Coronavirus (COVID-19) & Furloughed Employees

Coronavirus Job Retention Scheme (CJRS):

At a glance guide to upcoming changes

A one-off ‘Job Retention Bonus’ of £1,000 has been announced to help incentivise employers to retain employees beyond October. More details below

During June and July the government will continue to pay 80% of wages up to a cap of £2,500 as well as employer NIC and pension contributions.  Employers are not required to pay anything.

The CJRS will close to new entrants from 30 June 2020. The means that the final date by which an employer can furlough an employee for the first time was 10 June 2020 (unless the employee returns after this date from statutory maternity or paternity leave).

From 1 July we saw ‘flexible furlough’ introduced where furloughed employees will be eligible to work part time. The government will continue to meet the 80%/£2,500 cap to include NICs and pensions.

From July an employer will only be able to furlough an employee that they have furloughed for a full 3-week period prior to 30 June (unless the employee returns after this date from statutory maternity or paternity leave)

From July to October, when the scheme ends, furloughed employees will be able to work part time with the employer only claiming a grant for the normal or usual hours not worked.

From August employers will notbe able to reclaim the NICs and employer pension contributions that they pay in respect of furloughed employees from the government. The government will continue to meet the 80%/£2,500 cap.

From September the government will pay a reduced 70% of wages up to a cap of £2,187.50. Employers will be required to pay NICs and pension contributions and contribute a minimum 10% of wages (up to £312.50) to arrive at the 80% total and the overall cap of £2,500

From October the government will pay 60% of wages up to a reduced total contribution from the govt of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages (up to £625) to arrive at the 80% total and the overall cap of £2,500.

A 3rd Treasury Direction was issued on 26 June and we have a look into this later in this document.

The Overview

HMRC have announced that the eligibility cut-off date is 19 March 2020. The reference salary is the gross salary in the last pay period prior to 19 March 2020. 

All UK employers regardless of size, will be eligible for assistance where an employee has been designated as a ‘furloughed worker.’ For June and July, HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. This will change from August as set out in our at a glance note above.

The scheme does not allow for payments directly to employees, the responsibility for paying wages and salaries remains with the employer and must be recorded and reported in the normal way and the employer must pay all of the grant to the employee in full.

Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation. Collective agreement reached with a Trade Union is accepted as agreement. Our HR support line can help (0844 892 2807).

Claims can cover the period from 1 March 2020 as the scheme has been backdated and for full and part time employees the salary, as in their last pay period prior to, 19 March 2020 will be referenced.

This means that the employee must have been notified to HMRC through an RTI submission notifying payment in respect of that employee on or before 19 March 2020 for a qualifying claim. There is an exception to this for successions. Please see below.

Draft Legislation

A new schedule will be inserted into the Finance Act 2020. This new schedule will be called ‘Schedule X: Taxation of coronavirus support payments’

When will the scheme end?

The quick answer is: 31 October 2020.

Job Retention Bonus

Updated Thursday 9 July

On 8th July the government announced an intention to introduce a one-off payment to UK employers for every furloughed employee, as long as that employee remains continuously employed from June 2020 through to 31 January 2021 (As per HMRCs letter to the Chancellor on 8 July).

In order to be eligible, an employee would also need to earn above the Lower Earnings Limit of £520/month, on average, between 1 November and 31 January 2021.

The payments will be made in February 2021 and we expect to see more details released later this month.

The new ‘flexible furlough’ scheme from July to October

For the remainder of June the grant will cover 80% of an employee’s regular gross wage up to £2,500 per month, plus the associated Employer National Insurance contributions (Secondary Class 1 contributions) and minimum automatic enrolment employer pension contributions on that subsidised wage. During June, employees who are furloughed cannot work for the employer.

From July

From July onwards it will only be possible to furlough an employee if that employee has previously been furloughed for 3 consecutive weeks taking place any time between 1 March and 30 June. The last day that an employee could have been furloughed for the first time was 10 June.

As an employee, if you have not been furloughed yet then you cannot be furloughed going forward.

It is possible to furlough an employee for any amount of time from July onwards. There is no minimum 3 week furlough period per employee from July.  The period that an employer can claim for is a minimum of 7 calendar days apart from ‘orphan periods.’

Furloughed employees will be allowed to return to work on a part time basis to work any shift pattern and for any amount of time that has been mutually agreed between the employer and the employee.

The government will continue to pay 80% of wages up to a cap of £2,500 for the hours that an employee is on furlough. The government will also reimburse employer NICs and pension contributions for the hours that the employee is on furlough. If the employee does not work at all in July then these are the limits that will apply.

If, however, an employee returns to work for 3 out of 5 days or 60% then the claim will be for 40% of the £2,500 cap. In this sense, wage caps are proportional to the hours that the employee is furloughed. The employee will be entitled to full pay for work done – not subject to any CJRS cap or historical pay rates.

From August

The 80% and £2,500 remain in place. Again wage caps are proportional to the hours that the employee is furloughed.

Employers will now solely meet the expense relating to employers NICs and pension contributions, for furloughed employees, with no reimbursement from the government.

Employers will have to pay employees for the hours that they have worked without reimbursement from the government.

From September

The government will only pay 70% of a furloughed employees wages up to a maximum contribution from the government of £2,187.50 for an employee who is furloughed throughout September without working any hours at all for their employer.

Employers will now solely meet the expense relating to employers NICs and pension contributions, for furloughed employees, with no reimbursement from the government. Employers will also have to top up the employees wages by contributing at least 10% so that the employee still receives 80% of their wages up to a cap of £2,500.

For a furloughed employee (who does not even work part time) the employer will have to contribute £312.50 to top up the £2,187.50 governmental contribution to arrive at the £2,500.

Employers will have to pay employees for the hours that they have worked without reimbursement from the government.

From October

The government will only pay 60% of a furloughed employees wages up to a maximum contribution from the government of £1,875 for an employee who is furloughed throughout October without working any hours at all for their employer.

Employers will now solely meet the expense relating to employers NICs and pension contributions, for furloughed employees, with no reimbursement from the government. Employers will also have to top up the employees wages by contributing at least 20% so that the employee still receives 80% of their wages up to a cap of £2,500.

For a furloughed employee (who does not even work part time) the employer will have to contribute £625 to top up the governments maximum contribution of £1,875 to arrive at the £2,500.

Employers will have to pay employees for the hours that they have worked without reimbursement from the government.

Tabular guidance:

July August Sept Oct
Government contribution: employer NICs and pension contributions Yes No No No
Government contribution: wages 80% up to £2,500 80% up to £2,500 70% up to £2,187.50 60% up to £1,875
Employer contribution: employer NICs and pension contributions No Yes Yes Yes
Employer contribution: wages 10% up to £312.50 20% up to £625
Employee receives 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per
80% up to £2,500 per month

Example: Flexible furlough during July

HMRC have set out an example of an individual who works 50% of their normal or usual hours during July 2020. Here is a link to that example. Click Here

The main takeaway from this example is that even though this example is for July 2020 we still use the employee’s wages from their last pay period before 19 March 2020. We do not use the current salary.

We also use the number of hours the employee was contracted for at the end of the last pay period ending on or before 19 March 2020 as the reference for ‘usual’ hours rather than the number of hours that might be expected to work in July for example.

How long can an employee be furloughed?

During June an employee must be furloughed for a minimum of 3 weeks (21 calendar days)

From July there is no minimum period that an employer can furlough an employee and a separate agreement can be made when re-furloughing an employee on subsequent occasions.

Claims must start and end within the same calendar month and must last at least 7 days unless the employer is claiming for the first few days or the last few days in a month.

An employer can only claim for a period of fewer than 7 days if the period they are claiming for includes either the first or last day of the calendar month, and they have already claimed for the period ending immediately before it. . The 3rd Treasury Direction dated 26 June calls such a period an ‘Orphan Period.’

This will have an impact for the employer too. See ‘How often can a claim be made?’

Can an employee work for an employer whilst they are furloughed?

Yes; but only from 1 July. An employer can bring furloughed workers back to work part time from July whilst still claiming the CJRS grant for their normal hours not worked.

Up until the end of June, to qualify for the scheme, employees must not undertake work for the employer while furloughed. Having stated this, training is not considered to be working. The employee can also undertake volunteer work, all of which is on the proviso that no services are provided to the employer in question and the volunteering does not make money for the employer.

Where training is undertaken at the request of the employer the employee will be entitled to be paid at least the NMW for this training. In most cases, the 80% (70% from September) furlough payment will ensure that the NMW has been observed and so an additional payment will not be required.

How to make a claim

Click here to be taken to the site.

Employers will need to provide the following information via an Online Portal.

  • Employer PAYE reference number (the employer must be registered for PAYE online);
  • UK bank account and sort date; and
  • contact name and sort code.
  • the number of employees being furloughed;
  • the claim period – start and end date;
  • amount claimed
  • The employee’s National Insurance Number

Claimed too much in the past?

If an employer has overclaimed in the past then they have 2 choices.

  • Correct the matter in the next claim
  • Pay HMRC back (if there are to be no further claims by that employer)

Employers will need a 14 or 15 digit pay reference.

The reference begins with an ‘X’ and can be obtained from HMRC.  The idea being that the employer informs HMRC that they need to repay part of the CJRS and HMRC then gives the employer a reference.

An employer can delete a claim within 72 hours of submission so it may not be necessary to contact HMRC.

Step by Step Guide

HMRC have issued an updated step by step guide for employers on 22 June. click here to access it..

If you have fewer than 100 furloughed staff you will be asked to enter details of each employee you are claiming for directly into the system. If you have more than 100 furloughed staff then HMRC advise that you upload your file as an .xls, .xlsx, .csv or .ods and for claims on or after 1 July 2020 they advise that you use their template foundhere.

How often can a claim be made?

The claim period is not linked to the employee’s pay period. This simply affects the frequency by which an employer can submit a claim and has nothing to do with pay period intervals.

However, only 1 claim can be made per claim period.

This means that an employer should include all details for all of the employees that were furloughed during that claim period in one claim even if some of those employees are fully furloughed and some are flexibly furloughed.

An employer can now tell HMRC about an over-claimed amount as part of their next claim. This allows the employer to reduce the amount that they are claiming in their next claim if they have claimed too much in a previous claim.

Updated Friday 10 July
On Friday 10 July HMRC updated their guidance to state “we are introducing legislation to recover overclaimed grant amounts through the tax system…further guidance on this will be issued in due course.”

This further cements the position that they will zealously seek to recover overpaid amounts.

An employer who has made an error which has resulted in an underclaim should contact HMRC to amend their claim and this will result in HMRC conducting additional checks.

The first time an employer can claim for July will be 1 July. An employer cannot claim for periods in July in June.

Employers should note that they cannot claim for June after 31 July.

If the pay period includes days in more than one month, the employer will need to submit separate claims covering the days that fall into each month.

HMRC have announced that a claim can be deleted within 72 hours of submission so that is another option open to employers who fear that they may have submitted an incorrect claim.

It is also possible to save and return to a claim within 7 days of starting the claim.

Who can make the claim?

In addition to the employer, it is possible for an employer to authorise an agent to file a claim on their behalf. An employer can do that by accessing your HMRC online services and selecting ‘Manage Account’.

How many employees can a claim be made for?

From July onwards the number of employees in any claim cannot exceed the maximum number of employees claimed for in any period before. So if an employer has previously made 3 claims and they were for 20, 30 and 50 employees then from July they can only claim for a maximum of 50 employees (plus anyone returning from ‘Family related statutory leave’ and military reservists)

Job Retention Scheme Calculator Click here

A claim can be made before, during or after a payroll is processed. A claim can be made up to 14 days before the claim period end date.

Updated Friday 10 July

On Friday 10 July the calculator was updated so that it can be used to work out how much can be claimed for a claim period ending on or before 31 August.

The calculator cannot be used where employees have returned from family-related statutory leave (maternity leave, paternity leave, shared parental leave, adoption leave, parental bereavement leave).  The calculator cannot be used where there is an annual pay period.

HMRC have added guidance on 1 July in respect of the calculation method. Click Here

Annual Pay Period

HMRC confirm that the calculator should not be used where there is an annual pay period. Whilst the calculator cannot be used in those circumstances, those using an annual pay period will qualify for CJRS providing that a qualifying RTI submission was made by 19 March 2020 in the 19/20 tax year. We are mindful that this will not be the case for many Personal Service Companies (PSCs).

Maximum monthly, weekly or daily wage claim per employee.

This is £2,500 or £576.92 (weekly).

The daily figures are £80.65 per day for March, £83.34 per day for April, £80.65 per day for May, £83.34 for June, £80.65 for July and £80.65 for August.

The aim being that the employer will multiply the appropriate rate by the number of days that the employee has been furloughed in the particular pay period in order to work out the maximum amount they can claim.

In September and October the daily rates will be £83.34 and £80.65 and this will be the maximum amount the employer will have to pay the employee but the amount that the employer can claim from the government will be lower.

Record Keeping

An employer must keep all details of a claim including the claim reference number for 6 years.

Does it apply to all employers?

On Wednesday 15 April a Treasury Direction was issued and this provides some further information.  It states that ‘The employer must have a pay as you earn (“PAYE”) scheme registered on HMRC’s real time information system for PAYE on 19 March 2020 (“a qualifying PAYE scheme”).’  There is an exception to this where there is a business succession.

It applies to all UK businesses, regardless of their size. This applies to charitable and not for profit businesses too.  The scheme can also apply to any LLP member that is considered an employee by virtue of s863a ITTOIA 2005.  The reference salary for say, a Salaried Member of an LLP would be the LLP member’s profit allocation, excluding any amounts which are determined by the LLP member’s performance, or the overall performance of the LLP.


HMRC understand that there will be occasion when there is a business succession and they advise ‘Where on 19th March 2020 an employee was employed in a qualifying (RTI registered) PAYE scheme by someone who is not the current employer and after 19th March 2020 the employee is transferred to a new employer and the transfer meets one of the three conditions in paragraph 10, the new employer can make a CJRS claim even though they register an RTI PAYE scheme after 19th March. The new employer is treated as having made the 2019/20 earnings payments made by the former employer on or before 19th March 2020.’

Payroll Consolidation

Where a group of companies have multiple PAYE schemes and these are consolidated into a new PAYE scheme after 19 March 2020 then the new scheme will be eligible to furlough those employees.

Employment Allowance (EA)

The allowance increased to £4,000 from 6 April 2020. HMRCs guidance informs us that it is possible to delay claiming the employment allowance whilst claiming for NICs under this scheme.

It was feasible that HMRC ‘may’ have required the EA to be used at the earliest opportunity in the tax year by virtue of Section 4(4) of NICA 2014. However, they have opted to take a different approach, allowing the EA claim to be delayed but with some conditions and they say:

Employers who delay their Employment Allowance claim and have unused Employment Allowance available at the end of the tax year can use this to reduce other tax costs. Employers who have received a grant for employer NICs costs through the scheme should deduct the amount of grant they have received from the amount of Employment Allowance they have left before they use it, if not doing so would result in receiving relief for the same cost twice.

Employment Allowance and ‘State Aid rules do not apply’

A reminder that Employers must provide their business sector when claiming EA from April 2020. In most cases employers will choose ‘Industrial/other’ and they should only choose ‘state aid rules do not apply’ when the business does not undertake any economic activity.

Coronavirus Business Interruption Loan.

If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.

Please read our separate summary article for further information.

What is a ‘furloughed’ employee?

The word furlough generally means temporary leave of absence from work.

A furloughed employee is someone who rather than being dismissed for redundancy by their employer, is kept on the payroll during a period where the employer does not have any work for the employee.

There is an employment law aspect to this.  Employers will need to consult and agree which each employee that they are being furloughed. Employers will then have to confirm to the employee in writing that the employee has been furloughed.

An employee can be furloughed by one employer and continue to work for another employer as long as both employments were on different PAYE schemes.  This scenario would only apply if the employee was on two or more separate payroll schemes at 19 March 2020 (this was previously stated as 28 February 2020).  Having stated this, HMRC do also state ‘Whilst furloughed your employer cannot ask you to do work for another linked or associated company.’

Remember that an employee can be furloughed and still work part time from July. The employer would only claim for the ‘usual hours’ not worked in the claim period.

Gross or Net?

We use the Gross salary in their last pay period prior to 19 March 2020 (this was previously stated as the gross salary at 28 February 2020) is the relevant figure to use for full and part time employees.

Non-monetary benefits and Salary Sacrifice

When arriving at the gross salary the employer should not include non-monetary benefits in kind like a company car and salary sacrifice schemes.

Are Overtime, Bonuses and Commissions included in this Gross figure?

The Gross salary does not include Fees, discretionary bonuses and commission. Previously, HMRC told us that this can include past overtime and something that they referred to as ‘compulsory commission’.  HMRC have since updated their guidance to focus on whether the payment is discretionary or not.

On 14 May HMRC added ‘only include payments which you have a contractual obligation to pay and to which your employee had an enforceable right. HMRC also further clarify to add that if other variable payments are ‘always’ made then those may also be added to the calculation.

Overtime payments can be included in the calculation where the employer is contractually obliged to pay the employee at a set rate for overtime hours.

To be read in conjunction with the next section:

(The 2nd) Treasury Direction made on 22 May

On Wednesday 22 May a 2nd Treasury Direction was issued and this provides some further information.

It states that ‘no account is to be taken of anything which is not regular salary or wages.’ Paragraph 7.3 to 7.5 set out what is meant by ‘regular.’

In summary, regular salary or wages would be that which is not conditional on any matter, is not a benefit of any other kind and arises from a legally enforceable agreement.  Additionally, the regular wage or salary cannot vary according to the following matters:

(a)  the performance of or any part of any business of the employer or any business of a person connected with the employer,

(b)  the contribution made by the employee to the performance of, or any part of any business,

(c)  the performance by the employee of any duties of the employment, and

(d) any similar considerations or otherwise payable at the discretion of the employer or any other person (such as a gratuity)

Benefits that are provided via a Salary Sacrifice scheme (including pension contributions) should not be included when determining the gross salary.

HMRC do, however, advise that ‘Where the employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme’

HMRC agrees that COVID-19 counts as a life event/’lifestyle’ that could warrant changes to Salary Sacrifice arrangements.  It possible for the employer and employee to update the relevant employment contract to switch out of a Salary Sacrifice, however, at present the guidance does not allow for employers to recalculate the reference salary in order to reflect these increases in the amount of furlough pay the employers can claim under the scheme.  HMRC have updated their Salary sacrifice guide for employers on 9 April. Click here.

Employees whose pay varies

For those employers that have employees on varying wages the eligibility criteria continue to refer to monthly earnings and the following would apply.

HMRC have updated their guidance on 27 April 2020 to distinguish between an employee already employed at 6 April 2019 and one who started after 6 April 2019.

Employees whose pay varies and were already employed at 6 April 2019

Up until the end of August, claim for the higher of either (subject to the £2,500 cap):

  • 80% of the same month’s wages from the previous year
  • 80% of the average of your monthly earnings for the 2019/2020 tax year

To calculate 80% of the same month’s wages from the previous year:

Start with the amount they earned in the same period last year. Divide by the total number of days in this pay period -(including non-working days so for March 2020 this would be 31). Multiply by the number of furlough days in this pay period. Multiply by 80%. See HMRCs example here

For Employees whose pay varies and started work after 6 April 2019

The employer should determine the cumulative ‘earnings’ for 2019/2020 up to the day before furlough. Divide this by the number of days employed in 2019/20 (including non-working days) up to the day before furlough. Then multiply this result by the number of days furloughed in this pay period and then finally multiply by 80%. From September this figure will drop to 70%.

For example, in the case of an employee who started on 1 May 2019 and was placed on furlough on 23 March 2020 we would see 327 days in the tax year until they were furloughed and 9 days in the furlough period. For a salary of £15,000 the claim would be for £330.28 using the methodology set out above and HMRCs figures.

Note: HMRC use the word ‘earned’ rather than ‘paid’.

(The 3rd) Treasury Direction made on Friday 26 June Click Here

HMRC have made a 3rd Treasury Direction on Friday 26 June, using the powers conferred by Sections 71 and 76 of the Coronavirus Act 2020 to set out the legal framework for making claims under CJRS.  The direction brings together the information that been released in previous guidance and news alerts.

The direction is split into two parts. The first part concerning the existing or original furlough scheme and the second part which deals with the changes that apply from 1 July to 31 October.

Here are some of the key aspects together with a reference to where they can be found within the 3rd Treasury Direction.

The first point of note is that the Direction now states ‘Integral to the purpose of CJRS is that the amounts paid…are used by the employer to continue the employment of employees.’ Worth noting that the guidance has continually advised that all of the grant must be used to pay furlough wages and the employer is not permitted to reduce the amount paid over to account for any sums owed to the employer by the employee.

From 1 July, all furlough agreements between the employer and the employee must be in writing and kept until at least 25 June 2025. (Para 13(d))

Para 14.1 sets out the minimum claim periods of 7 days or an ‘Orphan Period’ which begins and ends in the same calendar month. See our section on claim periods.

Para 36.7 focuses on ‘work’ and states that certain actions carried out by a Director will not amount to ‘work.’  This includes fulfilling duties relating to the filing of company accounts, making a CJRS claim and making a payment of a wage or salary. See our comments on PSC companies.

Inserted Friday 10 July

Can an employer claim for an employee who is serving statutory notice?

HMRC updated their guidance on Friday 10 July to add ‘Your employer can continue to claim for you while you are serving a statutory notice period, however grants cannot be used to substitute redundancy payments.

Whilst the Treasury Direction reiterates the idea that the CJRS is there to be used by the employer to ‘continue the employment’, they ‘make it clear that you can continue to claim for a furloughed employee who is serving a statutory notice period’. As long as it isn’t being used to meet redundancy payments.

Working out ‘usual hours’

HMRC set out a number of examples to help employers work out what an employee’s ‘usual hours’ are: Click here

Family related statutory leave

If a fixed pay employee is furloughed on return from say, maternity leave or paternity leave then the reference salary is their gross salary rather than the pay that they received whilst on family related statutory leave.

The calculation of the Average Weekly Earnings or AWE is different for those who family related statutory pay begins on or after 25 April 2020. This applies where an employer has used CJRS to pay the employee during any part of the relevant 56 days or 8 weeks and this leave began from 25 April 2020.

From 25 April 2020 anyone who is entitled to Statutory Maternity, Shared Parental, Paternity Pay, Statutory Adoption Pay and Statutory Shared Parental Pay and Parental Bereavement leave will have the amounts calculated based on their full pay and not the 80% furlough rate.

Even if they return to work after 10 June an employee that is on Statutory Maternity, Shared Parental, Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay or Parental Bereavement leave can still be furloughed from July onwards.

Provided that an RTI payment submission was made on or before 19 March, the leave began before 10 June and the employer has previously submitted a claim for any other employee.

This will only apply where they work for an employer who has previously furloughed other employees.

If an employee has received any of the statutory payments highlighted in this section (statutory maternity etc) then the employer must subtract the amount which is paid to the employee for the claim period from the amount the employer claims under CJRS.

National Minimum Wage

Individuals that are working are entitled to NMW for the hours that they are working or treated as working under minimum wage rules.

Furloughed workers are not working and therefore, it is possible that the 80% (drops to 70% in September) figure might result in a figure that is below NMW.

HMRC state ‘This means that furloughed workers who are not working can be paid the lower of 80% (drops to 70% in September) of their salary or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage.’

Apprentices can be furloughed in the same way that any other employee can be furloughed, however, they are entitled to at least Apprenticeship Minimum Wage/National Living Wage/National Minimum Wage (NMW) as appropriate for the time that they are training, even if this is more than 80% of their normal wages.

Does it apply to all employees? – Unpaid, shielding, fixed-term contracts

The 80% wage guarantee will cover zero-hour contracts or casual workers as long as they were on PAYE payroll on 19 March 2020. A foreign national can also be furloughed. New guidance has been issued in relation to those on fixed-term contracts.

This means that any employee that is hired after 28 February 2020 (this has not changed to 19 March 2020) cannot be eligible for this scheme.

Employees that stopped working for an employer on or after 28 February (this date has not changed to 19 March) and on payroll (with a corresponding RTI submission) would also have qualified if the employer had rehired (re-employed) them and put them on furlough by 10 June.

An employee on a fixed term contract could have been re-employed, furloughed and claimed for if their contract expired after 19 March 2020 and an RTI payment submission for the employee was sent to HMRC on or before 19 March 2020 as long as they were furloughed by 10 June.

If the employee’s fixed term contract has not expired then it can be renewed or extended. A claim for them can be made as long an RTI submission for the employee was notified to HMRC on or before 19 March 2020.

However, those employees on unpaid leave cannot be furloughed in July, unless they were placed on unpaid leave after 28 February 2020 (this has not changed to 19 March 2020) and they have completed a 3-week furlough by 30 June.

‘Whistle-blower’ service and HMRC powers – Coronavirus Act 2020

HMRC have announced their intention to set up a ‘whistle-blower’ service for workers to use to report employers.  We are awaiting further details.

HMRC can carry out checks and ask for relevant information before or after a claim is processed. This power is given to HMRC by HM Treasury under s76 Coronavirus Act 2020.

HMRC will check claims made through the scheme. Payments may be withheld or need to be repaid in full to HMRC if the claim is based on dishonest or inaccurate information or found to be fraudulent.


It is acceptable for an employer to furlough an employee for business reasons while that employee is already on sick leave or isolating.

An employee who becomes ill during a period of furlough is entitled to SSP as a minimum, however, an employer may decide to keep paying the furlough rate.

If a fixed pay employee is furloughed on return from sickness then the reference salary is their gross salary rather than the pay that they received whilst off sick.

What if the employee is on SSP already?

HMRC state that employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.

Employees who are shielding in line with public health guidance can be placed on furlough, however, HMRC do state ‘It is up to employers to decide whether to furlough these employees.’

Holiday Pay

Employees will continue to accrue leave whilst on furlough and they can also take holiday whilst on furlough. In respect of holiday pay, HMRC say ‘Employers will be obliged to pay the additional amounts over the grant.’

updated 1 July

If an employee is flexibly furloughed (this applies to any new furlough period from 1 July) then any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours.

Working Time Regulations (WTR) require holiday pay to be paid at your normal rate of pay or, where your rate of pay varies, calculated on the basis of the average pay you received in the previous 52 working weeks.

If an employee takes holiday while on furlough then the employer should pay the employee their usual holiday pay in accordance with the WTR.

Dedicated Schools Grant (‘DSG’) & Early Years Funding

This section will be relevant to early years providers that are employers.  Where providers are in receipt of government funding such as the DSG the expectation is that those funds will be used in order to keep the business open.

For example: If a provider’s average monthly income is 35% from DSG and 65% from other income, the provider could claim CJRS for up to 65% of their staffing costs.

The government’s guidance: Click here


NHS England has stated that it will fully remunerate dentists for the NHS work that they would have otherwise undertaken since the pandemic began, subject to some conditions.

Dentists who are employees will be eligible for CJRS in respect of Non-NHS work.

NHS England will be asking of evidence of the portion of NHS/private income used in any applications for additional support.

The British Dental Association (BDA) suggest that if, for example, staff are furloughed and private income amounts to 33% then the employee should be furloughed for 33% of the time and paid in full under the NHS scheme for the remainder. If an employee was furloughed for 3 months then the split might be 1 month as furloughed and 2 months as NHS.

There is further guidance on how this impacts self-employed dentists in our SEISS article.

Does this apply to Personal Service Companies?

Updated recently

The guidance states that this applies to salaried individuals who are directors of their own Personal Service Company (PSC) including Off-Payroll workers supplying services via their PSC.

The 3rd Treasury Direction of 26 June confirms that work will not include any obligation of duty to file company accounts or to make a CJRS claim or paying wages and salaries.  The direction does not set out examples of what would be considered ‘work.’

Presumably, it remains possible that ‘work’ would include checking the post and replying to customer emails.

This may be slightly less contentious from July when all furloughed employees can undertake part time work and the employer would then only claim for the ‘usual hours’ not worked.

However, HMRC have previously stated that they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

Does this apply to a contractor within the scope of IR35 off-paying working rules?

Yes, it can do.  In this scenario, if a public sector body such as the NHS wanted to furlough a contractor then they would need to discuss this with the PSC and the fee payer.  Usually, the fee payer is an agency that pays the contractors PSC.  The agency would then make the claim for reimbursement under the job retention scheme and the PSC would then report the payment it pays to the contractor as deemed employment income via PAYE on the RTI return.

Where a contractor is continuing to receive payments from a public sector client (including through the CJRS or other any other scheme), income from this client should be excluded from any calculation of the reference pay for the purposes of the CJRS if the contractor also decides to furlough themselves as an employee or director of their own company.

Where the Public Sector Off-Payroll rules of s61R ITEPA 2003 apply, the earnings of the company are treated as earnings of the worker concerned.

Military Reservists

Updated Friday 19 June

A military reservist can be furloughed when they return to work even if they have returned to work after a period of mobilisation after 10 June even if they are being furloughed for the first time.

This is possible where the employer has furloughed at least one other employee for 3 weeks by 10 June and the 19th March requirements relating to RTI have been met and the employee was away on mobilisation before 10 June and returned after 10 June.

Must an employer supplement employees’ salaries over the 80%?

No.  Employers can if they wish to or if there is an employment contract in place which requires this.

The guidance states ‘You will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to’

How does the grant impact on a business’s tax position?

The Grant will be treated as normal business income and taxable accordingly.

Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) are not taxable on grants received under the scheme. Domestic staff are subject to Income Tax and NICs on their wages as normal.

Reporting via RTI

HMRC have issued guidance on how and when to report payments to HMRC. This will be of particular interest to those that prepare RTI submissions.

We will update this document as and when further governmental guidance is issued. To date, this has been on a daily basis.

Link to HMRC webinars

If you have any further queries regarding the above or you wish to speak to one of our advisors regarding this please call the Croner Taxwise Tax, VAT and Payroll advice line fill out the form to request a callback.

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Tax Advice Consultant
0844 892 2470

Pras has over 15 years’ experience in practice having worked for PwC and then Grant Thornton UK LLP immediately prior to joining the team. He is able to advise on a wide range of taxation matters and in particular issues relating to corporation tax and the challenges that owner-managed businesses face.

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