HMRC published the direction on the Coronavirus Job Retention Scheme on 15 April 2020, setting out the basis for how to claim. In principle, the scheme is an easy one; employers can claim back up to 80% of their furloughed staff’s wages, capped at £2,500 per month, plus the associated employer National Insurance and pension contributions, for those in an approved pension plan. Easy, you might say, until you actually come to work out:

• staff that are eligible, and if they remain eligible,
• whether they are fixed or variable paid, 
• their average earnings, 
• salary sacrifice implications, on both average earnings, and payroll treatment going forward,
• the periods over which this average is arrived at, especially those who are not paid in the week or month for which the work is performed,
• sick, maternity or unpaid leave absences. 

We have learned a lot over the past month, and so too has HMRC. Their guidance, and in particular their online calculators have evolved, reflecting the complexities once you get into the detail. Yet they still have more work to do, especially for employers who have voluntarily chosen to top up wages. Trying to tackle how to apportion the employer NIC element of the claim in these scenarios, has proven less than straightforward, and some companies may have underclaimed the employer NIC in certain circumstances. 

Whilst it is good that HMRC approach has adapted to the many permutations that employers have in place, the changing of the goal posts has proved a challenge for employers seeking to get their claim right first the time, which is a key feature of the rules. If staff have not been paid the CJRS to which they are entitled, employers will be required to repay the CJRS. 

Now that the scheme has been extended until the end of October, and at the current 80% of wages rate, it is important that employers reflect on the evolution of the scheme, and seek to embed a robust process into payroll and claims handling over the next six months. 

The site for claims appears to be holding up pretty robustly, and claims are being paid in the six days or less, as promised. HMRC have also introduced a save option now, so that you can go back into the claim and complete it at a later date. It still remains a challenge though to submit only one claim per period, and for this to include everyone you are entitled to claim for. Also, the fact that you cannot claim more than 14 days in advance, is proving challenging at a practical and cash flow level the longer furloughing continues. 

HMRC has recognised that, in particular, early claimants, may have made inadvertent errors in their approach and calculations, and are currently looking at how adjustments can be made by employers to earlier claims, ahead of any formal audit activity by HMRC. Given the amounts involved, it is clear that HMRC will undertake audits and are likely to focus their attention initially on employers exploiting the regime. 

Employers should use the time now available to review their previous claims, calculate any discrepancies so they are ready to make corrections when HMRC publish the way in which they wish these to be submitted. It is important that you do not offset or adjust May claims, with any March or April adjustments. Instead, adopt the updated more accurate approach to calculations for May onwards, which will strongly evidence that you are acting responsibly and within the spirit of the regime. Having files available computing any retrospective adjustments will also be invaluable, enabling employers to react quickly when the guidance is available, and pre-empt any audit enquiries from HMRC. 

We are also seeing a change in attitude from HMRC for certain employers who have deferred their PAYE remittances or formally sought time to pay, whilst also availing themselves of CJRS. HMRC do expect employers to use the funding for the purposes it was designed for, so payments to them for PAYE and NIC should be made, along with the contractual employer pension contributions legally due to be paid. 

How can A&M Taxand help?

A&M Taxand can advise on all aspects of the CJRS.  We have undertaken reviews of a number of claims, and have developed a comprehensive tool to assist with the checking of computations and claims submissions. 
 
Please do contact your usual A&M point of contact, or Louise Jenkins or Tracey Norton from our Reward & Employment Tax Solution team, should you require any assistance with the points raised above.