COVID-19: Version 2 of Coronavirus Job Retention Scheme Direction

On Friday 22 May 2020, Government published version 2 of The Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (Coronavirus Job Retention Scheme) Direction (“The Direction”). The publication has been backdated to 20 May 2020.

• In summary, the Direction rewrites clauses that appeared in the original Direction in a more clear and concise manner.
• The Direction now refers to the duration of the Coronavirus Job Retention Scheme (‘CJRS’) being until 30 June 2020 (as opposed to 31 May 2020).
• The Direction now includes the relevant law applying to Northern Ireland.
• Employers must have an agreement with their employees to state when a period of incapacity to work has ended. This applies in the case of employees who are “enjoying” an unpaid sabbatical or receiving statutory sick pay or an alternative statutory payment.
• The Direction requires that a formal agreement is in place between furloughed employees and their employers to cease work, which;
  • specifies the main terms and conditions upon which the employee will cease all work in relation to their employment,
  • is incorporated (expressly or impliedly) in the employee’s contract, and
  • is made in writing or confirmed in writing by the employer (such agreement or confirmation may be in an electronic form such as an email)
• In accordance with HMRC guidance, agreements between employers and employees to place employees on furlough must be retained until at least 30 June 2025.
• The Direction specifies further duties that furloughed directors are allowed to undertake, in addition to statutory duties-
  • making a CJRS claim in respect of an employee of the director’s company, and
  • making a payment of salary or wages of an employee of the director’s company.
• The Direction now includes reference to occupational pension schemes by virtue of section 1 of the Pensions Schemes Act 1993 -
  • Work undertaken by a furloughed employee or director for the sole purpose of fulfilling their duties as a trustee or manager of a scheme must be disregarded.
• The Direction provides clarity on what can be included in the CJRS claim calculation in terms of what is “regular” salary or wages. The Direction states regular salary or wages are wages that cannot vary unless the variation arises from a non-discretionary payment. Clause 7.19 sets out that a non-discretionary payment includes (but isn’t limited to) payments in respect of fees, commission or overtime, or a payment made in recognition of the employee undertaking additional/exception responsibilities. It must a payment made as a legally enforceable agreement, understanding, scheme etc.
• The Direction now outlines the criteria for a claim to be made for employees who have had their contract of employment terminated by virtue of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
• A claim for payment under CJRS must be made in accordance with the updated Direction if the claim is made after the day on which this direction is first published (20 May 2020).

View the updated Direction here.

See the original Direction here.

Aspire Comment

The updated Direction provides some much-needed clarification, however, is it too little, too late? The new Direction still references the CJRS only being open until the end of June 2020, with the Chancellor recently stating that the Scheme will run until the end of October 2020. The clearer format “tidies” the originally drafted clauses but is not enough to answer all of our burning questions, leaving huge loopholes which could ultimately result in HMRC challenging employers’ claims.

Many employers will have acted on their initial interpretation of the Direction and HMRC’s guidance. We have seen varying interpretations, however, it is essential to remember that HMRC’s guidance is only an interpretation of the law, and therefore, as long as you have taken reasonable care and have recorded this where possible, you should have a defendable position.

Aspire are offering a “Health Check”, where we will aim to duplicate the compliance investigations which we expect to see HMRC’s Fraud Investigation Services department to take during the years following the pandemic. See our blogs page where we discuss the necessity to have your policies and procedures in order to mitigate the risk if HMRC decide to investigate your claims. Aspire will produce a report with guidance and remedial actions.

If you wish to discuss this further, please call us on 0121 445 6178 or email enquire@aspirepartnership.co.uk.