual hours’ must be established in order to calculate a CJRS grant.

In turn, this involves determining whether the employee is in receipt of a fixed’ or a ‘variable’ rate of pay, and whether their hours are ‘fixed’ or ‘variable’.

This gives rise to four different categories of employees, with different rules to be applied when calculating the relevant CJRS grant:

Category

Rate of pay

Hours worked

1

Fixed

Fixed

2

Fixed

Variable

3

Variable

Variable

4

Variable

Fixed

 

HMRC’s guidance states they will not decline or seek repayment of a CJRS grant based solely on the employer’s choice of pay calculation, provided a reasonable choice is made.

Whilst this means HMRC is unlikely to challenge a claim based on fine points of interpretation, the employer must still adopt a robust and defensible methodology that is supported by HMRC’s guidance and the Treasury Directions that set out the legal basis of the scheme.

Reference salary can be difficult to establish.  Broadly, it includes regular payments such as wages, non-discretionary overtime (i.e. where the employer is contractually obliged to pay the employee at a set and defined rate for the overtime worked), non-discretionary fees and non-discretionary commission (i.e. where the employer has a contractual obligation to pay the relevant sum and to which the employee has an enforceable right).

Discretionary payments – such as bonuses and tips – and the cost of benefits in kind are excluded.

The calculation of usual hours is also complicated and sourcing the relevant data on hours worked is key.

Reference salary and usual hours are discussed at 14 – 17 below.

14. Determining reference salary for fixed rate employees for claim periods ending on or before 30 April 2021

Broadly, a fixed rate employee is one who is entitled to be paid an annual salary in equal weekly or monthly instalments (or in instalments based on a multiple of weeks) in respect of a number of basic hours which do not normally vary according to seasonal considerations.

In summary, for fixed rate employees who were included in an RTI submission made on or before 19 March 2020 and whose employment did not cease on or before 23 September 2020, ‘reference salary’ is equal to the amount payable before tax from the last pay period ending on or before 19 March 2020.

For all other fixed rate employees, ‘reference salary’ is equal to the amount payable before tax from the last pay period ending on or before 30 October 2020.

Note that for fixed rate employees who are on reduced rate paid leave or statutory leave during their reference period, their reference pay is based on the contractual salary before tax, and not what the employee was actually paid. 

HMRC will issue further guidance for claim periods beginning on or after 1 May 2021 in due course.

15. Determining reference salary for variable rate employees for claim periods ending on or before 30 April 2021

In summary, for ‘variable rate employees’ who were included in an RTI submission made on or before 19 March 2020 and whose employment did not cease on or before 23 September 2020, reference pay is:

  •  For claim periods that end on or before 28 February 2021, the higher of the employee’s:
    • Earnings in the corresponding calendar period in the 2019/20 tax year; and
    • Average amount payable in the 2019/20 tax year before any period of furlough began; or
  • For claim periods that begin on or after 1 March 2021, the higher of the employee’s:
    • Earnings in the corresponding calendar period in the 2019 calendar year (i.e. in March or April 2019 as appropriate); and
    • Average amount payable in the 2019/20 tax year before any period of furlough began

For all other variable rate employees, ‘reference salary’ is equal to the average amount payable during the period that:

  • Begins on 6 April 2020 or, if later, the date on which the employment began; and
  • Ends immediately before the first furlough period for the employee that begins on or after 1 November.

HMRC will issue further guidance for claim periods beginning on or after 1 May 2021 in due course.

16. Determining ‘usual hours’ on the fixed hours basis for claim periods ending on or before 30 April 2021

Employees are regarded as working ‘fixed hours’ if their contract requires them to work a specified number of hours over a specified period and their pay in respect of that period does not vary in relation to the number of hours actually worked.

In summary, for fixed hours employees who were included in an RTI submission made on or before 19 March 2020 and whose employment did not cease on or before 23 September 2020, the ‘usual hours’ for a particular pay period are based on the employee’s contracted hours in the last pay period that ended on or before 19 March 2020.

For all other fixed hours employees, ‘usual hours’ for a particular pay period are based on the employee’s contracted hours in the last pay period that ended on or before 30 October 2020.

HMRC will issue further guidance for claim periods beginning on or after 1 May 2021 in due course.

17. Determining ‘usual hours’ on the variable hours basis for claim periods ending on or before 30 April 2021

Employees work ‘variable hours’ where they are not contracted for a fixed number of hours, or their pay depends on the number of hours worked.

In summary, for variable hours employees who were included in an RTI submission made on or before 19 March 2020 and whose employment did not cease on or before 23 September 2020, ‘usual hours’ for a particular claim period is:

  • For claim periods that end on or before 28 February 2021, the higher of the employee’s: 
    • Actual hours worked in the corresponding calendar period in the tax year 2019/20; and
    • Average hours worked in the tax year 2019/20; or
  • For claim periods that begin on or after 1 March 2021, the higher of the employee’s:
    • Actual hours worked in the corresponding calendar period in the 2019 calendar year (i.e. in March or April 2019 as appropriate); and
    • Average hours worked in the tax year 2019/20.

For all other variable hours employees, ‘usual hours’ is equal to the average number of hours worked during the period that:

  • Begins on 6 April 2020 or, if later, the date on which the employment began; and
  • Ends immediately before the first furlough period for the employee that begins on or after 1 November.

HMRC will issue further guidance for claim periods beginning on or after 1 May 2021 in due course.


Section 3: Operating flexible furlough

18. How do employers claim the grant?

Once employees have been furloughed, employers will need to submit relevant information through HMRC’s CJRS online portal in order to make a claim by the relevant deadline set out below:

Claim periods:

Submission deadline

Ended on or before 31 October 2020

30 November 2020

In November 2020

14 December 2020

In December 2020

14 January 2021

In January 2021

15 February 2021

In February 2021

15 March 2021

In March 2021

14 April 2021

In April 2021 14 May 2021

In May 2021

14 June 2021

In June 2021

14 July 2021

In July 2021

16 August 2021

In August 2021

14 September 2021

In September 2021

14 October 2021


Supporting calculations and certain other information must be retained for at least 6 years.

19. What’s the tax treatment of a CJRS grant for the employer?

The employer should include the CJRS grant as income in its tax computation.

However, as this receipt should be offset by deductible employment costs, no associated tax charges should arise.

Some employers have chosen to voluntarily repay CJRS grants they were entitled to claim and retain.

In March 2021, HMRC updated their guidance to say that such repayments should be treated as a reduction in the amount of taxable income received from the CJRS. However, it is currently unclear how this applies if the grant income was received in an earlier accounting period to the one in which it was repaid.


Section 4: Errors and compliance

20. What errors are common in CJRS claims?

Common errors include incorrectly calculating ‘usual hours’ for flexibly furloughed employees, including ineligible pay elements (e.g. tips) in reference pay, treating salary sacrifice and overtime incorrectly, and failing to implement or observe furlough agreements properly.

These often result from overlooking changes to HMRC’s guidance as the CJRS evolved.

Employers should ensure their CJRS claims are supportable, and that this can be demonstrated to HMRC and other stakeholders, such as auditors, investors and potential purchasers. This includes ensuring key judgements are documented and supported by relevant HMRC guidance, the data underlying submitted claims was robust, and that supporting calculations are accurate.

Where claims cannot be supported, they should be corrected, and steps taken to prevent a reoccurrence.

21. How are any errors corrected?

Employers who have under claimed need to ensure that furloughed employees still receive the full minimum payments to which they’re entitled. This is because it is a requirement of the CJRS that the employee receives a minimum of 80% of reference pay. If this condition is not satisfied, HMRC has confirmed that there is a risk that the entire claim made for the employee for that claim period is invalid. An underclaim that leads to underpayments to furloughed employees is therefore potentially more serious than an overclaim, as the whole of the relevant grant might need to be repaid.

Any claims that are understated must be corrected, and the relevant claim increased, by the relevant deadline set out below:

Claim periods:

Correction deadline

Ended on or before 31 October 2020

30 November 2020

In November 2020

29 December 2020

In December 2020

28 January 2021

In January 2021

1 March 2021

In February 2021

29 March 2021

In March 2021

28 April 2021

In April 2021 28 May 2021

In May 2021

28 June 2021

In June 2021

28 July 2021

In July 2021

31 August 2021

In August 2021

28 September 2021

In September 2021

28 October 2021


Employers must repay HMRC where a CJRS claim was overstated, a correct claim subsequently becomes excessive, or the grant is not used to pay relevant costs within a reasonable period (see 9 above).

This may be done by reducing a subsequent claim or, if no further claims will be made, by a direct payment to HMRC.

Under legislation introduced by Finance Act 2020, employers must notify HMRC of any overclaims that are not repaid before the relevant reporting deadline.

The notified amount will then be recovered through a special income tax charge.  

Unless previously repaid, any overclaims should either be repaid in full or notified to HMRC within 90 days of arising.

Penalties may be imposed for late notification. It’s therefore important for employers to identify and address overclaims on a timely basis.

In addition, in certain circumstances company officers will be held jointly and severely liable for repayments.

22. What is HMRC’s enforcement approach?

At the Budget on 3 March 2021, the Chancellor of the Exchequer announced that HMRC are investing over £100 million in a new Taskforce to combat COVID-19 support fraud.

As well as targeting illegitimate CJRS claims, the Taskforce will have a broader role ensuring employers have followed the fundamental requirements of the scheme.

HMRC have confirmed this will extend for several years beyond the end of the CJRS with approximately 800 Officers reviewing CJRS claims.

HMRC have also confirmed they won’t impose penalties for innocent errors that are corrected – or recover grants based solely on the employer’s choice of pay calculation, provided it’s reasonable.

23. Can I rely on the statutory audit to identify any CJRS errors?

We await final details but understand employers will be required to confirm their total CJRS claims, and grants repaid or repayable, on their corporation tax return - subject to the usual declaration that all information given in the CT600 is correct and complete.  Employers should, therefore, consider what controls are in place over the preparation of CJRS claims and the underlying accounting records, and what checks should be carried out on their accuracy.

A company’s statutory audit should not be relied on to provide comfort over the accuracy of CJRS claims.  External auditors focus on the risk of material misstatements in the financial statements taken as a whole, whether caused by fraud or error, rather than the precise accuracy of any specific area of the accounting records.

HMRC also consider that the CJRS falls within the Senior Accounting Officer (SAO) regime. Claims should therefore be considered when deciding whether SAO certification should be qualified or unqualified. Compliance failures can potentially lead to personal liabilities for the SAO.

24. Do we still need to review CJRS calculations if we choose to repay our grants voluntarily?

It might still be necessary to check CJRS calculations, and the corresponding payments made to employees, where grants are voluntarily repaid to HMRC.

This is because furloughed employees who were underpaid could potentially bring a claim for unlawful deductions from wages or breach of contract where they did not receive at least the minimum payments they were entitled to under their furlough agreement.