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HMRC responds to Daniel Barnett’s questions on CJRS loophole

Further to Daniel Barnett‘s recent article highlighting a potential problem with the Coronavirus Job Retention Scheme, HMRC has responded directly with some answers.

Daniel Barnett recently wrote an article highlighting a problem with the Coronavirus Job Retention Scheme (see here). He also highlighted this directly to HMRC.

HMRC has written to Daniel, providing clarity for employers and employees on one of the seemingly inconsistent aspects of the Coronavirus Job Retention Scheme.

Paragraph 6.7 of The Treasury’s Direction to HMRC, which is the legislative source of HMRC’s power to make payments under the CJRS, states that an employer can only reclaim the employee’s salary, amongst other things, “…if the employer and employee have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment.”

However, that is contradicted by the HMRC Guidance.  The sixth iteration, issued on 20 April 2020, states:

“To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years.”  (emphasis added)

They are not consistent.  Which should be followed?

Technically, the Direction trumps the Guidance but…

Reassurance from HMRC

However, a senior executive within HMRC, who works in the office of Jim Harra, HMRC Chief Executive and First Permanent Secretary, has written to Daniel Barnett to explain HMRC’s approach going forward.

HMRC states that employers should follow the Guidance (and that they will treat applications for reimbursement under the Furlough Scheme in accordance with the Guidance).  The crucial paragraph from the letter is this:

“…the employer and the employee must reach an agreement and an auditable written record of this agreement must be retained. It does not necessarily follow that the employee will have provided written confirmation that such an agreement was reached in all cases.”

Whilst one might fairly take issue with whether that squares perfectly with the wording of the Direction, it is a helpful, clear and unequivocal statement from HMRC that they will not deny an employer the ability to reclaim funds simply on the basis the employer had not obtained written agreement from the employee to cease all work for the employer.

Could HMRC renege on what it has repeatedly said, and refuse to pay out to employers who cannot supply an employee’s written agreement to ceasing all work for the employer?  If it did, it would be extremely vulnerable to a judicial review claim; see here.

The correct approach seems therefore to be: don’t panic.  HMRC seems to be quite happy to accept claims for reimbursement of 80% of salary without requiring evidence of the employee’s written agreement.  It is unlikely to change its approach.

Find Out More

This update was written by Daniel Barnett, a member of the Employment Law Team. If you would like to discuss any of the issues covered in this article please contact his Practice Director, Nicholas Levett at or call 020 7427 4908.

This article represents Daniel’s views and specific legal advice should always be sought.

Covid-19 23 Apr, 2020


Daniel Barnett

Call: 1993

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