More guidance for furloughed directors on annual payrolls
29 January: ICAEW’s Tax Faculty highlights updated HMRC guidance confirming that directors paid annually and claiming grants under the third version of the Coronavirus Job Retention Scheme must align salary payments with claims.
The legislation enacting the Coronavirus Job Retention Scheme (CJRS) published on 12 November 2020 states that the costs which can be recovered in a claim period are only those which “relate to the payment of earnings to the employee during that period”.
For directors using an annual payroll model, perhaps paying themselves in dividends at intervals while their salary is paid in March, this means that the their grant claim must be made in respect of the same month that salary is paid and reported under RTI .
On 26 January, HMRC updated example 3.17 in its guidance on calculating employees’ wages, which relates to an annually paid director last paid on 30 March 2020.
It confirms that prior to 1 November 2020 no CJRS grant could have been claimed because the director did not receive a salary in the tax year 2019-2020 reported through RTI by 19 March 2020.
They are, however, eligible for the third version of the CJRS and are furloughed from 1 November to 30 November 2020, with the reference date of 30 October 2020.
The guidance states: “The director is not due to be paid until 30 March 2021, but employers can only claim CJRS in advance if the payroll run is imminent. If W Ltd claims CJRS for November 2020 in respect of this director, they will need to pay them (and operate PAYE) earlier than usual.”
In effect, the CJRS claim can only be made if the salary payment date was brought forward to November.
ICAEW’s Tax Faculty warns those on annual payrolls that any mismatch of claim and payment date could invalidate claims and furlough grants would need to be repaid to HMRC.