How the CJRS changed from 1 November 2020
Practical guidance from ICAEW's Tax Faculty on the changes to the furlough scheme
Last updated: 17 November 2020
Seven things you may not have realised about the latest version of the Coronavirus Job Retention Scheme (CJRS), the UK government's furlough scheme which provides financial support to employers during the coronavirus pandemic.
The CJRS as re-engineered from 1 November allows businesses to furlough and claim grants for an additional group of employees.
The earlier versions of the CJRS (ending 31 October 2020) required an employee to have been employed and an RTI submission to have been made on or before 19 March 2020.
Claims for periods starting on/after 1 November 2020 can include individuals employed at 30 October 2020 provided an RTI submission has been made between 20 March 2020 and 30 October 2020 notifying at least one payment of earnings for that employee. New employees hired in late spring and summer can now be eligible for furlough grants.
There is no requirement for either employers or their employees to have used the scheme before to be eligible for periods from 1 November 2020.
Employers should remember to change the terms of employment contracts by agreement before furlough starts as this will be needed for new furlough arrangements.
Note that because of the rush to have everything in place for CJRS V3 in early November it was possible to use retrospective agreements. However note that only those put in place up to and including 13 November 2020 can be relied on for the purposes of a CJRS V3 claim.
What can employers claim for periods starting from 1 November 2020?
For employees on fixed pay, the claim is based on 80% of the usual salary/wages in a reference period.
The reference period is the last pay period ending on or before 19 March 2020 for employees who:
- were on the payroll on 19 March 2020 (ie, there had been a payment of earnings in the tax year 6 April 2019 to 5 April 2020, reported on an RTI submission made on or before 19 March 2020),or
- for whom you have made a valid CJRS claim in a period ending on or before 31 October 2020.
For all other employees, the reference period is the last pay period ending before 31 October 2020.
This can produce some unexpected results.
Illustration: Annie, Betty and Cathy
Annie and Betty have worked for X Ltd for many years each on a fixed salary of £24,000. Annie was furloughed between March and July 2020. Betty was not.
On 1 September, they both had a pay rise to £25,000 and Cathy joined the company also on £25,000.
On 1 November, all three ladies are furloughed under the new scheme. Although they will each be paid in accordance with their employment contract, the CJRS grant claimable by X Ltd will be
- Annie: based on her previous reference salary because she was furloughed previously, so £24,000
- Betty: based on her old reference salary even though she was not furloughed under the earlier versions of the scheme, so £24,000
- Cathy: based on her new current salary as at September because she was not actually employed until after 19 March 2020, could not have been furloughed under the earlier versions of the scheme, so £25,000.
For an employee on variable pay, hours and so pay will vary, hence usual hours are relevant.
For an employee:
- on the payroll on 19 March 2020 (ie, there had been a payment of earnings in the tax year 6 April 2019 to 5 April 2020, reported on an RTI submission made on or before 19 March 2020), or
- for whom you have made a valid CJRS claim in a period ending any time on or before 31 October 2020,
the usual wages are the higher of:
o wages in the corresponding calendar period (if relevant) in the tax year 2019 to 2020, and
o the average wages payable in the tax year 2019 to 2020.
For all other employees, just use average wages payable between 6 April 2020 (or, if later, the date the employment started) and the day before they were furloughed after 31 October 2020.
How long will support remain at 80%?
CJRS has been extended to 31 March for all parts of the UK. From 1 November, the UK Government will pay 80% of employees’ usual wages for the hours not worked, up to a cap of £2,500 per month. But, the UK Government has said it will review the policy in January for claims for February and March.
HMRC has said it intends to publish details of employers who use the scheme for claim periods from December 2020 onwards. It will publish the employer name and also, where relevant, the company registration number, including for LLPs.
Employees will be able to find out if their employer has claimed for them under the scheme. It has not yet been confirmed how employees will be able to obtain this information.
There are now shorter deadlines for submitting monthly claims. Claims for periods starting on/after 1 November must be submitted within 14 calendar days after the month they relate to, unless this falls on a weekend, in which case the deadline is the next week-day. But:
- A claim once made can be increased provided it is amended within 28 calendar days of the end of the month it relates to (note that if you have overclaimed, this extension doesn’t apply).
- It is also possible to claim after the deadline if there is a reasonable excuse.
For further details go to GOV.UK and search ‘Claim for wages through the Coronavirus Job Retention Scheme’.
Claims: Maximum number of employees
When CJRS V2 was introduced from 1 July 2020, the maximum number of employees which could be included in a claim was limited to the maximum number the employer had ever previously claimed for in any single claim made for periods before 30 June 2020.
For claims under CJRS V3 this limit no longer applies. This will be useful to businesses who have taken on additional staff since 1 July, who would otherwise not have been able to furlough all their staff, eg, those currently facing a new compulsory lock down of their entire business.
A few cribs to remember
- You can save and continue a claim within seven days of starting it.
- You can delete a claim within 72 hours of submitting it.
- Claim periods must start and end within the same calendar month.
- The claim period must usually be for a minimum period of seven days - the exception is for the first and last few days in a calendar month. However, flexible furlough agreements can last for any amount of time.
- Employees can take holiday while on furlough, but if flexibly furloughed, holiday hours count as furloughed hours rather than working hours.
- CJRS V3 is NOT the same as CJRS V1, because:
o CJRS V3 is flexible; and
o employers must now bear the cost of employers’ NIC and pension contributions.
ICAEW Know-How from the Tax Faculty
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities.