The Government has extended its furlough scheme until the end of June.
The recently published Direction from HM Treasury, which has gone further than the previous HMRC Guidance by making it a requirement that staff agree in writing to be furloughed, has created a great deal of uncertainty. For those businesses that have already notified staff of furlough without written agreement, this could present a problem.
Previous versions had stated that it would be sufficient for an employer to provide written notification to employees that they have been furloughed and to retain a copy of this for five years. The guidance indicated that the letter did not have to be sent prior to the furlough period commencing and could be sent at any point after it had begun.
The Direction, however, diverges from this. Instead, it states that furlough will only be deemed valid by HMRC “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”. Therefore a formal written agreement that an employee will not continue to work during the furlough period is required, rather than merely supplying a notification.
Naturally, employers who followed the earlier guidance and simply notified employees of their being furloughed will have concerns that their claims may be rejected by HMRC on this basis. So what options are available to them if this occurs?
One approach is for the employer to contact the relevant employees and ask them to sign a document agreeing not to work. However, para 6.1 and 6.7 of the Direction suggests that the written agreement cannot be made retrospectively after the furlough period has begun. Equally, it’s not clear what the consideration for such an agreement would be.
In line with its statutory duties, HMRC is legally bound to follow the Direction. However, due to the lack of consistency, it appears that there is a legitimate case to be made for a judicial review claim to be made against the Treasury and HMRC by employers who have acted in accordance with previous versions of the furlough guidance and not secured written agreements with their employees.
Feel free to get in touch with our Employment team to talk through your options.
