CJRS rules interpretation

[Kulvinder]

Can someone explain their interpretation of the CJRS rule 6.2 below.

We have an employee who was furloughed at Company A. Then they secured new employment at Company B whilst they were on Furlough.

There is a link between both companies....

1. The director owns the shares of both Companies and is the director.

My question is was the employee still eligible for CJRS at Company A even though they took new employment at Company B under a new contract.

Interpretating the legislation, it is not the employee working for Company B.
It is the individual who has established a new employee relationship alongwith a new contract with Company B. The CJRS rules permit individuals to take a new job whilst furloughed.

The legislation is quite specific as it refers to it as if the "Employee works for ", and that word employee has a legal definition from Section 4 of ITEPA.

I think the legislation was meant to stop employers asking furloughed employees to work at another business they control during their furlough time but it does not effect this scenario due to the individual accepting a new contract with Company B when employment commenced, so it's not the same employee because the elements for the employment contract are different, the contents of the contract and employer who is party to the contract.

Here is the section from the CJRS 2020 Act that I am referencing.

6.2 - An employee has not ceased all work for an employer if the employee works for a person connected with the employer (see paragraph 13.4) or otherwise works indirectly for the employer.

Here is section 4 of ITEPA that CJRS uses to define employer and employee.

“Employment” for the purposes of the employment income Parts
(1)In the employment income Parts “employment” includes in particular—
(a)any employment under a contract of service,
(b)any employment under a contract of apprenticeship, and
(c)any employment in the service of the Crown.
(2)In those Parts “employed”, “employee” and “employer” have corresponding meanings.

Thank you advance,

 

[Newchodge]

I think it is perfectly clear that there is no right for Company A to claim furlough payments.

I think the legislation was meant to stop employers asking furloughed employees to work at another business they control during their furlough time but it does not effect this scenario due to the individual accepting a new contract with Company B when employment commenced, so it's not the same employee because the elements for the employment contract are different, the contents of the contract and employer who is party to the contract.

If it is 'not the same employee' there can be no issue, however I cannot see how under any reading of anything the same person can be 'not the same employee'. If you mean 'not the same employment' then, obviously it is not the same employment, however it very clearly is "asking furloughed employees to work at another business they control during their furlough time ". Please explain exactly how it is not.

 

[Kulvinder]

I think it is perfectly clear that there is no right for Company A to claim furlough payments.


If it is 'not the same employee' there can be no issue, however I cannot see how under any reading of anything the same person can be 'not the same employee'. If you mean 'not the same employment' then, obviously it is not the same employment, however it very clearly is "asking furloughed employees to work at another business they control during their furlough time ". Please explain exactly how it is not.

CJRS definition of the employee is someone in an employment contract. The contract consists of 3 elements to create the employee.

1. The individual being employed
2. The employment contract
3. The employer

When the individual took a different employment at Company B, they entered a new employment contract, so they are not the employee of Company A working at Company B. They are the new employee of Company B because of the contract they signed. The job at Company B is different and it operates its own paye scheme.

The rule says the employee cannot work at the linked company, it doesn't restrict the individual entering a new employment contract at Company B.

Is the employee of Company A and B the same?
I think the individual is but the other parts to form the contract and create the employee status are different. Usually if an employee is asked to work for another company that is linked or associated then they are told to go on an secondment for a certain duration, that is not what has happened.

 

[Newchodge]

An employee has not ceased all work for an employer if the employee works for a person connected with the employer (see paragraph 13.4) or otherwise works indirectly for the employer.

any employment under a contract of service,

To paraphrase:

If the employee works for a person connected with the employer under ANY employment contract they have not ceased work for employer A so company A cannot claim furliough and has committed a criminal act in doing so.

 

[Newchodge]

The rule says the employee cannot work at the linked company, it doesn't restrict the individual entering a new employment contract at Company B.

You cannot work for anyone without an employment contract (written or not). Presumably Company A has been caught out? I strongly recommend paid for legal advice rather than trying to twist the meaning of a perfcetly intelligible regulation.

 

[Kulvinder]

You cannot work for anyone without an employment contract (written or not). Presumably Company A has been caught out? I strongly recommend paid for legal advice rather than trying to twist the meaning of a perfcetly intelligible regulation.

Section 6.2 references 13.4 which I have included below, 'person' is explained under13.4 (a). Will the 'person' in 6.2 be interchangeable with 'company' and therefore 13.4 (b) applies because the employee hasn't worked for the person it is Company B.

13.4 For the purposes of determining whether a person, company or charity is connected with an employer for the purposes of CJRS-

a. whether a person is connected with an employer must be determined in accordance with section 993 of the Income Tax Act 2007;

b. without prejudice to paragraphs 13.4(a) and 13.4(c), whether a company is connected with an employer (where the employer is a company) must be determined in accordance with section 1122 of CTA;

c. without prejudice to paragraphs 13.4(a) and 13.4(b), whether a charity is connected with an employer (where the employer is a charity) must be determined in accordance with section 5 of SCDA construed as if-

(i) references to a tax year in that section were omitted,

(ii) subsection (7) of that section were omitted.

 

[Wilson Philips]

You cannot work for anyone without an employment contract (written or not). Presumably Company A has been caught out? I strongly recommend paid for legal advice rather than trying to twist the meaning of a perfcetly intelligible regulation.

There is no point in trying to reason with someone of that mindset. Witness the same query on Accounting Web, where clearly the answers were not to the querist’s satisfaction!

 

[japancool]

The rule says the employee cannot work at the linked company, it doesn't restrict the individual entering a new employment contract at Company B.

So if you already know, or think you know, the answer, why are you asking?

 

[Newchodge]

There is no point in trying to reason with someone of that mindset. Witness the same query on Accounting Web, where clearly the answers were not to the querist’s satisfaction!

You are right. Worryingly the companies concerned appear to be accountants!

 

[NicoJ]

Have you claimed employment allowance for both companies?

 

[Newchodge]

The contract consists of 3 elements to create the employee.

What a load of tosh. The contract consists of 3 elements to create the employment relationship.

 

[Newchodge]

Usually if an employee is asked to work for another company that is linked or associated then they are told to go on an secondment for a certain duration, that is not what has happened.

Please show me anywhere in the regulations that it states the employee needs to be asked to work for an associated company. The regulations state 'if the employee WORKS'.