Christmas is coming and many businesses will be shutting down production for an extended period. However, where that shutdown is not due to the effects of the coronavirus, the employer should not use the furlough scheme to cover the cost of paying the workers during that business closure.
The HMRC guidance has been updated to say: “You can only place employees on furlough if coronavirus is affecting your operations. You should not place employees on furlough just because they are going to be on paid leave or you usually do less business over the festive period”
We should also warn you that HMRC will be publishing the names of businesses who use the CJRS in December 2020 and/or January 2021, including how much they claim within a banded range. The employees will also be able to check through their personal tax account in February 2021, to see whether their employer has claimed CJRS grants for their wages for periods in December and January.
Where the furlough period begins before shutdown and continues after, then the furlough grants can be claimed for the holiday period. The leave taken by the employees will be treated as using up some of their statutory and contractual leave, although they will also be on furlough.
The CJRS grant can be claimed for amount of the holiday pay which falls with the CJRS limits (80% of reference pay capped at £2,500 per month). However, the employer must follow the working time regulations that require holiday pay to be paid at the employee’s normal rate of pay, as set out in their employment contract.
Remember the CJRS grants for November onwards must be claimed within 14 days of the end of the month they relate to, so by 14 December for November claims.
When reporting any early paid December salaries under RTI the ‘payment date’ in field 43 must be left as the normal contractual payment date, or over written if your software changes it to actual payment date. Say employees are normally paid on the last Friday of the month (25 December) but the employer will pay them on 18 December, the payment date must remain as 25 December.
Written by the Tax Advice Network