Does an employer need an employee's written agreement to being furloughed before they can make a claim under the JRS?
The question is relevant because last week, the Treasury issued a Direction to HMRC. This provides the basis of HMRC’s power to operate the CJRS and make payments.
Paragraph 6.7 of the Direction provides that an employer can only reclaim, "...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."
That represented a significant change from what had been said in the previous HMRC Guidance. The first 5 versions of the Guidance (all of which were issued before the Direction) said that the employer needed to notify the employee in writing that they had to stop work and that the employer had to keep a copy of the written notification for five years.
So, that’s pretty problematic for employers who have simply told employees in writing that they had to stop working without getting express agreement and as there are tens of thousands of employees whose employers have simply told them in writing that they had to stop work, is there a real risk that HMRC won’t pay out?
On Monday (20 April) a further iteration of the Guidance was issued (the sixth!). Does it resolve the issue identified above? Unfortunately not… it 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."
That seems to hark back to previous iterations of the Guidance (by not requiring a written agreement) and totally ignores the Direction (which does require written agreement).
"As the Direction carries more legislative force than the Guidance, is this going to give HMRC a loophole to get out of making payments under the scheme?"
Probably not and here’s why:
Firstly, the sixth iteration of the Guidance was published three days after the Direction and has to be seen to be the most up to date version of the rules that employers are required to abide by in terms of the CJRS. Reneging on Guidance published after the Direction would leave HMRC open to legal challenge via Judicial Review.
Secondly, making claims via the portal doesn’t require the employer to provide proof of a written agreement (or indeed proof of the notification) and so it would appear that HMRC isn’t overly concerned about this. Although HMRC reserves the right to audit claims, we don’t think that HMRC has the resources or manpower to start auditing every claim to examine whether there was a written agreement. Realistically, it is going to be focused on uncovering cases of real fraud e.g. where the employer ‘furloughed’ the employees to reclaim ages from the CJRS but encourage or coerced the employees into carrying on working.
Thirdly, one only has to pause for a moment to consider the astronomical amount of political fallout that HMRC reneging on the Guidance would cause. That would be hugely embarrassing for the HMRC, the Treasury and the wider government.
So the answer to the question posed in this article is, probably not.
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All information in this document is accurate at the time of writing. It is meant for general information only and is not legal advice.