HMRC finalises CJRS guidance for contractor customers, ahead of today’s portal launch

Public sector limited company contractors caught by IR35; private sector umbrella company contractors supplied by agencies and PSC directors who furlough themselves.

These “specific customers” HMRC addresses in guidance for the Coronavirus Job Retention Scheme, which updated again on Friday, following umbrellas’ calls to clarify holiday pay.

And so umbrellas are another contractor sector customer of HMRC’s addressed in its CJRS guidance, but their fears that holiday pay will accrue for their furloughed staff have been realised.

'May help umbrella companies'

Despite this, umbrella workers will be able to take holiday while on furlough and can agree with their umbrella to vary holiday pay entitlement as part of the furlough agreement, the update adds.

“It explains it accrues, but also that it can be taken during furlough leave which may help umbrellas as they’ll only need to top up 20% for any holiday taken while furloughed,” Jo Handler, senior associate at Brabners told ContractorUK.

The legal adviser on recruitment and employment law also said: “I think we’ll see some clever drafting to tie in furlough agreements to try and reduce these holiday costs by offsetting them against furlough pay.”

As well as four new paragraphs on holiday pay, the CJRS guidance update contains new details on fixed term contracts, statutory leave returnees, sick pay, fraud and agency workers.

Where the latter supplies clients with workers who operate through a PAYE umbrella, the guidance states that the decision on whether to furlough is for umbrella and worker to take.

'Would have to confirm this with PSC'

More involved, yet also concerned with the furlough decision-maker, is where an agency-supplied PSC, deemed inside the off-payroll rules, works for a non-central government body.

The guidance says the public sector end-user who wants to furlough the PSC “would have to confirm this” with both the PSC and agency, ahead of the agency applying for the grant.

Once a “no work” agreement by the PSC is in place, the agency can get 80% of the “monthly contract value” (no more than £2,500), as well as the employer NICs on that subsidised wage.

'For contracts in scope of IR35'

“The fee-payer would then pay at least the amount of wage-grant received to the PSC, and report the payment via PAYE using the contractor’s details, making the usual tax and NICs deductions for contracts in scope of the off-payroll rules,” the guidance says, adding.

“The PSC would then be required to report the amount it pays to the contractor as deemed employment income via PAYE using box 58A on the PAYE Real Time Information return.

“Where a contractor is continuing to receive payments from a public sector client (including through the CJRS or other any other scheme), income from this client should be excluded from any calculation of the reference pay for the purposes of the CJRS if the contractor also decides to furlough themselves as an employee or director of their own company.”

'PSCs need to agree with themselves, and put it in writing'

PSC contractors then “need to agree with the employee – i.e. themselves, that all work will cease and that must be a written agreement,” advises status expert Rebecca Seeley Harris.

Although she was reflecting on the prior CJRS guidance update, on Thursday, her advice applies to the Friday update too, meaning both private and public sector PSCs should heed it.

The latter PSCs might fall under the ‘contingent worker’ central government edict but, regardless, whenever a PSC furloughs itself, the no-work pledge must now be in writing.

“Previously only a notification was required,” says Ms Seeley Harris.

“Also significant is that furloughed directors are now also told they should not do work of a kind they would carry out in ‘normal circumstances’ to generate commercial revenue or provides services to or on behalf of their company.”

'Enforcement remains to be seen'

As to how HMRC will enforce the requirement that furloughed directors are only allowed to do their statutory or administration duties “in practice, remains to be seen,” says Chartergates.

“We would advise that you [directors to] take that into consideration,” the employment law firm warns

“This would seem to [only permit] work relating to VAT returns, PAYE returns, Companies House returns, and any other work required by statute.”

'Complexities'

At Brabners, Ms Handler reflected: “Given the complexities in the guidance, we expect employers will have a number of questions when the claims portal goes live [today].”

On Friday, chancellor Rishi Sunak said the government would continue to monitor the scheme, which has been extended by one month, meaning it will run until at least the end of June. ContractorUK has commissioned a step-by-step guide for contractors but HMRC guidance is available in the meantime.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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