CJRS – emerging issues and answers
Updated 30 June 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.
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’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.
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.
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.
The Tax Faculty has made representations to senior HMRC staff who have confirmed that ‘HMRC requires the employer to have a UK bank account for delivery, assurance and compliance purposes’. We do not expect HMRC to change their position and having a UK bank account is likely to remain a requirement.
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.
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.
HMRC’s guidance, Calculate how much you can claim using the CJRS, says:
“Adjusting your claim because of Employment Allowance
"You may be eligible to claim the Employment Allowance.
"The rules for claiming and applying the Employment Allowance are not different because you are claiming a Job Retention Scheme grant for your Class 1 employer NICs costs. You can claim for a grant towards your Class 1 employer NICs costs in claims up to 31 July 2020.
"Eligible employers can use the Employment Allowance to pay less employer NICs, until the allowance runs out or until the end of the tax year, whichever comes first. The Employment Allowance cannot be manually spread out over the tax year if it would otherwise be used up sooner.
"When working out how much employer NICs you can claim back from the scheme, you should subtract any Employment Allowance you have used in that pay period.
"If you’ve claimed the Employment Allowance and you do not have to pay any employer NICs in a pay period, you should not claim for any employer NICs costs through the scheme.
"If the amount of Employment Allowance you can claim will not cover the total employer NICs due, the grant you can claim is the lower of:
- the grant towards employer NICs costs that you’ve already calculated; or
- the employer NICs costs that you paid, or expect to pay, across your entire payroll
"Eligible employers can claim the Employment Allowance at any point in the tax year they are claiming for, or for 4 years afterwards. If you have claimed or will claim the grant for employer NICs, you must ensure that you do not receive relief for the same employer NICs costs twice. To do this, you can either:
- not claim the employer NICs grant;
- reduce the grant you claim to take account of the Employment Allowance; or
- contact HMRC via the employer helpline to restrict the value of your Employment Allowance claim.
"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. Attempting to get relief for the same costs twice is a fraud and may result in claims being investigated."
It is not clear from this guidance whether HMRC considers it acceptable to delay claiming employment allowance until later in the tax year when CJRS grants are no longer being claimed. The employment allowance legislation does not require an immediate claim and allows claims to be backdated four years. The CJRS guidance requires the grant to be reduced by the employment allowance but only where it has been claimed.
The Tax Faculty put this scenario to HMRC and in a response received prior to this version of the guidance HMRC appeared to confirm that it does not take exception to this approach so long as where employment allowance has been claimed, the CJRS grant is reduced accordingly and relief is not claimed for the same cost twice. This latest version of the guidance puts the matter in doubt once more; the Tax Faculty continues to press HMRC for clarity but it not clear whether this will ever be forthcoming.
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."
Under the rules for CJRS V1 there is a minimum furlough period of three weeks. HMRC has confirmed to the Tax Faculty that: “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.”
Under CJRS V2 rules there is no minimum furlough period.
The UK's Department for Business, Energy and Industrial Strategy has confirmed that CJRS grants do not constitute state aid.
For an annual payroll scheme to qualify for a CJRS grant the annual RTI report for 2019/20 must have been filed by 19 March 2020. 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. HMRC has confirmed that, in line with the rule that applies to all claims, the annual payment must have been included in an RTI report filed by 19 March 2020 and it does not intend to change this position.
On 5 June 2020 HMRC introduced the functionality to correct overclaims by amending subsequent claims.
The application system was updated and now asks if the claimant needs to reduce the claim to take account of a previous error. The amount of the claim will be reduced accordingly; a record of this adjustment should be kept for six years.
On 26 June 2020 HMRC published the process for employers that have made an error in a CJRS claim and do not plan to submit further claims. The employer needs to contact HMRC to obtain a payment reference number.
Underclaims cannot be corrected online; employers will need to contact HMRC and webchat is recommended.
HMRC has confirmed to the Tax Faculty that: “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. 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 and scheme is to protect the system from being abused. 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. Claims should be made for each PAYE scheme operated by an employer and include all eligible employees on that scheme. It is not possible to make separate claims for segmented sections of a payroll scheme, (eg, by location or by period of furlough).
For claims under CJRS V2 there is a minimum claim period of one week, except for orphan periods at the beginning and end of a month. Under CJRS V2 no claim period can extend across a calendar month end which in some cases will mean that pay periods will have to be split with separate claims for different parts of the pay period.
HMRC has confirmed to the Tax Faculty that: “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.”
Employers can makes claims up to 14 days in advance so claims cannot end more than 14 days ahead of the date of the claim. Claims can be made after the payroll has been run and pay periods can be aggregated 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. Employers with a PAYE scheme that includes employees with different pay frequencies will need to plan their claims carefully.
The timing of claims under CJRS V2 will require careful planning due to the minimum claim period of one week (except for orphan periods) and the requirement that claims cannot extend across a calendar month.
The deadline for claims under CJRS v1 is 31 July 2020. The deadline for claims under CJRS V2 is expected to be 30 November 2020.
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 although HMRC has now made it possible to save partly completed claims. 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. The Tax Faculty understands that HMRC has considered reducing the 100-employee requirement and allow file uploads for smaller employers, but at this stage it seems unlikely that the process will change.
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.
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.
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