Contractors’ Questions: Do I qualify for the CJRS furlough because my project ended?

Contractor’s Question: I’ve been contracting for several years via my PSC. In June 2018, I started a new contract with a client that I had worked with previously. In September 2019, on contract renewal, the client deemed my contract no longer outside IR35 and said to continue, I must use an umbrella company.

I negotiated a rate increase and accepted. On January 31st 2020, my contract ended and the client was unable to extend my contract because the budget had run out. I was told to take a short break and the client would bring me back. Now, with COVID-19, the project has been put on hold.

My PSC is still running in the background. But since the beginning of February 2020, I’ve not been working and now that my client no longer requires my services, and the contracting market and economy has taken a dive, I’m stuck.

But the government announced financial help with the Coronavirus Job Retention Scheme and I would like to know if I would eligible, in relation to the guidance stating:

1)Multiple employers can put the same person on furlough…if you’re put on furlough by more than one employer, you’ll receive separate payments from each employer. The 80% of your regular wage up to a £2,500 monthly cap applies to each job.”

So does this mean I can claim through the CJRS both through my limited company and the umbrella company?

2) “[You] must have been on your employer’s PAYE payroll before or on 19 March 2020”

My preference is to claim via the umbrella company as this shows a higher salary on the payroll. I finished the contract on January 31st, and my last pay slip was generated for period ending February 9th 2020, i.e. I was on the payroll before 19h March. So do I qualify?

3)You are unable to work due to coronavirus (COVID-19).”

Well, my project was put on hold so the client was unable to call me back for work, so do I qualify on these grounds, if not the above two?

Expert’s Answer: Let’s start by tackling your first question ‘1)’ – can you claim through both your own limited company and the umbrella company?

The Coronavirus Job Retention Scheme (CJRS) is essentially based on the contractor being paid PAYE. For the contractor to be paid PAYE there has to be an employer but, what if there is more than one employer or, as in this question, what if you are paid PAYE through an umbrella but, also have your own limited company?

One keyword

In the government guidance, the relevant section is headed by the question, “If you currently have more than one employer”. The most essential part of this for you is the word ‘currently’.

As you seem to know, it adds: “You can be put on furlough by one employer and continue to work for another and if you are put on furlough by more than one employer, you will receive separate payments from each employer. The scheme pays 80% of the regular wage up to the monthly cap of £2,500 and this applies to each job.

“If you have had multiple employers over the past year, it depends on whether you were working with them concurrently or consecutively. You can only be furloughed by a current employer, not a previous employer.”

In your situation, the umbrella company would have been the current employer, unless of course you were also being paid PAYE concurrently by your own limited company. It would be hard to see why this concurrent payment would be the case but, if it was, the rule would apply to both PAYE payments so, technically, you could apply in relation to each company.

Despite what the client said...

As to ‘2),’ concerning the timing of when you were on the payroll, in your case you were working until September 2019 outside IR35 but, from then until January 31st 2020,  you were working through an umbrella company for the same client. The contract ended on January 31st because the budget had run out and this also pre-dated the COVID-19 lockdown in the UK.

The government guidance on the CJRS states that the contractor must have been on the employer’s payroll on or before March 19th 2020.

What the guidance does not say, however, is how long before March 19th 2020 did the contractor have to be on payroll for them to be eligible for the CJRS! The guidance is silent on this particular point but, it also states that if the individual was on contract, the contract must not have ended. In your case, despite the client saying they wanted to bring you back on to the project, the contract had, in fact, ended.

So it's up to the umbrella

Finally, ‘3),’ whether you qualify for the CJRS because the project was stopped due to COVID-19.

The point of the CJRS is to enable the employer to keep an employee on payroll when there is no work for them to do because of coronavirus impacts. This is known as the ‘furlough’.  In your case, however, the client had ended the project because they had run out of budget.

In the meantime, the project was put on hold because of COVID-19. You, however, as a contractor are employed by the umbrella company. So all things considered, it would be for your umbrella company to decide whether they wanted to furlough you. Best of luck!

The expert was Rebecca Seeley Harris, founder of status advisory Re Legal Consulting.

Wednesday 6th May 2020
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Written by Rebecca Seeley Harris

Rebecca is a leading expert in ‘employment status’ and IR35 and the law involving independent contractors and the self-employed for the purposes of tax and employment law. Rebecca has run her own consultancy for the past 20 years covering all employment status issues such as off-payroll in the private and public sector, otherwise known as IR35, s.44 and any issues affecting the self-employed and personal service companies.
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