On 17 April 2020, we highlighted that the latest government guidance made clear that, in addition to written confirmation by an employer, the employee’s agreement to be furloughed must also be recorded in writing in order to be eligible to claim under the CJRS and that it would not be sufficient to rely on implied consent.
This position on an employee’s agreement to be furloughed in writing was re-enforced in the Treasury’s Direction to HMRC, which is the legislative source of HMRC’s power to make payments under the CJRS. Paragraph 6.7 provides an employer can only reclaim the employee’s salary, amongst other things,:
“…if the employer and employee have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment.”
Based on the Treasury’s Direction, the position seemed clear, right? Well, not exactly!
Since the CJRS was first announced, there have been six iterations of the HMRC Guidance, four of which predated the Treasury Direction. The first iteration simply required the employer to notify the employee in writing that they had to stop work (but did not require the employee to agree anything, and certainly not in writing). The second to fifth iterations added a requirement that the employer keep a copy of that written notification for five years but, again, said nothing about written agreement.
The sixth iteration, issued yesterday, states:-
“To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years.” (emphasis added)
This latest iteration is quite clearly inconsistent with the Treasury Direction and has left many Employers confused and concerned, wondering which guidance they should follow – The Treasury Direction or the latest HMRC Guidance.
Officially, the Treasury Direction overrides the HMRC Guidance, but the Guidance shows the way that HMRC intends to interpret and apply the Direction and this latest iteration, which was published three days after the Treasury Direction, makes a clear and unmistakable statement that HMRC will not require evidence of the employee agreeing in writing to stay at home in order to allow a claim under the CJRS. In fact, HMRC seems to be quite happy to accept claims for reimbursement of 80% of salary without requiring evidence of the employee’s written agreement and there is nothing to suggest that HMRC is likely to change this approach.
Theoretically, HMRC could renege on what it has repeatedly said, and refuse to pay out to employers who cannot supply an employee’s written agreement to ceasing all work for the employer? However, if it did, it would be extremely vulnerable to a judicial review claim. The re-issue of the Guidance, subsequent to the publication of the Direction, which flatly contradicts the Direction, would make HMRC’s position very difficult if it subsequently sought to deviate from its previous Guidance to Employers.
If you have not yet furloughed employees but now intend to do so, you must comply with the Treasury Direction and secure written agreement. However, if you have already furloughed employees and simply notified them in writing that they have been furloughed, consent notwithstanding, it is probably best to leave things as they are.
If you are an employer and require a written furlough agreement to ensure you are compliant and eligible to claim the furlough grant, call us now on 0800 612 4772 or Contact us via our website.