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closed business due to covid

Employers can't shirk CJRS pension obligations


Does an employer have to pay over pension contributions when the business has been financially impacted by the Covid-19 pandemic? Ian Holloway explains why it does.

22nd Mar 2022
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The CJRS proved a vital lifeline for employers during the pandemic, especially in the early stages when, until the end of July 2020, the employer could reclaim minimum employer pension contributions from HMRC. This arrangement applied regardless of the type of pension scheme that was actually in operation.  

Yet, throughout the operation of the CJRS, The Pension Regulator (TPR) was always clear that employer duties remained unaltered – if the worker was a member of the pension scheme, the contribution requirement was non-negotiable, as was the requirement to pay these over to the pension scheme. Of particular note is that the conditions for reclaiming pension contributions from HMRC was that contributions were actually deducted and paid over.

TPR was clear that employer duties remained unaltered, as did their non-compliance regime. If employers were non-compliant and did not maintain their duties in regards deducting and paying contributions, TPR would issue an Unpaid Contribution Notice (UCN) which could be followed by a Fixed Penalty Notice (FPN) and then an Escalating Penalty Notice (EPN).

Appealing against non-compliance

The case of Morecambe Bay Wines Limited v. The Pensions Regulator  illustrates what happens if the employer does not comply.  

TPR issued an UCN to Morecambe Bay Wines on 23 April 2021 regarding unpaid contributions between 6 December 2020 and 5 April 2021.  These dates are important, as they are outside of the period for which an employer could make a reclaim from HMRC under the CJRS in place at the time.  Simply, the employer had a legal obligation to deduct and pay over worker and employer contributions but none of the employer costs could be recovered under the CJRS.

Morecambe Bay Wines asked for the first UCN to be reviewed and TPR extended the deadline from 20 May to 24 June 2021, by which time the employer was required to pay all underpaid contributions.  This was not done and a FPN of £400.00 was issued, to be paid by 26 July 2021 together with the unpaid pension contributions. On 29 July 2021, TPR issued an EPN stating that an escalating penalty of £500 per day would apply if contributions were not paid by 25 August 2021.

Morecambe Bay Wines appealed the EPN on the grounds that no UK government finance was available to help them meet the value of the employer contributions. TPR had revised the EPN deadline date from 25 August to 22 September 2021 (which was also appealed), but the company said that staff were furloughed, and the business had been closed due to lockdowns. But there was the intention to meet the overdue payments in the months after re-opening.


Whilst Morecambe Bay Wines acknowledged the underpayment, their key grounds for appeal was that it was not appropriate for TPR to issue such penalty notices and require pension contributions to be paid.

Judge Hazel Oliver sympathised with the company, acknowledging the challenging financial difficulties that were experienced.  However, UK Government guidelines were clear that employer contributions would not be covered under the CJRS so the company should have realised that, perhaps, it was not affordable to retain all of the staff they had furloughed.

The penalty notices are a fundamental part of TPR’s compliance regime, ensuring that employers do meet their legal obligations to deduct and pay pension contributions. The appeal against the issue of these notices by Morecambe Bay Wines was dismissed.

Lesson for employers

This was an important case for TPR and the tribunal has endorsed their compliance regime and use of penalty notices. There is a legal obligation for the employer to maintain their duties, regardless of difficult financial circumstances.

As the judge herself said: “late compliance does not prevent penalties from being enforced”.

Replies (3)

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By Hugo Fair
22nd Mar 2022 13:21

"Morecambe Bay Wines appealed the EPN on the grounds that no UK government finance was available to help them meet the value of the employer contributions" ... who on earth advised them to take that tack?
It's barely an enhancement over a 5-year old stamping their feet and screaming "It's not fair!"

Legislative rules remain in force until/unless they are rescinded, varied or a temporary easement is agreed by the collecting/enforcing authority. Anything else is just (ineffective) excuses.

Thanks (1)
By Paul Crowley
22nd Mar 2022 17:57

Maybe I am wrong but Bounce back loans guaranteed by HM Gov were available throughout.
Interest free for a complete year and interest subsidised by the taxpayer thereafter.
I sincerely hope that they were DIY wages.

Thanks (0)
By rememberscarborough
23rd Mar 2022 10:38

Suspect there's far more to this case than we know because at my old job we had a similar problem and the pension authorities didn't come down anywhere near as hard or as quickly as they have in this case. Suspect someone's nose has been put out of joint big style hence the polarising of opinions in the case.

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