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CJRS – emerging issues and answers

Updated 5 May 2020: The Tax Faculty has expanded its popular 'Top 10 things we don't know' article to summarise additional emerging issues about the Coronavirus Job Retention Scheme (CJRS) and the answers that HMRC has provided.

1. Agent access to the system

It was not clear exactly what authority agents need to have in place to be able to apply for CJRS grants.

HMRC has now provided details to ICAEW's Tax Faculty of what was needed to authorise an agent to make claims for CJRS grants. HMRC is still working on a simpler process

2. What furloughed directors can do

HMRC’s guidance says that furloughed directors can carry out duties which are necessary to fulfil statutory obligations they owe to the company. It is not clear whether this includes preparing accounting records, VAT returns, passing information to the accountant to allow then to prepare accounts and returns, pay suppliers, process payroll etc.

The Tax Faculty suggests taking a pragmatic, sensible approach, avoiding any activity that could be construed as generating revenue.

3. Requirement for a national insurance number

The application for a CJRS grant requires a national insurance number. HMRC has confirmed that organisations claiming for 100 or more employees and who are uploading a spreadsheet should include a payroll or employee reference number if no national insurance number is available. The missing national insurance number will not cause a problem with the application, but the employer may be contacted to query why a national insurance number has not been provided. Where an employer has fewer than 100 furloughed employees, but has one or more without a national insurance number they should contact the COVID-19 helpline on 0800 024 1222 who can process their claim over the phone.

These processes also apply to claims for under 16 year-olds who do not yet have a national insurance number.

4. Requirement for a UK bank account

One of the requirements for a CJRS grant is having a UK bank account. Some employers use a UK representative to handle their payroll and payments go through the representative’s UK bank account (sometimes known as a client account). The employer does not have their own UK bank account but operates all payments via the client account. This may prevent some claims.

It appears that employers without their own UK bank account will not be able to make claims until such time as HMRC provides a solution.

5. Requirement for an SA UTR, CT UTR or CRN

HMRC’s guidance indicates that the application for a CJRS grant requires the employer to provide one of: a self-assessment UTR, a corporation tax UTR or a company reference number. The workaround for employers without one of these identifiers is to answer ‘No’ to the questions:

  • Does the employer submit a company tax return?
  • Is the employer registered for self-assessment?
  • Is the employer registered at companies house?

The applicant or agent will then be asked another question, which is: ‘What is the name of the employer?’ and the claim can proceed.

This means that employers who do not have any of these references (eg, those who employ domestic staff and some overseas companies) are not prevented from making claims.

6. TUPE transfers and payroll consolidation

On 1 May 2020 HMRC updated its guidance on employees transferring under TUPE or business succession rules. CJRS grants are available where employees transfer under these rules after 28 February 2020, or a group of companies consolidates multiple PAYE schemes after this date.

The previous version of HMRC’s guidance indicated a date of 19 March 2020 which caused a problem for a number of businesses; this issue was resolved satisfactorily following representations from ICAEW.

7. Employment allowance

It was not clear how the grant interacts with the employment allowance. On 17 April HMRC provided this clarification in its guidance, Work out 80% of your employees wages

"In calculating the total employer National Insurance contributions paid in any pay period, the employer should subtract any employment allowance used in that pay period. If you have not, or do not expect to pay any employer national insurance contributions in a pay period as a result of the employment allowance, you should not claim any employer national insurance contributions costs for furloughed employees in that pay period. If you expect to exhaust any employment allowance in a pay period then you should claim the lower of the employer national insurance contributions grant calculation, and the employer national insurance contributions costs that you paid, or expect to pay across your entire payroll."

The Tax Faculty suggests that, in some cases, it may be simpler not to claim employment allowance, avoiding the need to adjust the CJRS grant for employment allowance but giving the same net result. This leaves open the possibility of claiming the employment allowance later in the tax year once the CJRS has ended; this appears to be permitted by the legislation which does not require an immediate claim to employment allowance and allows claims to be backdated four years. The CJRS guidance requires the grant to be reduced by the employment allowance only where it has been claimed. The Tax Faculty has asked HMRC to confirm that this is an acceptable practice. 

8. Holidays and bank holidays

HMRC’s guidance was silent on the impact of bank holidays and annual leave.  

On 17 April HMRC provided this clarification in its new guidance, Work out 80% of your employees wages:

"Furloughed employees continue to accrue leave as per their employment contract.

"The employer and employee can agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.

"Employees can take holiday whilst on furlough. Working Time Regulations require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks. Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations.

"Employers will be obliged to pay additional amounts over the grant, though will have the flexibility to restrict when leave can be taken if there is a business need. This applies for both the furlough period and the recovery period.

"If an employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up their usual holiday pay, or give the employee a day of holiday in lieu.

"During this unprecedented time, we are keeping the policy on holiday pay during furlough under review."

9. Can furlough periods be extended?

HMRC’s guidance says: “If your employer chooses to place you on furlough, you will need to remain on furlough for a minimum of three consecutive weeks. However, your employer can place you on furlough more than once, and one period can follow straight after an existing furlough period, while the scheme is open.”

The Tax Faculty had interpreted this to mean that once an employee has been furloughed it is not possible to extend the furlough period.

We now understand from HMRC that it is possible to extend furlough periods. The update provided by HMRC says: “Furlough periods can be extended beyond the minimum three-week period. Each consecutive period counts as a single furlough period, regardless of the initial period. The clock is only reset should the employee return to work and then be put on furlough. For example, an initial furlough period of three weeks could be extended for a further two weeks, provided the employee does not return to work at any point.”

10. State Aid

The UK's Department for Business, Energy and Industrial Strategy has confirmed that CJRS grants do not constitute state aid.

11. Annual payroll periods

The HMRC CJRS portal is rejecting claims from some annual payrolls. The legislation - paragraph 5(a)(i) of the direction - makes it clear that claims must relate to an employee to whom the employer has made a payment of earnings in the tax year 2019/20 that was made before 19 March 2020. This issue has been raised with HMRC, but it would appear that the system is working in accordance with the legislation and the annual payment must have been included in an RTI report filed by 19 March 2020.

12. Correcting mistakes in a CJRS claim

Noting that it is not currently possible to make changes to a claim, the Tax Faculty asked HMRC how employers can correct mistakes made when making a claim.  

HMRC responded: “The ability to amend for future claims will be available, but we do not have a process in place at the moment.”  

Employers should take care before running their payroll for furloughed employees and before making a claim for a grant under the CJRS portal. The need to exercise due care is highlighted by the fact that there is currently no ability to correct mistakes, but care should be exercised for the duration of the scheme regardless of whether mistakes can be corrected.

13. Definition of a claim period

The Tax Faculty asked HMRC whether all employees furloughed during a month have to be included in one claim as some employers may find it easier to track claims for segmented sections of the payroll, (eg, by location or by period of furlough).  

HMRC responded: “A claim period is whatever the employer wants to make it – so can be a week, a month, etc depending on what suits the employer – they are likely to want to use a claim period that works best for them. Customers cannot not make multiple claims for different groups of employees covering the same claim period from the same PAYE scheme. For any given claim period, all employees on a PAYE scheme must be included. A subsequent claim for further employees within the same claim period will look like a duplicate claim to the system.” 

The Tax Faculty understands that the reason for excluding multiple claims for the same claim period is to protect the system from being abused. A claim should be made for each PAYE scheme operated by an employer. Care should be taken to include all eligible employees for a claim period within a single claim as an additional claim is not possible for the same claim period.  

14. When to make a claim

The Tax Faculty requested clarification about when to make a claim as HMRC’s guidance indicates that only one claim can be made in a claim period and this must be shortly before or during running payroll.  

HMRC responded: “Claims can be made in anticipation of an imminent payroll run, at the point you run your payroll or after you have run your payroll. Claims should cover all relevant furloughed employees for a claim period. A separate claim needs to be made for each PAYE scheme operated.”  

A separate claim should be made for each PAYE scheme operated by an employer. You can claim 14 days in advance so claims cannot end more than 14 days ahead of the date of the claim. You can claim after the payroll has been run and can aggregate pay periods into one claim. Care should be taken to include all eligible employees for a claim period within a single claim as a further claim is not possible for the same claim period. There is no restriction on the frequency of claims.

15. 100 employee minimum for uploading spreadsheets

Claims for fewer than 100 employees have to be made directly in the HMRC portal. Claims for 100 employees or more can be made by uploading a spreadsheet with the details. This makes it more onerous for smaller employers and for agents handling claims for a number of smaller employer clients. The problem is exacerbated because of the limited time in which the forms must be completed on the system (30 minutes). Members have asked why this limit has been imposed and why it is not possible to upload spreadsheets for employers with fewer than 100 furloughed employees. 

HMRC has indicated that it will consider reducing the 100-employee requirement and allow file uploads for smaller employers, but this may not be possible.

16. Working vs calendar days in calculations

HMRC’s guidance says that calculations should use calendar days when working out the amount of the grant for a period in which an employee has been furloughed for only part of the payroll period. Many employers use working days when doing payroll calculations. HMRC has confirmed that calendar days must be used.

17. Address required on the CJRS portal

The HMRC CJRS portal includes a screen which asks for: “The address associated with the employer’s bank account” - this is just after the bank account details have been requested. 

There has been some confusion about whether this should be the employer’s address or the address of the bank. The Tax Faculty understands that the address the employer’s bank statements are sent to should be provided. 

Further ICAEW support:

HMRC guidance: