Only days after the last UK Government update, we now have a further set of updates in relation to the Guidance Note on the Coronavirus Job Retention Scheme, and to the Self Employment Income Support Scheme, both of which we have written about previously. Crucially we also now have a Treasury Direction which provides the legislative framework for the Scheme and an immediate headache for some employers. Our article starts by looking at the updates to the Guidance Note and the Self-employment Income Support (‘SIS’) Scheme Guidance Note. Although these are now less important documents given that we have the Treasury Direction itself, the Notes are familiar and the changes stand out more clearly. We conclude by looking at the Treasury Direction.

1. Coronavirus Job Retention Scheme Guidance Note Update, dated 15 April 2020

This is the third update in as many weeks from the UK Government. In relation to the changes, the pace of change in the Guidance Note has definitely slowed down. However there are a number of important changes.

  • The key date for eligibility to the Coronavirus Scheme has been changed from 28 February 2020 to 19 March 2020. Thus employers, in order to be eligible, must have created and started a PAYE Scheme on or before 19 March 2020. Similarly employees must have been on that PAYE payroll by that same date. They also however need to be notified to HMRC on an RT1 submission on or before 19 March 2020.
  • The Government had previously provided confirmation that a transfer under the Transfer of Undertakings Regulations after 28 February 2020 would not render those employees ineligible to be furloughed. The fear was that the employees might be deemed to have started new employment after the eligibility date. This eligibility date too has been changed to 19 March 2020. There is some debate online whether that change might leave some employees out in the cold but given the reduction in the number of TUPE transfers that we are currently seeing we will not delve into that here.
  • Those who were employed as of 28 February 2020 and on the employer’s payroll but who ceased working for the employer after that, but before 19 March 2020, can be reemployed by the employer and then be furloughed. The employer can reemploy them even after 19 March 2020, and still put them onto the Furlough Scheme.
  • Employees on unpaid leave only qualify for the Furlough Scheme if they started unpaid leave after 28 February 2020. It is then permissible to switch this onto a furlough arrangement at any point. However, if the employee was on unpaid leave prior to 28 February 2020 then they cannot be furloughed until the date on which the employee was expected to return from unpaid leave.
  • Since the eligibility date for employees has changed this has an impact on the relevant pay period used to calculate the relevant salary being recouped under the Furlough Grant Scheme. The grant applies to the figure of 80% of the employee's salary, which is now to be calculated on the salary in the last pay period prior to 19 March 2020.This of course will be different to the previous Guidance Note, which based the salary on the employee's salary as at 28 February 2020. The Guidance Note accepts that the employer is still entitled to rely on the salary as at 28 February 2020 (the old calculation method), if it has already calculated the claim it is making for a grant in respect of the previous guidance. It seems to be clear however that employers will be expected to recalculate the grant being claimed and base it on the salary in the last pay period prior to 19 March 2020, for any subsequent periods of furlough.
  • Further guidance has been provided on the information to be provided by employers if they wish to make a claim for the grant. If employers are furloughing fewer than 100 staff they will be asked to enter details of each employee being claimed directly into the system to include details such as name, national insurance number, claim period, claim amount etc. If there are more than 100 staff being furloughed then this is to be provided by a file with the information rather than input directly into the system.
  • The Guidance Note requests employers to keep employees fully up-to-date on the claims being made on their behalf. HMRC is not providing employees with details of claims made on their behalf. This is presumably mostly of importance where employers have furloughed people on the basis that they accepted they would only get paid when the furlough grant monies came through from the Government.Otherwise the employer remains on the hook to make the salary payments due during the furlough period irrespective of whether it is in funds for the period in question.

2. Self-employment Income Support Scheme Guidance Note

The Guidance Note for the SIS Scheme has also been updated. There is further helpful detail provided for individuals who are looking to make a claim. In brief the SIS Guidance Note confirms that HMRC expects the payments under the Scheme to be made by early June 2020.  As before it is important to remember that it is not employers filing applications for grants, under this Scheme, but instead individuals who, in the view of HMRC, appear to qualify will be contacted by HMRC directly as the first step in the process of applying for the grant. The Guidance Note confirms that this will be by mid-May 2020. 

The Note confirms that the SIS Grant does not need to be repaid at a later date (assuming it was validly applied for) and does not preclude an individual from taking on work or other employment during the period of receipt of the grant. However it will be necessary to confirm to HMRC that the business has been adversely affected by coronavirus. This is not defined, and there may, of course, be some situations where the individual cannot show a decline in profits, but is able to argue that the profits would have been higher but for the coronavirus pandemic. Guidance is provided in the Note about making claims for the SIS Grant.  It reiterates that individuals who have not submitted a self-assessment tax return for 2018-19 must have submitted this by 23 April 2020 or they will simply be completely ineligible for coverage.  There is no mention of any leeway in the Guidance Note so this is being presented as a hard stop date.

The Government grant will be a sum equivalent to 80% of a claimant's average trading profit up to a maximum of £2,500 per month. 

3. The Treasury Direction dated 15 April 2020

This is now the single most important document relating to the Coronavirus Job Retention Scheme. This is, essentially, the legal framework which will govern the operation of the grants under the Coronavirus Job Retention Scheme. The importance of the guidance note therefore is significantly diminished because it is no longer our primary source of guidance for the Scheme and in the event of any inconsistencies we would obviously expect the Treasury Direction to prevail.

For the most part the Treasury Direction follows closely in the footsteps of the Guidance Note, which is obviously a good thing. Focusing on the points in the Treasury Direction, which either supplement or contradict the Guidance Note, these are set out below:

  • The Treasury Direction gives HMRC the power to decide what information is going to be necessary to establish entitlement to payment under the Scheme.This is different from the actual entitlement itself but it does mean that employers are going to need to be alert that record keeping or the evidential requirements may be developed by HMRC during the continuation of the Scheme or indeed after it is over.
  • There is also a general power to reject a claim if the claim being put forward on behalf of the employee is "abusive or otherwise contrary to the exceptional purpose of CJRS".This is clearly intended as a failsafe is if individuals find creative ways to game the furlough system.
  • The Treasury Direction identifies that an employee is capable of being a furloughed employee if they meet three conditions:
  1. first the individual has got to have been instructed by the employer to cease all work in relation to their employment;
  2. the period for which the employee has or will have ceased such work is 21 calendar days or more;
  3. the furlough instruction "is given by reason of circumstances arising as a result of coronavirus or coronavirus disease".
  • Whilst it is clear that it is not necessary for individuals to be facing redundancy, in order for the employer to be able to furlough employees, there is going to need to be some adverse link back to the coronavirus in terms of the impact on the business itself. The test is, as we said in our previous update, in relation to the comments in the Guidance Note, a very broad one. Indeed although it would probably be an abusive claim for a grant and so it would be denied, it is not even necessary for the circumstances leading to furlough to be caused by the adverse impact of the coronavirus. The furlough is "by reason of circumstances arising as a result of coronavirus…". This does mean that some of the public debate about whether or not it is ethical for well-resourced employers to make use of the furlough scheme is going to continue.
  • The scope of the employer's activities on furlough has been tightened. The Guidance Note said that the individual should not be "providing services or generating revenue". This has now altered so that the employee must not be working for a person who is “connected” with the employer nor must an employee otherwise work "indirectly" for the employer.This seems to us to go rather further than the restrictions envisaged by the Guidance Note.Accordingly, employers will need to check carefully where they have issued guidance to employees being furloughed about what they could do, to see whether that advice still remains correct. Similarly if employees have been given consent to undertake particular activities, on a case by case basis, then employers should reconsider this and see if their approach still fits with the Treasury Direction. Deciding whether an individual is "connected" depends whether you are looking at connection with a person or a company.If the focus of the enquiry is whether the new work is for a connected person, then the test is laid down in section 993 of the Income Tax 2007. This would include working for an employer’s spouse, or a relative, or a relative of the spouse. If the test is whether a company is connected to the employer then that will be determined in accordance with section 1122 of the Corporation Tax Act 2010 and applies, for example if the same person controls both companies, or two or more persons acting together do so. This is clearly a lot more detailed and prescriptive than the Guidance Note that precludes employees from working "for or on behalf of the organisation or any link to an associated organisation”.
  • Where an individual is already eligible for statutory sick pay at a point when they are furloughed, the furlough period does not begin until the sick pay period to which the individual was entitled has expired. This seems to be very confused drafting and its meaning is not clear. However, at face value it seems to contradict paragraph 21 of the Guidance Note, which expressly recognised that individuals could be furloughed if they were on short term illness/self-isolation. This is, naturally, a material point in the current circumstances, especially since individuals who are self-isolating, in line with medical guidelines, are entitled to claim statutory sick pay as a result of the amendments to the legislation passed by the Government. It has to be hoped that this will be clarified as a matter of urgency.
  • The training activities that employees can do has also been potentially curtailed. This is important because the ACAS Note and the Guidance Note both placed emphasis on individuals ability to undertake training whilst on furlough, and indeed the ACAS Note encourages employers to make training available to employees on furlough. Paragraph 6.8 of the Treasury Direction states "Training activities directly relevant to an employee's employment agreed between the employer and the employee before being undertaken” do not count as work. This is an odd formulation. It makes clear that some training activities are acceptable (i.e. do not take the individual outside the furlough scheme) if agreed by the employee concerned. What does this mean for all training that is not of direct relevance? If direct training is fine provided that the employee consents, does this mean the employer is able to require an employee to do training that is not directly relevant?Or does this require consent too? And who is going to decide whether training is directly or indirectly relevant? On the assumption that employers are not going to be promoting training that is of no relevance to employees then how is an employer going to know whether the training is direct, or indirectly relevant. We assume the point is that if the training is directly relevant to the business it might count as work otherwise and therefore render that individual ineligible for the furlough during that period, which could otherwise break the three week period.
  • Equally it looks as if the employee has a right to refuse such training activities if they are on furlough. Once again these activities have to be "agreed between the employer and the employee before being undertaken". If consent is not obtained does that mean it takes the employee outside the scope of the Furlough Scheme? Employers so far have been looking to follow the Guidance Note of the ACAS Guidance and there is no mention of employees having to consent to any training so employees may be asked for retrospective consent for mandatory training in the hope that can cloak mandatory directly relevant training as having been duly agreed.
  • The Treasury Direction also provides guidance on what elements of pay can be taken into account when calculating 80% of the employee's reference salary. Anything that is not "regular salary or wages" is excluded. This is defined as salary or wages, which arise from a legally enforceable agreement, and which are not conditional on any matter. More importantly it excludes any performance related pay, whether that's personal performance of the employee or the business of the employer, unless this is enshrined in the legally enforceable agreement itself. In essence the scheme seems to be drawing a distinction between matters of contractual entitlement, and discretionary matters but the drafting of this short section is most unclear. Bonus schemes laid out in the contract of employment, which relate to company performance, would seem to be in scope for the purposes of calculating the furlough grant, but not if the employer has a right to exercise discretion in relation to a predetermined set of factors, because that would seem to be a payment conditional on the exercise of the employers discretion and in order to qualify the right must be unconditional. Where this will leave allowances, which may be conditional on the employer allocating particular work, is hard to see.
  • Finally we have a change to one of the key aspects of the Scheme. Whereas the Guidance Note suggested that consent from the employee was required if there was a change to the contract, we now have a much more direct statement in the Treasury Direction. 

The Scheme applies to individuals who have been instructed to cease work by their employer. Paragraph 6.7 of the note states “An employee has been instructed by the employer to cease all work in relation their employment only 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”.

Regrettably this now seems to be a clear indication that employees have to consent to be furloughed. Whilst there may be clever arguments about what to do if the employer has a layoff provision in the contract previously (would an employee’s agreement to a contract of employment amount to agreeing in writing?) the risks have gone up significantly for employers who do not get some form of consent back from each individual employee. It is obviously very unhelpful to have dropped this into the Scheme in mid-April when many employers have already furloughed staff or are carrying out such exercises this week.

If employers are furloughing people after today we think there is little to be gained by ignoring the Treasury Direction and relying on clever arguments about what could amount to the employee agreeing in writing. So employers will have to get individual consents. We do not think this has to delay the start of the furlough period itself especially if the workforce is largely working from home already.

We think that an employer has several options if it has already furloughed staff. First, and obviously, it should seek consent from individual employees. An employer might use a voting button attached to an email to ask the employee to consent by that means. Secondly the employer should use managers to chase up the furloughed staff to give their consents. If a large part of the workforce is furloughed this will place quite a strain on the remaining managers who are working, but there is probably no alternative to do this. The employer will also need to be quite clear about what will happen if individuals do not consent. In some cases the employer may be forced to consider making redundancies. However this will result in a greater drain on cash in the short term in many cases, particularly with long serving staff. We know that in some cases staff are objecting to being furloughed because they see it as giving rise to a risk of redundancy. It would be ironic indeed if those concerns led staff to act in a way which brought about the outcome they were trying to avoid.

What should employers do if staff fail to respond to such chasing, or object? First, is there any option open to argue that the Treasury Direction should not be interpreted too strictly. The requirement is that the employer and employee have agreed in writing that the employee will cease all work. So it is just about possible to argue (but it is a stretch) that a written record that the employee has been told to remain at home, to which the employee has verbally consented, is evidence in writing that the parties have agreed an outcome. But it is a strained meaning as the clause seems to mean that the employee’s consent must be in writing. So that probably leaves only arguments about whether the consent relates to being placed on this particular furlough period, or general pre-existing authority under the contract of employment would suffice. Would agreement to proposals from a staff representative committee or a recognised union amount to agreement in writing by the employee?

Sadly the effect of the change in message from the employer having to “confirm in writing to their employee confirming (sic) that they have been furloughed” (which is what the Guidance Note still says) to the employer, and that they “have agreed in writing that the employee will cease all work….” in the Treasury Direction is going to create a lot of urgent retrospective administration work. If the employer can obtain consent this week then this seems by far the best solution. By the time the employer’s claim is made for the staff who are already furloughed consent will be in place. There is nothing in the Treasury Direction which expressly says employees must have agreed before or at the point they were put on furlough. It is possible the Scheme will be read that way, but in reality employers who have furloughed staff already have nothing to lose and everything to gain by getting email consent this week.


There is scope for HMRC to address the uncertainties and concerns created by the Treasury Direction. Ultimately this all flows from the fact that the legislative process has been inverted. The Guidance cart should follow the legislative horse whereas the cart has been directing operations thus far. This has led to the situation where the greater precision and detail offered in the Direction come after employers have relied on the Guidance Notes in their planning. To that extent (and labouring the equine imagery) for employers who have relied on the Guidance Note to furlough staff already, it is to be hoped that the Direction is not shutting the stable door after the horse has bolted.