The Coronavirus Job Retention Scheme: making a claim

HMRC’s portal for making claims under the Coronavirus Job Retention Scheme is about to go live and they have issued revised guidance. You should read the simple step-by-step guide before making any claim.

HMRC have also issued much more detailed updated guidance, covering a wide variety of circumstances.

We set out below a summary of the main points of the scheme.

The Essentials

The online service you’ll use to claim will be available on 20 April 2020.

You can claim for 80% of your furloughed employee’s wages (even for employee’s on National Minimum Wage) – up to a maximum of £2,500 per month. You’ll still need to pay employer National Insurance and pension contributions on behalf of your furloughed employees, and you can claim for these too.

You can choose to top up your employees’ wages, but you do not have to. You cannot claim for:

• any top-up wage you pay;
• additional National Insurance or pension contributions you make because you choose to top up your employee’s wages
• any pension contributions you make that are above the mandatory employer contribution

Employees must not work or provide any services for the business while furloughed, even if they receive a top-up wage.

You must check that you can use the scheme first.

Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they are written to confirming their furloughed status.

A calculator will be available from 20 April 2020 to assist you in calculating how much you can claim.

What to include when calculating wages

The amount you should use when calculating 80% of your employees’ wages is regular payments you are obliged to make, including:

• regular wages you pay to employees
• non-discretionary overtime
• non-discretionary fees
• non-discretionary commission payments
• piece rate payments

You cannot include the following when calculating wages:

• payments made at the discretion of the employer or a client – where the employer or client was under no contractual obligation to pay, including:
  • tips
  • discretionary bonuses
  • discretionary commission payments
• non-cash payments
• non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay

Work out the maximum wage amount you can claim

The maximum wage amount you can claim is £2,500 a month, or £576.92 a week.

If the length of time you’re claiming for is not one week or one month, you’ll need to use the daily maximum wage amounts to work out the maximum amount you can claim for each employee. The daily maximum wage amount is £80.65 for March and May and £83.34 for April and June.

Work out your employee’s usual wage

The way you should work out your employee’s usual wages is different depending on the way they’re paid.

A For fixed rate full or part time employees on a salary, you can claim for 80% of the employee’s wages from their last pay period before 19 March 2020, up to a maximum of £2500 per month.

Example

Worker started work for B Ltd in 1997 and is paid a regular monthly salary on the last day of each month. The worker agreed to be placed on furlough from 23 March 2020. The worker was paid £2,400 for the last full monthly pay period before 19 March 2020. There are 9 days between 23 March and 31 March.

1. Start with £2,400 (employee’s wages)
2. Divide by 31 (the total number of days in March)
3. Multiply by 9 (the number of furlough days in March)
4. Multiply by 80% – which is £557.42

B For employees whose pay varies and were employed from 6 April 2019, you can claim the highest of either:

• 80% of the same month’s wages from the previous year (up to a maximum of £2,500 a month)
• 80% of the average monthly wages for the 2019 to 2020 tax year (up to a maximum of £2,500 a month)

Example of claiming for the same period last year

A Ltd pays an employee on a weekly basis. The employee’s pay period starts on 23 March 2020 and ends on 29 March 2020. The employee was paid £350 for 23 March 2019 to 29 March 2019. The employee was furloughed for the whole week.

1. Start with £350 (the amount they earned in the same period last year)
2. Divide by 7 (the total number of days in this pay period)
3. Multiply by 7 (the number of furlough days in this pay period)
4. Multiply by 80% – this is £280

Example of working out 80% of average monthly wages for the last tax year

Worker started work for A Ltd in 2010 and was placed on furlough on 23 March 2020, earning £15,000 between 6 April 2019 and 22 March 2020 inclusive. There are 353 days between 6 April 2019 and 22 March 2020. A Ltd is claiming for 23 March to 31 March 2020. There are 9 days between 23 March and 31 March.

1. Start with £15,000 (the amount they earned in the tax year up to the day before they were furloughed)
2. Divide it by 353 (the number of days from the start the tax year, up to the day before they were furloughed)
3. Multiply by 9 (the number of furlough days in this pay period)
4. Multiply by 80% – this is £305.95

C For employees whose pay varies and who started employment after 6 April 2019, you can claim for 80% of their average monthly wages since they started work until the date they are furloughed, up to a maximum of £2500 per month.

Example of working out 80% of average monthly wages for the last tax year

Employee started work for A Ltd in 1 May 2019 and was placed on furlough on 23 March 2020, earning £15,000 between 1 May 2019 and 22 March 2020 inclusive. There are 327 days between 1 May 2019 and 22 March 2020. A Ltd is claiming for 23 March to 31 March 2020. There are 9 days between 23 March and 31 March.

1. Start with £15,000 (the amount they earned in the tax year up to the day before they were furloughed)
2. Divide it by 327 (the number of days from the start the tax year, up to the day before they were furloughed)
3. Multiply by 9 (the number of furlough days in this pay period)
4. Multiply by 80% – this is £330.28

How much you can claim for employer National Insurance contributions

You can claim reimbursement for the cost of some or all of the Class 1 employer National Insurance contributions paid on the gross pay grant you pay to the employee.

The total grant for employer National Insurance contributions cannot exceed the total amount of employer National Insurance contributions you are due to pay.

In calculating the total employer National Insurance contributions paid in any pay period, the employer should subtract any Employment Allowance used in that pay period. If you have not, or do not expect to pay any employer National Insurance contributions in a pay period as a result of the Employment Allowance, you should not claim any employer National Insurance contributions costs for furloughed employees in that pay period. If you expect to exhaust any Employment Allowance in a pay period then you should claim the lower of the employer National Insurance contributions grant calculation, and the employer National Insurance contributions costs that you paid, or expect to pay across your entire payroll.

How much you can claim for employer’s pension contributions

You’ll still need to pay pension contributions on behalf of your furloughed employees, and you can claim for these up to the level of the mandatory employer contribution, even if it’s not an auto-enrolment pension.

You cannot claim for any pension contributions:

• if there are no contributions made, or due to be made for an employee
• you make that are above the mandatory employer contribution

How to claim

The online service you’ll use to claim will be available on 20 April 2020.

You can only claim for periods when your employee was on furlough.

You cannot make more than one claim during a claim period – you should make your claim shortly before or during running payroll.

You must claim for all employees in each period at one time – you cannot make changes to your claim.

You can make your claim in anticipation of an imminent payroll run, at the point you run your payroll or after you have run your payroll. Claims can be backdated from 1 March 2020 where employees have already been furloughed from that date. A claim cannot start any earlier than the date the employee was first furloughed.

The full amount you claim in respect of wages, national insurance contributions and pensions contributions must be paid or you will need to repay the grant money to HMRC. By making a claim, you agree that:

• the grant you receive can only be used to pay your employee’s salary and the employer national insurance contributions and pension contributions you must pay in relation to the salary paid to your employee
• you will return any grants back to HMRC immediately if you’re unwilling or unable to use it to pay your employee’s salary and the employer national insurance contributions and pension contributions

You must not make the claim if you do not accept that you can only use the money you claim for making those payments and that it must be returned to HMRC if you do not.

After you’ve claimed

HMRC will check your claim, and if you’re eligible, pay it to you by BACS to a UK bank account.