Page last updated 7 October 2021 

On 20 March 2020, the Government announced the Coronavirus Job Retention Scheme ('the scheme' or 'CJRS') to provide support for employers to enable them to continue paying part of their employees’ salaries rather than lay them off as a result of the impact of coronavirus. Initially running until the end of May, then June, on 12 May 2020, the Chancellor extended the scheme further until the end of October 2020. Following the Government's announcement of the second lockdown in England from 5 November 2020, the Coronavirus Job Retention Scheme was extended again until December 2020. Details of the extended scheme (which in the end ran until 30 September 2021) can be found on a separate page. 

On 29 May 2020, major changes to the original scheme were announced. In effect there were two schemes prior to 1 November 2020 - the 'mark I' scheme which ran until 30 June 2020 and the 'mark II' scheme scheme which ran from 1 July 2020 to 31 October 2021. The 'mark II' scheme introduced the concept of 'flexible furlough'  - which allowed employees to work some of the time and be furloughed for the rest of their time. The aim of this was to help employees back into work. For some of the period of the mark II scheme employers were also asked to contribute towards the cost of their furloughed employee's salaries to replace part of the contribution made by the Government. 

Other related schemes

At the Summer Statement on 8 July 2020, the Chancellor announced an incentive to retain furloughed workers in the form of the Job Retention Bonus. This was subseuqently withdrawn when it became necessary to extend CJRS into 2021. 

On 24 September 2020, as part of the Winter Economy Plan, the Chancellor announced the Job Support Scheme. This scheme was originally scheduled to take effect from 1 November 2020 and run until 30 April 2021 and was later adjusted to provide different support to open and closed businesses. Following the announcements on 31 October 2020, the start of the Job Support Scheme was deferred as the CJRS was extended and in practice has not yet ever come into effect. Our understanding is that the JSS remains deferred. 

Guidance on the Job Retention Scheme 

To illustrate the scale of the Job Retention Scheme, the Government reported that by the end of the mark I version of the scheme on 30 June 2020 it had been used by over one million employers to protect the jobs of around 9.4 million workers at a cost of £26.5 billion.

This article covers the following topics relating to the versions of the Job Retention Scheme which ran between 20 March and 31 October 2020:

• Key Dates
• HMRC guidance and Treasury Directions
• Which employees were eligible?
• Who could be furloughed?
• For how long could staff be furloughed?
• How were employees furloughed?
• How did flexible furlough work?
• How were claims made?
• Claims under the Mark II scheme
• Could agents help their clients to claim?
• What were furloughed employees entitled to be paid?
• What did employers receive under the scheme?
• What must be reported under RTI?
• How was this treated in the employer's business accounts?
• Checking claims
• What happened when the scheme ended?
• Working while furloughed
• Employing a furloughed worker

The scheme applied not just to employees but also to workers who were paid via PAYE. For consistency we have used the term employee throughout this note.

Key Dates

The key dates for changes to the scheme are set out below. 

• 10 June 2020 - In most circumstances this will be the last day on which an employee can be furloughed for the first time in order that they can complete the minimum three week period under the mark I scheme before the scheme closed to new entrants on 30 June.
• 30 June 2020 - The original 'mark I' scheme closed to new entrants.
• 1 July 2020 - The 'mark II' version of the scheme took effect. From this date, the scheme was only available to cover the wages of employees who were furloughed at some point under the 'mark I' scheme. At the same time, employers were able to bring back furloughed employees on a part time basis, with the furlough scheme contributing to 80% of their salary (subject to the relevant cap) for their normal hours not worked.
• 31 July 2020 - This was the deadline for employers claiming under the 'mark I' scheme to have completed and submitted all claims for the period to 30 June 2020.
• 1 August 2020 - From this date the scheme no longer covered the costs of employers NIC and pension contributions on furloughed wages and employers were required to cover this element of the cost.
• 1 September 2020 - The Government contribution was reduced to 70% of wages, up to a cap of £2,187.50 per month, for the hours the employee did not work. Employers had to make up the difference of 10% to bring furlough payments to 80% of wages (up to a cap of £2,500) for unworked hours, while continuing to meet NIC and pension contributions on furloughed wages.
• 1 October 2020 - The Government contribution was reduced to 60% of wages, up to a cap of £1,875 per month for the hours the employee did not work. Employers had to make up the difference of 20% to bring furlough payments to 80% of wages (up to a cap of £2,500) for unworked hours, while continuing to meet NIC and pension contributions for furloughed wages. 
• 31 October 2020 - The 'mark II version of the scheme ended.
• 1 November 2020 - The 'extended' or 'mark III' version of the scheme commenced. 
• 30 November 2020 - This was the deadline for claims under the mark II scheme. After this date, employers were not be able to submit, or add to, any claims.

HMRC Guidance and Treasury Directions

Government guidance on the scheme was updated regularly throughout the period the schemes were live. There are a number of pages of guidance which could be accessed from the central landing page here - although it should be noted that earlier guidance was superceded by guidance for the extended scheme. On 3 August 2020, the detailed guidance for the mark I version of the scheme was removed from the main collection of guidance. Details of how to access guidance for the mark I scheme in the UK Government Archive can be found here.

Specific guidance was also available on holiday entitlement and pay during coronavirus (COVID-19).

In addition to the above, a step by step guide to making a claim under the mark I scheme was published on 17 April 2020 which was updated on 11 May 2020. Employers were advised to check that they were referring to the latest guidance before making a claim. 

HMRC also produced a Coronavirus Job Retention Scheme calculator which, while it did not address all situations, helped employers to calculate the amount they could claim. Again, the calculator was updated as the scheme progressed. 

Detailed Treasury Directions for the mark I scheme were published on 15 April and 20 May 2020. Claims made after 20 May 2020 had to comply with the notes set out in the Direction of 20 May.

A further Direction covering both the mark I and mark II schemes was published on 26 June 2020. The original scheme Directions continued to have effect but were modified by this latest Direction.

Prior to the Treasury Direction for the mark II scheme, HMRC provided a summary factsheet of the intended policy.

Particularly in the early months of the scheme, HMRC asked employers to look online or speak to their agent for advice and guidance in the first instance and only to contact HMRC if absolutely necessary as HMRC helplines were under a lot of pressure.

Scheme grants were not classed as state aid.

Which employers were eligible?

The scheme covered employers in business, in the public sector, Local Authorities and private individuals with staff. While designed for employers whose operations had been affected by COVID-19, it was open to all employers because all businesses were impacted in some manner.

According to the Treasury Directions and HMRC guidance, any UK employer was be eligible if they had:

• a PAYE scheme that had been created and started by 19 March 2020,
• enrolled for PAYE online and
• a UK bank account

Initially the cut-off date for having a PAYE scheme in place was 28 February 2020 - this was moved to 19 March when the first Treasury Direction was published on 15 April 2020.

From 1 July 2020, there were further restrictions on both which employees could be furloughed (see below) and the number of employees that could be furloughed in any given claim period. The number of employees on any given claim relating to periods after 1 July 2020 was also not allowed to exceed the maximum number of employees included on any claim made prior to 30 June.

The Treasury Direction of 20 May 2020 also required that the employer had a PAYE scheme registered with HMRC's RTI system at the time of making a claim. This suggested that if an employer lays off all their staff and wound up their payroll scheme, any scheme claims should be made before the PAYE scheme was closed down.

The employer was required to provide details of a UK bank account which belonged to them and could accept BACs payments. As the account needed to belong to the employer it appears that employers who used a representative in the UK to make payments via the representative’s client account were not able to claim.

Employers with more than one PAYE scheme were required to make separate claims for each scheme.

HMRC confirmed that groups of companies who had consolidated their PAYE schemes after 28 February 2020 and transferred employees to a new PAYE scheme were able to apply. Similarly, if an employee was transferred to a new PAYE scheme after 19 March 2020 and either the TUPE rules or business succession rules applied, then a claim should still be possible.

Who could be furloughed?

Employees under any type of contract could be furloughed as a result of circumstances relating to COVID-19 including full time and part-time employees, those on zero-hours or flexible contracts and those on agency contracts (including workers employed by umbrella companies) and limb (b) workers paid through PAYE.

To be furloughed under the mark I scheme, an employee must have been on the employer’s payroll at 19 March 2020. (This was a change to the initial guidance which had set the cut-off date at 28 February 2020.) In practice, this meant that a payment in respect of earnings needed to have been made and notified to HMRC on a Real Time Information (RTI) submission on or before 19 March 2020. An employee or worker paid under PAYE who started after this date, or who had started but not been paid by that date, was not eligible for the mark I scheme (and thus not eligible for mark II scheme either- although they could have been eligible for the mark III scheme.) The deadline was set to help reduce the risk of fraudulent claims, although it was appreciated by HMRC that some people were adversely affected and missed out from inclusion in the scheme.

Mark II scheme

The mark I scheme closed to new entrants on 30 June 2020. From 1 July 2020, only employees who have already been furloughed under the mark I scheme could be included in the mark II scheme. Since an employee had to be furloughed for a minimum of three weeks to be eligible for the scheme, this meant that the final date on which an employee could be furloughed for the first time was 10 June 2020.

The only exceptions to the 10 June 2020 deadline were employees returning from any form of parental leave (maternity, paternity, adoption or parental bereavement) after 10 June. Such individuals could be furloughed for the first time after 10 June provided that:

• The employer had previously claimed for at least one furloughed employee between 1 March and 30 June.
• The employee started their parental leave before 10 June and finished it after 10 June 2020.
• The employee was on the employer's payroll on or before 19 March and a RTI submission had been made in respect of them in 2019-20.

On 15 June 2020 the Chancellor confirmed a similar exception would also apply to reservists returning from active duty. It was possible to furlough them for the first time after 10 June provided that their employer had already made a claim under the mark I scheme for another employee.

Even if the employee was not actually furloughed on 1 July 2020, as long as they had been furloughed at some point for the minimum three month period between 1 March and 30 June 2020, they could be re-furloughed after 1 July. This was relevant where employers were furloughing groups of staff on rotation - for example where one team would be working for three weeks before being placed on furlough and replaced by another team.

Special cases

Foreign nationals

Foreign nationals were also eligible to be furloughed as well as all employees on all categories of visa as grants under the scheme were not counted as 'access to public funds'.

Employees recently made redundant

Employers could re-employ any ex-employees who had been made redundant after 28 February 2020 and put them on furlough instead. Such individuals could be reemployed after 19 March. This applied as long as the employee was on the employer's payroll by 28 February 2020 and included in an RTI submission made on or before that date to HMRC. Once furloughed under mark I, they could continue to be furloughed under mark II.

HMRC created a table showing when an employee must have been employed and when an RTI submission must have been made to help determine which employees who have recently been made redundant can be included within the scheme. (link removed as no longer available.) 

Specific guidance was also provided via GOV.UK for employees on fixed term contracts which had come to an end.

Employees who were being made redundant

HMRC guidance was updated to confirm that employers could continue to claim furlough payments for the wages of employees who are serving statutory notice periods - this was not the subsequently the case for the mark III, extended scheme. Grants could not be used however to substitute redundancy payments. Where the employee was being made redundant because the employer was insolvent, further guidance was provided here (although please note this has been updated since publication and you may wish to consult archived versions of this page for the guidance as it applied to mark I and II of the scheme.) 

When calculating an employee's statutory redundancy pay, employers were advised to use their normal pay rather than the (potentially) reduced amount received under the furlough scheme. A statutory redundancy pay calculator is available on GOV.UK.

Employees on unpaid leave

If an employee started unpaid leave after 28 February 2020 then they could be furloughed instead and receive payments under the normal rules for any furloughed member of staff.

If they were on unpaid leave before 28 February 2020, then they couldn't generally be furloughed until the date on which it was originally agreed or contemplated that they would return from unpaid leave. Where it was uncertain when the individual would return, but the date was dependent on a particular event or circumstance occurring, then furlough could start when that event had occurred.

Where it was agreed at some point between the start of the unpaid leave and 20 March 2020 to change the date when the unpaid leave would finish, based on the Treasury Direction of 20 May, this agreement could be taken into account when considering when the unpaid leave was intended to end.

The final date by which an employee returning from unpaid leave could be furloughed was 10 June 2020.

Employees on sick leave, shielding or with family responsibilities

You could furlough the following employees (provided that for furlough to continue under the mark II scheme, the individual had been furloughed under the mark I scheme):

• Individuals on sick leave or isolating due to COVID-19.
• Individuals who were in a vulnerable group and who were shielding in line with Government guidance (including those who needed to stay at home with an individual who was shielding).
• Employees who could not work because they had to care for children or other family members.

There was no provision which would allow an employee who was required to shield for the first time after 10 June (for example if they received a diagnosis or started treatment after 10 June which then required them to shield) and who had not previously been furloughed to be included in the mark II scheme.

In respect of employees on sick leave, provided that there was a business reason to do so, HMRC guidance at the time confirmed that employees who were on sick leave were eligible to be placed on furlough (subject to the mark II rules from 1 July) - at which point they would cease to receive sick pay and receive furlough pay instead.

The Treasury Direction of 20 May said that, in these circumstances, the employee and employer should agree when the period of sick leave was considered to end. If a furloughed employee became sick, then the employer could choose to move them to SSP and pay them according to their statutory SSP rights (in which case the employer would pay their SSP and could be entitled to a two-week rebate), or keep them on furlough at their furloughed rate. In the latter case, the employer could continue to claim support under the scheme. It was not permitted to make an SSP rebate claim and a scheme claim for the same employee for the same period of time.

Office holders and directors

We received a number of queries at the launch of the scheme from members wanting to know if company directors – particularly those running family businesses and those with personal service companies (PSCs) could be furloughed. These individuals often receive a modest salary and take the rest of their income as dividends. While some may consider themselves effectively self-employed, they are not actually self-employed from a legal perspective, and were not eligible for the Self-Employed Income Support Scheme.

On 4 April 2020, HMRC confirmed that office holders, including company directors could be furloughed and that support would be available for the PAYE (i.e. salary) element of their remuneration. There was no equivalent support for any loss of dividend income.

There were two key issues to consider before furloughing a director under the mark I scheme:

Firstly, many directors in small owner-managed businesses have their salary paid on an annual basis. The Treasury Direction of 15 April required that, for an employee (including a director) to qualify for the scheme, they must have been on the payroll at 19 March 2020 and have received a payment in the 2019/20 tax year. This meant that a payment to the director must have been notified to HMRC via RTI on or before 19 March 2020. In practice, many annual directors' salaries had not been run by that date, so these directors were unable to claim under the mark I scheme and, accordingly, could not access the mark II scheme.

Secondly, director(s) seeking furlough under the mark I scheme had to consider carefully what work they could do while on furlough, given that any company has ongoing statutory obligations with which it must comply.

Companies with two or more directors could choose to furlough some, but not all of their directors, leaving those remaining in work to carry out on their normal duties and ensure that the company’s statutory duties were complied with.

For companies with only one director (such as a PSC), or where all directors had been furloughed, the guidance permited a furloughed director to carry out particular duties to fulfil the statutory obligations they owed to their company. (In addition, the Treasury Direction of 20 May specifically allowed directors to make CJRS claims and to pay salary/wages of their employees while on furlough.)

However, a furloughed director was not supposed do more than would reasonably be judged necessary for that purpose and they couldn’t do any work which generated a commercial revenue or provided services to their company during their furlough time. This meant that furloughed directors were limited in terms of what they could do under the mark I scheme. This was challenging for some owner managed businesses who were hopeful of continuing to be able to do some work during those months in order to keep their business going. In this case, they had to choose between furlough pay or keeping the business going on a smaller scale.

If a director was furloughed under the mark I scheme this should have been documented. HMRC’s guidance recommended that, in addition to confirming in writing to the director concerned, that the decision was formally adopted as a decision of the company and noted in the company records.

Directors and Mark II furlough

We requested further detailed guidance on how flexible furloughing would work for company directors from 1 July 2020 but were advised that no further guidance for company directors was going to be provided and that members should use their own judgement.

While directors should be able to carry out some work for the company while also claiming some furlough support under the mark II scheme, there were likely to be significant challenges evidencing both the usual and actual hours for directors, who do not typically have a recording of this sort of information.

If a director's furlough continued under mark II, further documentation was required to confirm this decision.

An article on the mark II scheme and directors highlighting these issues was published in Accountancy Age on 14 July 2020. (For more discussion on self-furloughing as a director under the mark I scheme, please see this article originally written for Accountancy Age.)

Apprentices

Apprentices could be furloughed in the same way as other employees. They could continue to train while on furlough, as long as they received at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for the time they spent training. Separate guidance covered how apprenticeship learning arrangements were affected by COVID-19.

Maternity leave and other parental leave

The normal rules for maternity leave, adoption leave, paternity leave or shared parental leave continued to apply and it was possible claim back through the scheme for any enhanced (earnings related) payments to furloughed employees.

Care was needed however in calculating the pay due to employees under these leave provisions. A statutory instrument was published on 25 April 2020 together with an explanatory memorandum setting out amendments to how these allowances should be calculated for employees on furlough who become eligible for one of these payments on or after 25 April 2020. The changes to the calculations were intended to ensure those on furlough who were receiving reduced earnings did not lose out. 

HMRC updated its guidance as follows:

• 'Statutory Adoption Pay: employee circumstances that affect payment
• Statutory Adoption Pay: manually calculate your employee's payments
• Manually calculate your employee’s Statutory Parental Bereavement Pay
• Employee circumstances that affect payment of Statutory Parental Bereavement Pay  
• Statutory Paternity Pay: manually calculate your employee’s payments 
• Statutory Paternity Pay: employee circumstances that affect payment 
• Work out your employee's payments for Statutory Maternity Pay 
• Statutory Maternity Pay: employee circumstances that affect payment 

Individual employers

The guidance confirmed that individuals who employed staff such as nannies were also able to access the scheme and we presumed this would apply to all domestic staff (cooks, cleaners, etc.) provided that the employer was operating a payroll and the furloughed worker was on the payroll by 19 March 2020 for the mark I scheme. (Again, access to the mark II scheme depended on the employee being furloughed under the mark I scheme.) 

On 9 April, it was confirmed that any grant received by an employer who was not employing staff in the course of a business would not be taxable.

For how long could staff be furloughed?

Under the mark I scheme, employees had to be furloughed for a minimum period of three weeks. They could be furloughed for longer periods if required and the furlough period could be extended whist the employee was on furlough. Staff could be furloughed, return to work and then be furloughed again, but each furlough period had to be for a minimum of three consecutive weeks (21 consecutive days).

Employees could be flexibly furloughed from 1 July 2020.  From that date the three week period was no longer relevant and workers could be furloughed for any required period under the mark II scheme.

Transitioning from mark I to mark II

Where an employee was furloughed under the mark I scheme, but the three-week period required under mark I crossed the 30 June deadline and extended into July, they could not be flexibly furloughed until they had completed their three-week period. So if they were furloughed on 22 June while still under the mark I scheme, they had to stay on furlough for three continuous weeks until 12 July. They could then be flexibly furloughed from that date under the mark II scheme.

(NB To qualify for mark II furlough, any employee furloughed on 22 June must either have been furloughed previously as this was past the 10 June cut-off, or be returning from parental leave if this is the first time that they were furloughed.)

How were employees furloughed?

Affected employees had to consent to being furloughed. They had to be notified in writing that they were now furloughed, and it is required that a copy of the notification should be kept for five years. HMRC guidance from 12 June 2020 confirmed that agreement from the employee did not need to be in writing. A further agreement was needed if the employee was to move from full furlough to flexible furlough.

HMRC's guidance was updated on 12 June 2020 to add that the employer must also keep records of how many hours an employee worked and the number of hours they were furloughed (i.e. not working). We presumed at the time that this instruction only applies for the mark II flexible scheme only, although the guidance did not make this clear.

Any changes in an employee's status relating to full or flexible furlough was subject to existing employment law (including equality and discrimination law) and depending on the employment contract, could be subject to negotiation. If sufficient numbers of employees were involved, it may have been necessary to engage collective consultation processes to procure agreement to changes in terms of employment. A collective agreement between an employer and a trade union was considered to be an acceptable way of confirming furlough arrangements for the scheme.

Up to 30 June 2020, while on furlough an employee was not allowed to do any work for their employer or any linked or associated organisations. If an employee was still working, even on reduced pay or hours, then the employer could not furlough them or make a claim for their wages under the mark I scheme. HMRC took - and continues to take - any abuse of the scheme, such as requesting furloughed employees continue to work in furloughed hours, very seriously. Employees could though continue to carry out training, providing such training did not make money or provide services to their employer, or any company linked or associated to their employer.

From 1 July 2020, new flexibility was introduced to allow employees to return to work on a part-time basis. Under the 'mark II' version of the scheme which applies from that date, employees were allowed to return to work for any amount of time and on any shift patterns. While the employer had to pay them their usual rate for actual hours worked, the furlough scheme could be used to provide support for the hours that they would usually have worked but were not doing.

Under the flexible scheme, during the time that they were recorded as being on furlough, an employee was not allowed to do any work for their employer. Care was needed where the employee was salaried and used to working beyond contracted hours in order to get work finished. For example, where it was agreed to bring an employee back to work three days a week on a seven hour day, if they actually worked eight hours a day, while usually this overtime might not be paid normally, it appeared from the guidance that the actual 8 x 3 = 24hrs worked should be taken into account in determining how many hours were furloughed.

During both mark I and mark II phases of the scheme, employees were permitted to carry out union or non-union representative duties for the purpose of individual or collective representation of employees or other workers, provided that the work done did not result in the provision of services to, or generation of revenue for, their employer or anyone associated with their employer.

It is important to note that employees retained their usual rights to Statutory Sick Pay, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments during the furlough period.

How did flexible furlough work?

Under the mark II scheme, employees could be brought back, with their agreement, for any pattern of part-time working. This agreement had to be confirmed in writing. The employee were required to be paid their usual wages for hours worked (and National Minimum Wage requirements applied) while remaining eligible for the scheme for any of their normal hours not worked.

How were claims made?

HMRC designed a new, online portal for employers to claim under the scheme. Testing of the portal commenced on 8 April 2020 and the portal opened on 20 April 2020.

Employers or agents making a claim needed to be aware that only one claim could be made for each claim period. Claims could not be made for overlapping periods. All employees who had been furloughed in that period had to be included in the claim. Those requirements applied to both mark I and mark II schemes.

Records of claims (including the amount claimed, claim period, claim reference numbers, any calculations and details of usual and actual hours worked for flexibly furloughed employees) were required to be kept for six years.

Claims could be made in anticipation of a payroll run, during a run or after it. If a claim was made before the payroll is run because the employer needed the monies to make the payments to employees, the employer had to make the claim at least six working days before they were due to pay their employees to allow time for the funds to clear. A claim could be made up to 14 days in advance of a payment date to employees.

There was no email confirmation of claims made so it was necessary to print the confirmation screen as proof of submission. In the early months, users had to be careful as the system would 'time out' after 15 minutes of inactivity (not the 30 minutes suggested in HMRC guidance) which meant that they could lose data and be forced to start again.

If the employer was missing National Insurance numbers for any of their staff, HMRC provided a further update on 22 April 2020 setting out how to deal with this issue.

There were around 600 employers were are unable to file online (either for religious reasons or disability) and were thus unable to claim for the scheme online. HMRC supported this group through their usual Assisted Digital channels.

Abuse of the scheme was and is taken seriously by HMRC. Claims will be audited retrospectively and HMRC stated that they may contact employers - including by phone - to request further information about claims or any misleading information. HMRC also had the power to withhold payments before they were made and to seek to recover payments made outside the terms of the scheme where there is evidence of abuse.

Mark I claims

Details of how to calculate a claim were available on GOV.UK, including examples.

Claims for the period 1 March 2020 to 30 June 2020 under the mark I scheme had to be submitted by 31 July 2020. Claims could be backdated to 1 March 2020 and were paid by BACs into a UK bank account.

For mark I claims there was no limit on how long a claim period could be. A claim period started on the date that the first employee was furloughed and could continue to 30 June, or be broken into multiple claims of at least three weeks. (A claim period could not run beyond 30 June on the mark I scheme even if the employees remained on furlough.)

Amending a claim

Where an employer made an error in a scheme claim that meant they received too much money,  they had to pay this back to HMRC. The application system was upgraded to enable claimants to tell HMRC if they had over-claimed in a previous claim, enabling HMRC to reduce a later claim to take account of a previous error. Employers were required to keep records of any such adjustments for six years.

If an employer made an error in a scheme claim and did not plan to submit further claims, they needed to contact HMRC for a payment reference number in order to pay back the overpayment. Further details were available here.

The deadlines to notify HMRC and repay any over-claims were the latest of whichever date applies below:

• 90 days of receiving the CJRS money that the employer was not entitled to
• 90 days of when circumstances changed so that the employer was no longer entitled to keep the CJRS grant
• 20 October 2020 if the employer received CJRS money they were not entitled to, or if their circumstances changed, on or before 20 July 2020.

HMRC can charge penalties if over-claims are not corrected in time. HMRC has provided a factsheet with further details.

On 3 July, new functionality was added to allow employers to delete a claim within 72 hours of submitting it, which employers could use if they spotted a mistake and needed to resubmit.

If an employer under-claimed from the scheme, this could not be corrected online and was necessary to contact HMRC's helpline on 0800 024 1222. The deadline for correcting under-claims for the mark I scheme was 31 July 2020.

Claims under the 'Mark II' scheme

Claims under the mark II scheme were permitted from 1 July 2020. From that date, claims could be made for a minimum period of one week (7 calendar days) - unless claiming for the first few or last few days in a month and there there had been a claim for the previous period. Claims could not overlap calendar months. This was necessary because the amount of support reduced on a monthly basis from 1 August 2020.

Claims had to include all furloughed employees - whether full or flexibly furloughed - and employers were asked to avoid claiming for flexibly furloughed employees until their hours worked were known, otherwise the claim would have to be corrected at a later date. This could then delay when an employer made a claim in some cases so consideration had to be given to the cash flow implications. HMRC also asked employers to align, if possible, their claim and pay periods.

Employers needed to report both the hours worked and the usual hours that an employee would normally have been expected to work in a claim period. The employer was responsible for paying the wages due (plus Employers pension contributions and National Insurance contributions) for hours worked.

From 1 July 2020, the number of employees that could be claimed in any one claim period was not allowed to exceed the maximum number of employees that were claimed for in any previous claim period. So if the employer had made three claims for the period prior to 30 June with 15, 21 and 14 employees respectively, the maximum number of employees they could include on a single claim after 1 July was 21. 

This meant that if an employer had 20 staff and had been furloughing them in rotation with 10 working, and 10 on furlough at any point and had made a claim every three weeks, the maximum number of previously furloughed staff on a claim was likely to have been 10. It was not possible therefore to bring back all 20 staff on reduced hours from 1 July as only 10 staff could be included on any subsequent claim. Some form of rotation pattern (not necessarily three weekly) therefore needed to continue if there was not enough work for all 20 staff to return at once.

However, if the employer had made monthly claims instead - which would have included all 20 staff at some point - then their maximum number of furloughed staff would have been 20 and it should have been possible to put all 20 staff onto flexible furlough at once, provided they agreed to it.

Could agents help their clients to claim?

Agents that were authorised to act on behalf of clients for PAYE matters were able to file claims on behalf of their clients. However, file only agents (who submited RTI returns only), including Payroll Bureaus, were not be able access the service for data protection reasons.

How did agents obtain authorisation to complete a claim?

Agents who were authorised to act on behalf of clients for PAYE matters online were able to make claims. That meant that they:

• were registered as an agent with HMRC and have a PAYE agent code
• were enrolled for PAYE online Services for Agents
• had been authorised to act online for their client's PAYE. This could be via an existing FBI2 form or the Online Agent Authorisation process.

If an agent was unsure of the level of authorisation they have, they could check the list of payroll clients in their agent portal. If the client was listed as 'confirmed' they could make a claim on their client's behalf. However, if they were not listed, or listed as 'limited authorisation' then the agent could not claim on behalf of the client without obtaining further authorisation.

If an agent was registered with HMRC, but had not been authorised to act online for their clients in PAYE, they could seek authorisation to be able to act for the client.

Rather than using paper form FBI2 or the online agent authorisation process, agents could ask their clients to authorise them to act for PAYE through the client's Business Tax Account. This was a faster route to get the right permissions in place.

Prior steps required:

• The client needed to have enrolled for PAYE online for employers (the issue of activation codes was temporarily suspended to make this instantaneous)
• The agent had also be enrolled for PAYE online services for Agents
• The agent needed  to give their Agent Government Gateway ID to the client

Steps for client to authorise agent:

• The client signs into HMRC online services (their Business Tax Account)
• In their Business Tax Account, select 'Manage Account' and select the 'Add, view or change tax agent' option under the heading Tax Agents
• Select 'PAYE for employers' and click continue
• On the 'Manage who can access your taxes and schemes' page, click the 'Add an agent' link next to the service that you want to assign an agent for (e.g. PAYE)
• Enter the Agent Government Gateway ID provided to you by your agent and click continue
• Click on 'Add Agent' to confirm you want to add the selected agent
• You will receive confirmation the agent has been added on the screen

Putting in place the authorisation enabled an agent to act for the client in all PAYE matters online, not just for this scheme. So if this authorisation was intended to be specific to the scheme claim, the client should have been advised to remove the agent access via the BTA once the claim had been made.

HMRC looked at ways to make third party authorisations simpler but we didn't receive further guidance.

File only agents

File only agents could help to support their clients to make a claim by supplying information that they held on employees to those clients. Businesses needed the following information on each of their furloughed employees in order to identify furloughed employees and calculate the claim amount:

• National Insurance number
• Salary, National Insurance and pension contribution information.

HMRC anticipated that the demands for support by phone would exceed their capacity, and agents (including file only agents) were asked to help support businesses directly.

What were furloughed employees entitled to?

For each month that an employee is fully furloughed, the employer was required to pay the lower of:

• 80% of their regular wage
• £2,500

Employers could choose to pay their employees their full wage, but they were not obliged to do so.

If an employee took leave during their furlough period, they were entitled to be paid 100% of their usual pay for that period. A claim could be made for up to 80% of the pay under the scheme but the balance had to be topped up by the employer.

Where the employee was furloughed for less than a month, or was working part time, the £2,500 cap had to be pro-rated accordingly.

As the employee was not working, then the amount paid under the rules above could fall below the NLW or NMW if the payment was averaged over the hours that they would have worked. However, if the employee undertook any training during their furloughed period then they were entitled to the NLW/NMW for the time spent training. The amount paid had therefore to be enough to ensure than when looking at the hours they spent training the employee had received NLW/NMW for those hours. If this was not the case, the employer had to increase the payment accordingly.

From 1 July 2020, as employees could start to return to work under flexible furlough, they had to be paid their usual wage for any hours that they worked. For any period that they would normally work, but were instead part-furloughed and not working, they were entitled to 80% of their wages subject to a scaled version of the monthly cap of £2,500 which was proportional to the hours not worked.

Guidance on how to calculate the 'usual' hours worked for employees with fixed and variable hours was available on GOV.UK. For variable hours, reference was made to hours worked in the same period in 2019-20, or the average hours worked in 2019-20.

From 1 August 2020, the support that the mark II scheme provided towards that cost reduced in stages, and employers also needed to contribute towards the cost of wages for unworked hours.

What did employers receive under the scheme?

Until the end of July 2020, employers who furloughed workers were able to claim a grant of up to £2,500 per month for the regular wage of each furloughed worker, plus the associated costs of Employer’s National Insurance contributions and the minimum employer contributions under automatic enrolment. 

HMRC published full guidance on calculating a claim under the mark I scheme and a calculator here.

From August 2020, furloughed workers continued to receive 80% of their current salary (up to the cap of £2,500 per month if fully furloughed, or the relevant proportion of that cap if partly furloughed) for furloughed time, but employers were asked to pay a percentage towards the salaries of furloughed staff.

Where staff remained completely furloughed, the monthly cap shown below applied. Where they were part-furloughed and partly working, the monthly cap on the furlough claim had to be reduced accordingly.

	July 2020	August 2020	September 2020	October 2020
Government Contribution:
Employer NICs and pension contributions (on furloughed wages)	Yes	No	No	No
Furloughed wages for the fully furlouged employee	80% up to £2,500 per month	80% up to £2,500 per month	70% up to £2,187.50 per month	60% up to £1,875 per month
Employer Contributions:
Employer NICs and pension contributions (on furloughed wages)	No	Yes	Yes	Yes
Furloughed wages for fully furloughed employee	No	No	10% up to £312.50	20% up to £625
Employee receives (if fully furloughed)	80% up to £2,500 per month	80% up to £2,500 per month	80% up to £2,500 per month	80% up to £2,500 per month

What must be reported under RTI?

On 23 April 2020, HMRC issued guidance on what payments to report under RTI in respect of payments made to employees under the scheme.

How was this to be treated in the employers’ business accounts?

The grant received should have been treated as taxable income in the business's accounts. However, as it was designed to offset the allowable expenses of keeping staff on the books (who would otherwise not have been paid), the end result should have been that there was no profit on which to pay tax.

For employers (such as those with domestic staff) who were not in business, it was confirmed on 9 April that the grant monies received under the scheme would not be taxable on them personally.

Draft legislation on the taxation of all coronavirus support payments, including the Coronavirus Job Retention Scheme, was published on 29 May 2020. The legislation was subsequently enacted and can now be found in Finance Act 2020. The legislation allows HMRC to recover payments under the scheme which employers were not entitled to or where funds have not been used to pay furloughed employee costs.

Checking claims

HMRC continues to check claims made through the scheme. Payments may need to be repaid in full to HMRC if the claim is based on dishonest or inaccurate information or found to be fraudulent. HMRC issued the first batch of compliance letters to employers on 18 August 2020.

Employees and the public were asked to report suspected fraud in the Coronavirus Job Retention Scheme to HMRC in order to ensure that Government funds were not misused and were available to support the NHS and other Government priorities.

What happened when the scheme ended?

The scheme was intended to run for eight months from 1 March to 31 October 2020, with increased flexibility being introduced from 1 July. In practice the scheme was then extended to 30 September 2021 under similar rules. 

Working while furloughed

It was made very clear by Government and HMRC that any employees who were furloughed during the mark I version of the scheme were not allowed to undertake any work for their employer. The GOV.UK website said at the time:

“You cannot ask your employee to do any work that:

• makes money for your organisation or any organisation linked or associated with your organisation
• provides services for your organisation or any organisation linked or associated with your organisation

They can take part in volunteer work or training.”

This position changed from 1 July 2020, when the scheme was amended to allow more flexibility. Under the mark II scheme, workers were allowed to return part-time to do some work, for which their employer would pay their usual rate while receiving support from the furlough scheme for hours not worked. 

Whether the employee had been furloughed on a full or flexible basis, they should not have been carrying out work during furloughed hours. If they still had access to work emails, texts or phone calls, employers should have ensured that employees did not answer these. As a precautionary measure, employers should have considered instructing employees to include an out of office message on emails and phones explaining they were not carrying out any work during furloughed hours. 

For employees to continue working for their employer while furloughed raised the risk of the employer being suspected of fraud and being reported to the HMRC fraud line or to the National Crime Agency.  The employee could however undertake other paid work for another employer unrelated to the employer who had furloughed them.

As noted above, employees could still carry out union or non-union representative duties for the purpose of individual or collective representation of employees or other workers during their furloughed hours, provided that the work done did not result in the provision of services to, or generation of revenue for, their employer or anyone associated with their employer.

Employing a furloughed worker

Provided their existing contract allows, furloughed employees were allowed to take work with another employer during their furlough period as the Government did not wish to restrict the availability of labour during this period.

What an employee could not do, was any work that made money for the employer who had put them on furlough or any person connected with that employer during their furloughed hours.