Can an employee who does not have a UK contract of employment be placed on furlough under the coronavirus (COVID-19) job retention scheme?

This Q&A takes account of the HMRC guidance for employers: Claim for your employees' wages through the Coronavirus Job Retention Scheme as at 15 April 2020.

For information on the updates to the HMRC guidance made on 4 April, 9 April and 15 April 2020, see the following News Analysis:

• HMRC publishes updated employer and employee guidance on Coronavirus (COVID-19) job retention scheme

• HMRC publishes second update to employer and employee guidance on Coronavirus (COVID-19) Job Retention Scheme, and

• Treasury gives legal effect to Coronavirus Job Retention Scheme and updates guidance a third time

For information:

• on how to determine which system of law is applicable to a contract of employment or employment relationship, see Practice Note: Applicable law—which system of law applies to the contract or employment relationship

• on the coronavirus (COVID-19) job retention scheme (CJRS), see Practice Notes: Coronavirus job retention scheme and Coronavirus job retention scheme—FAQs

The updated employer guidance makes it clear that any entity with a UK payroll can apply for a grant under the CJRS, provided it has:

• created and started a pay as you earn (PAYE) payroll scheme on or before 19 March 2020 (previously 28 February 2020)

• enrolled for PAYE online, and

• a UK bank account

In relation to the employee, the updated employer guidance states:

• (as updated on 4 April 2020) that foreign nationals are eligible to be furloughed, and

• (as updated on 9 April 2020) that grants under the scheme are not counted as ‘access to public funds’, and an employer can furlough employees on all categories of visa

The key requirement is that the furloughed employee was:

• on the employer’s PAYE payroll on or before 19 March 2020, and

• notified to HMRC on an RTI submission on or before 19 March 2020

Alternatively, if an employee was employed as of 28 February 2020 and on payroll (ie notified to HMRC on an RTI submission on or before 28 February) and then made redundant or stopped working for the employer between that date and 19 March 2020, they can also qualify for the scheme if the employer re-employs them and puts them on furlough.

It is not clear from your query what is meant by ‘…a UK contract of employment’. The PAYE position will vary depending on the specific circumstances, for example the treatment may be different where the individual is:

• a non-UK resident who performs employment duties for a UK entity

• seconded to the UK entity from a non-UK group entity

• a short-term business visitor, or

• a UK employee who operates outside the UK

For more information on the PAYE obligations arising in these different circumstances, see:

• Practice Note: UK tax issues for cross-border employment

• Practice Note: PAYE—readily convertible assets, intermediaries and jurisdictional scope

• Q&A: Coronavirus (COVID-19)—what are the potential tax consequences of working remotely, including cross-border employment tax issues?