Publish Date

Apr 16, 2020

HMRC issues updated guidance and CJRS direction on 15 April 2020

A&M Tax Advisor Update

As you may be aware, HMRC issued updated guidance on 15th April, accompanied by this CJRS direction, linked to the Coronavirus regulations.
The guidance and directions provide further detail on the operation, computation and mechanics of the claim.

Extended cut off date

It includes an extended deadline for employees to be on a PAYE scheme and filed on a submitted RTI return by 19 March 2020. This extension, whilst helpful, is likely to apply to weekly or fortnightly paid employees more than four weekly or monthly paid employees, due to when the RTI submissions are due to be made.

This is likely to increase queries from employees who were employed before 19 March, but for whom no FPS had yet been filed. You should therefore consider identifying these personnel, for whom CJRS is not going to be payable, and notify them of this as soon as possible so that they may make alternative funding arrangements.

Flexible pay employees

The direction does not define these employees but it does outline to whom these rules apply first, implying it will cover the vast majority of employees. This may increase the workload involved at arriving at the amount of pay to which CJRS is to be calculated, the “reference pay.” The reference pay will be the higher of:

  • The average of the 19/20 tax year’s earnings, or a pro-rata value of the employee has been employed for less than a year, or
  • the equivalent pay in 2019 pay period.

As an average will be payable, this may be higher than the anticipated earnings for the current payroll. However, it is a requirement of the scheme that the amount of CJRS is paid to employees, and not any lower value.

It is anticipated that most employees will be paid CJRS based on this averaging method, which includes contractual or regular payments, such as overtime, allowances, commissions and fees.

There may be winners or losers from applying an average basis, and some employees may be expecting 80% of their February pay instead. You should therefore communicate the basis of the amount paid and HMRC guidance to your employees, to help reduce the number of queries you may get. If you have an intranet site, you may wish to make the links available to employees.

Fixed rate employees

Initially it was understood that full or part time salaried employees would be due to be paid CJRS based on their February 2020 earnings.
The direction now defines what a fixed rate employee is, and how the pay should be calculated.

In reality, this is less likely to apply to most employees now, compared to what had been envisaged, and we recommend you carefully review your employees in accordance with this definition, to ensure the correct identification is made. In simple terms, it encapsulates employees on a fixed annual salary, defined by fixed hours, irrespective of when the hours are worked, and is limited to their basic salary only. e.g. a full time employee on an annual fixed salary of £24,000 paid in 12 equal installments of £2,000 and for whom no other variable pay is contractually due, and when the hours are worked does not impact on pay in any way…