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Agreement to Coronavirus Job Retention Scheme clarified

On 15 April the Treasury issued a Direction to HMRC under powers conferred by the Coronavirus Act 2020, setting out the legal framework for the Coronavirus Job Retention Scheme (“CJRS”).  Whilst it was hoped that the Direction would provide more clarity on the operation of CJRS, unhelpfully there are some inconsistencies between the Direction and HMRC’s subsequent guidance. In particular, there appears to be a discrepancy in respect of an agreement to CJRS which is discussed below.

The Direction states that the employer and employee must have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work for the employer. This wording suggests that a written agreement is required prior to the employee being furloughed and it appears that such an agreement would have to be signed by both parties (either electronically or on paper).

By contrast, the HMRC Guidance only requires a written confirmation from the employer to the employee that the employee has been furloughed. The Guidance specifically says that “there needs to be a written record, but the employee does not have to provide a written response”.

In light of this discrepancy, it is somewhat unclear to what extent, if any, the existing cases may be affected.

Does the wording of the Direction mean that employees who have already been furloughed (strictly speaking, without a written agreement) may not fall within the scope of CJRS?

Is the written agreement necessary?

The Treasury’s Direction forms the legal basis of HMRC’s power to make payments under CJRS.  Technically speaking, it would therefore appear that the Direction trumps the Guidance. Having said that, the most up-to-date (sixth) version of the Guidance was published three days after the Direction. The guidance shows how HMRC intends to interpret and apply the Direction, and as such, it is a clear statement intended for employees and employers to rely upon.

We have now received further insights from a leading senior counsel regarding HMRC’s unpublished advice. It has been unofficially confirmed that that employers should follow the Guidance. It appears that HMRC proceeds on the basis that the employer and the employee must reach an agreement and a written record of this agreement must be retained. It may not however necessarily be the case that the employee will have provided written confirmation that such an agreement was reached in all cases. Whilst this clarification must be caveated to some extent, it will certainly provide some relief to many employers.
If you require further advice on CJRS or other employment law matters, please get in touch with our team – we are working remotely and can readily answer your queries.