Furlough means furlough

Furlough means furlough

After months of high-pressure number crunching in the face of evolving guidance, for agents and HMRC alike furlough means a lot of work, writes Helen Thornley, ATT Technical officer

Furlough means furlough

A recent NAO report highlights that a large number of employers are not respecting the crucial non-working point, with nine percent of employees surveyed admitting to working whilst on furlough at the request of their employer – even though asking employees to work during furloughed time is clearly against the rules.

Although the Coronavirus Job Retention Scheme (CJRS) has gone through various incarnations since March, the guidance on what furlough means has been consistent throughout. The CJRS is designed to provide support for unworked hours.

During the period of furlough – whether fully furloughed under the scheme from March to June, or partially furloughed with a mix of working and non-working hours since July 1 – the Treasury Directions which regulate the scheme confirm that employers can only claim support for the time that the employee is doing ‘no work in relation to their employment’.

HMRC’s guidance expands on this by explaining that, for the hours recorded as being on furlough, an employee cannot to do any work for their employer that:

  • makes money for the employer’s organisation or any organisation linked or associated with them.
  • provides services for the employer’s organisation or any organisation linked or associated with them.

Even if the employer correctly instructs an employee not to work but the employee chooses to disregard that instruction and work during furloughed time, the employer will still be in breach of the rules. While the employee might think that they are helping, they are actually putting their employer at risk of serious financial and reputational implications by continuing to work in their furloughed time.

The definitions of ‘work’ and ‘provisions of services’ are important, and very broad. We recently received a query about an employer who had found out that some of their employees had kept in touch with clients during their furloughed time. While no sales were made and the employees had thought they were acting with the best intentions in keeping their clients up to date, HMRC confirmed to us that they would view the calls made and received in this time as the provision of services. As a result, their employer had to repay much of their CJRS grant.

To prevent this sort of problem arising, employers may wish to consider steps such as blocking access to emails for any periods of time when employees are on furlough.

Permitted activities

There are few exceptions to the ‘no work’ for your employer rules during furloughed time. Subject always to the caveat that they are not providing services or generating revenue for the employer or connected organisations, the main exception is that furloughed employees are permitted to undertake union or non-union representative duties.

Individuals are of course (subject to their employment terms and conditions) allowed under furlough rules to take paid work with other employers during furloughed time while still receiving furlough support from their original employer. Individuals with more than one job can be furloughed from one or more of them, while still continuing to work on their remaining employments.

Employees can also use their furlough time to carry out training, again provided that they aren’t providing services or generating income for their employer – although for any training which is carried out on the request of the furloughing employer the individual must be paid at least the National Minimum Wage (NMW). If the furlough pay is not sufficient to cover this, then the employer must pay the difference to bring them up to NMW levels.

Employee agreement

Under the scheme rules, the requirement to down tools for all or part of the employee’s usual working time must be agreed with the employee in advance of the start of any ‘short-time’ working arrangements. The agreement must be in writing and failure by the employee to adhere to the terms of it could be a disciplinary matter.

The only concession to agreeing terms in advance relates to the third extension to the scheme from November 1, as full guidance on the extension was not published until November 10. Employers were therefore given until November 13 to get agreements in place.

Compliance activity

HMRC compliance activity in respect of the CJRS commenced in mid-August and HMRC is planning to redeploy the equivalent of 500 full time staff to look at compliance work in the coming months.

An employer who realises that they need to correct any of their CJRS claims should notify HMRC as soon as possible to minimise potential penalties for over claims.

Professional obligations

Finally, an agent who discovers that a client has made a claim under the CJRS for employees who have been working during their furlough time will also have certain obligations, starting with advising their client that they have broken the CJRS rules.

For professionally qualified agents, if the client is not willing to make corrections then further guidance on what to do and when it may be appropriate to cease to act for the client can be found in PCRT Helpsheet C: Dealing with errors.

Agents will also need to consider their anti-money laundering reporting obligations. The approach here depends on whether there are proceeds of crime. Where the agent considers that their client has made an innocent mistake and corrected matters straightaway as soon as they were advised, then it is unlikely there are proceeds of crime and a report is not required.

But if the agent believes that the client was fully aware of the restrictions on employees working for them while furloughed, then the agent should report the matter to their Money Laundering Reporting Officer (MLRO). By knowingly claiming government funds to which they are not entitled the client has acquired proceeds of crime and the agent’s MLRO should submit a report to the National Crime Agency, unless the privilege reporting exemption applies.

Working during furlough can potentially be a very serious matter. Furlough really does mean furlough.

 

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