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24th March 2020A Guide to the Coronavirus Job Retention Scheme (CJRS) [Updated]

Under the new Coronavirus Job Retention Scheme, announced on 19 March 2020, the Government is putting arrangements in place to provide grants to cover 80% of the salary of PAYE employees (up to a capped level) who would otherwise have been laid off during this crisis.

Key aspects of the scheme:

  • The scheme will be open to any employer in the country
  • It will cover the cost of wages, NIC and minimum pension contributions backdated to 1 March 2020
  • It can include workers who were in employment on 28 February
  • Redundancies since 28 February can be reversed and the worker furloughed instead
  • Plans are afoot to open the scheme before the end of April 2020 to include March payroll
  • The scheme is initially intended to continue for at least three months and will be reviewed by the government thereafter

Although detailed guidance has yet to be issued, to claim under the scheme employers will need to:

  • Designate affected employees as ‘furloughed workers’, and notify your employees of this change
  • Furlough that worker for a minimum of three weeks
  • Only furlough employees fit for work. Employees on sick leave cannot be furloughed so are subject to the SSP rules regarding pay and reimbursement, not the Retention Scheme
  • Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal
  • Only one claim can be made every three weeks, even if employees are paid weekly
  • HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month HMRC will set out further details on the information required

While an employee is furloughed, the worker should not undertake any work for the employer; by doing so, the employer may not qualify for the grant on wages. Online training may be completed without jeopardising the grant.

While furloughed, the employer can choose to pay the employee the difference between the grant payment and salary, but there is no obligation to do so. If an employee’s salary is reduced as a result of the use of this facility, the employee may be eligible for support through the welfare system which includes Universal Credit.

Only basic wages and salaries are included. Bonuses and commissions are not included in the scheme.

A note of caution

Changing the status of your employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation. As such, we would recommend you seek legal advice before you do anything relating to this new initiative.

Rules regarding discrimination apply as normal when selecting employees to be furloughed. However, the National Living Wage rules do not apply when an employee is not working.

Interim measures

While HMRC is working urgently to set up a system for this reimbursement, we understand existing systems are not set up to facilitate payments to employers.  We will keep you updated as further guidance is issued and of course, we would be happy to assist with any applications you need to make to HMRC.

Businesses that need short-term cash flow support, may benefit from the VAT deferral policy and may also be eligible to apply for a Coronavirus Business Interruption Loan.

CIRS – What if I am an employee? 

Unanswered questions

How long will it take for the Government to reimburse my employer?

We don’t know. HMRC are working on a system to reverse the normal flow of cash so that it goes to the employer. There are loans available for employers to alleviate the timing difference until the system operates smoothly.

Is the £2,500 cap on the wages or the payment, and is it net or gross of normal taxes?

We don’t know. Details of the scheme, such as these, are expected imminently.

I operate an “IR35” company. Is last year’s “deemed employment income” used to calculate my grant?

Probably not, however we will wait to see. It has long been HMRC’s argument that the tax system should treat employees and PSC contractors the same.

To discuss any of these issues further, or to find out how we can help you, please contact us.

These details are in accordance with Government guidelines on 27 March 2020.

The information contained in this guidance has been obtained from public sources and every attempt has been made to ensure its accuracy at the date of publication. In this ever changing environment, this information is subject to change and we will not accept liability for losses arising from changes in the law or the interpretation thereof.

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