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Furlough CJRS claims, are people wrongly claiming?

Regulation 7.1(b), sting in the tail?

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Following on from the EXCELLENT point made by member ‘unearned luck’ in this thread:-

https://www.accountingweb.co.uk/any-answers/odd-cjrs-calculation

the regulations which are here:

https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

state:

7.1 Costs of employment meet the conditions in this paragraph if-

(a) they relate to the payment of earnings to an employee during a period in which the employee is furloughed, and

(b) the employee is being paid-

 (i) £2500 or more per month (or, if the employee is paid daily or on some other periodic basis, the appropriate pro-rata), or

(ii) where the employee is being paid less than the amounts set out in paragraph 7.1(b)(i), the employee is being paid an amount equal to at least 80% of the employee’s reference salary.

Is there a sting in the tail caused by 7.1(b)(ii)?

I’ve put together a spreadsheet here:-

https://www.dropbox.com/s/kr3l0kvkqrmwc36/FurloughCalculatorV1.xlsx?dl=0

Which takes this into account and also calculates the maximum claim.

Can people look at this and constructively criticise please? I think there could be many claims when people are overlooking this.

More than happy for the error of my ways to be pointed out, but there could be some nasty surprises for some!

Replies (13)

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By Wanderer
27th Apr 2020 17:44

Few points:-
Please only base any comments on the regulations, not on HMRC guidance, what the man down the pub said, or what anyone has managed to get through the system.
Excel isn't my strongest point and so very open to suggestions which I'll incorporate and update if there is interest.
And obviously E&OE, no warranties given, use at your own risk etc. etc.

Thanks (1)
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By Mr_awol
27th Apr 2020 18:19

I think unearned luck replied quite concisely to an OP whose client had unnecessarily complicated the position by trying to separate basic vs commission from the furlough payment/claim. What the OPs client should have been doing is calculating the 'reference pay' (including non discretionary commission but excluding discretionary commission and bonuses) at the outset. Effectively, they need to decide what the legal position is on the commission. I think you need to focus less on 7.1 and more on 7.3,7.4 and 7.5...………

Perhaps I have oversimplified it. TBH my brain hurts today.

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Replying to Mr_awol:
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By Wanderer
27th Apr 2020 18:29

Mr_awol wrote:

I think you need to focus less on 7.1 and more on 7.3,7.4 and 7.5...………

I believe that's what I've done in my spreadsheet and the point that's easily overlooked.
My head hurts as well!
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By unearned luck
28th Apr 2020 01:34

My only quibble with your spreadsheet is that the £1 adjustment to the last salary payment before 19/3/20 should be a minus. that is to say bonuses etc paid then should be subtracted to arrive at the 'regular' element.

Mr awol is right, it is key to correctly identify the reference pay in accordance with the directions - which, of course, is the purpose of your spreadsheet. My point in the other post is that if employers are basing furlough pay on something else, say, the employee's basic pay for the month furloughed then they are in danger of paying too little and therefore forfeiting any grant, or paying too much and being unintentionally out of pocket.

If an employer has made this mistake in regard to, say, furlough pay to be paid for April on 30/4/20 and pays too little. Can the error be corrected later by making a top-up payment? The inference of para 7.12 is 'no'. Do you agree that that is the inference and, if so, is the inference strong enough to bar corrections?

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Replying to unearned luck:
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By Wanderer
28th Apr 2020 02:05

Thanks for looking.

Para 1) I purposely put that £1 in as a +ve to show the less usual situation when you have to increase the salary as in 7.10. For situations like you say (more common), just enter a -ve figure. Maybe I'll add some extra wording.

Para 2) One of the main purposes was to make the very point that you do. i.e. underpay by £1 results in no claim back at all.

Para 3) I think that it's stronger than an inference, it is fact. 7.12(a) only gives the option to make the top up under 7.12(c) if the original payment was 18 April or prior. In your example an original payment date of 30 April, being later than 18 April, can't be corrected to validate the claim.

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Replying to unearned luck:
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By unearned luck
28th Apr 2020 13:01

Regarding the correction of errors.

Para 7.11 says that corrections of underpayments made in the time frame 1/3 to 18/4 must be regarded as made at the same time as the original payment. The directions are silent on corrections made outside of that timeframe, other than (I think) para 8.1 pay "reasonably expected to be paid".

The guidance here: https://www.gov.uk/guidance/reporting-payments-in-paye-real-time-informa... suggests that HMRC won't be strict paying outside of the 7.12 time frame is OK (eg for the case of employers who have paid nothing yet and those who have only paid 20% so far).

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Replying to unearned luck:
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By Wanderer
28th Apr 2020 13:36

unearned luck wrote:
The directions are silent on corrections made outside of that timeframe, other than (I think) para 8.1 pay "reasonably expected to be paid".

Not convinced. Doesn't 7.12(c) require the employee to be paid the correcting amount before the CJRS claim in respect of the original payment?
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Replying to Wanderer:
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By unearned luck
28th Apr 2020 14:17

Indeed it does. My thinking was that the employer would pay the shortfall and then make the grant claim or, as the case may be, make an amendment to the grant claim already made (we have been promised the ability to make amendments).

In the link I gave there is no mention of the 18 April date.

I assume that employers who have underpaid and have already made their claim will have claimed the same amount as they paid the employee. In such cases making an amendment to claim more will be a poisoned chalice as itd will alert HMRC to the failure to comply with para 7.1.

I'm not saying that you are wrong. Its just that I think its harsh on struggling employers if the letter of the law is applied for a failure to appreciate the intricate rules of the scheme or because of a computational error. Arguably it would be unfair for the letter to be applied in the absence in the guidance of a prominent caveat against making the mistake of paying too little. I like to think that the letter will only be applied in cases where the employer has deliberately underpaid with no intention of making a top-up.

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Replying to Wanderer:
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By unearned luck
28th Apr 2020 15:16

Indeed it does. My thinking was that the employer would pay the shortfall and then make the grant claim or, as the case may be, make an amendment to the grant claim already made (we have been promised the ability to make amendments).

In the link I gave there is no mention of the 18 April date.

I assume that employers who have underpaid and have already made their claim will have claimed the same amount as they paid the employee. In such cases making an amendment to the claim more will be a poisoned chalice as it will alert HMRC to the failure to comply with para 7.1.

I'm not saying that you are wrong. Its just that I think its harsh on struggling employers if the letter of the law is applied for a failure to appreciate the intricate rules of the scheme or because of a computational error. Arguably it would be unfair for the letter to be applied in the absence in the guidance of a prominent caveat against making the mistake of paying too little. I like to think that the letter will only be applied in cases where the employer has deliberately underpaid with no intention of making a top-up.

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By paulwakefield1
28th Apr 2020 09:05

I think there is another point which comes from the regulations and from your spreadsheet which may not be generally recognised.

The guidance says you can claim the higher of 80% of the average or last year's actual (subject to the cap and reference pay adjustments). This is of course true but the missed point in the guidance (as far as I can see) is that the employee MUST be paid the higher of 80% of those two calculations to be a qualifying cost.

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Replying to paulwakefield1:
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By Wanderer
28th Apr 2020 09:21

The point you make is, I believe correct, according to the regulations and built into my spreadsheet.
What the guidance says I don't know. I haven't bothered reading that. Learned some time ago not to rely on dumbed down versions of the law reflected on .gov.uk.

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Replying to Wanderer:
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By paulwakefield1
28th Apr 2020 09:25

I agree with that but many will be only using the guidance and, for once, it is detailed with many examples and still remains misleading. :-)

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7om
By Tom 7000
29th Apr 2020 13:17

How can the Govt make something which is meant to be simple so complicated.

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