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Coronavirus Job Retention Scheme and IR35

Nick Irvin, Employment Tax Assistant Manager
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The Coronavirus Job Retention Scheme (CJRS) is helping many employers and employees who have faced disruption during the ongoing pandemic. However, some questions remained over whether those working through an intermediary (usually a personal service company, PSC) and subject to IR35 qualify for the CJRS. 

The government have released some further guidance on when the CJRS may apply to individuals working through an intermediary, which is summarised below.

We have also outlined a number of key tips to be aware of when submitting your CJRS claim in our insight the Four key tips relating to CJRS claims.

Working in the public sector

Generally, the government have said that they don’t expect the CJRS to be used in the public sector, as the funding for the costs of hiring the employees or workers is likely to be provided by the government as a matter of course.

Where contingent workers in the public sector cannot work due to COVID-19, the Cabinet Office has issued Guidance notes on Payments to Suppliers for Contingent Workers impacted by COVID-19.  This guidance suggests that the pubic sector body should continue to pay 80% of the costs of hiring contingent labour up to £2,500 per month without claiming through the scheme. This means that these individuals should still receive the same amount of pay that they would have received had they been eligible for the CJRS. Where this scenario applies, the detailed guidance should be considered carefully as it is complex.

However, individuals who are subject to the off-payroll working rules (IR35) in the public sector may qualify for the scheme. This could be, for example, where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response.

If this is the case, the individual should perform no work for the public sector body. The arrangement should be agreed with the individual’s PSC and the fee-payer (usually the person paying the PSC) if they are different from the public sector body engaging the worker. From this point, the usual CJRS rules for employees should be followed, with the usual monthly wage costs based on the monthly contract value.

It is the fee-payer who claims under the scheme and must pay any amounts received under the scheme (minus the grant amount covering employer National Insurance contributions and employer pension contributions) to the PSC.

Not working in the public sector

The CJRS does not cover individuals in relation to engagements with non-public sector clients, even if the individual’s PSC operates the IR35 rules. However, the government have confirmed that individuals who are directors of their PSC can be furloughed by their own PSC, even if they are the PSC’s only employee.

Company directors furloughing

An individual who is a director of their own PSC can be furloughed. As with regular employees, the employee cannot carry out any work during the furlough period for the PSC or for any clients that would generate revenue for the PSC.

However, where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their PSC, they may do so provided they do no more than would reasonably be judged necessary for that purpose, e.g. filing accounts or returns.

When individuals who are directors of their own PSC are furloughed, the usual rules for claiming the usual monthly wage, subject to a cap of £2,500, still apply. However, the usual monthly wage costs are based only on amounts processed through payroll and subject to PAYE. Therefore, any amounts extracted by the director through dividends or a loan account will not be used to calculate the amount that can be claimed under the CJRS.

Where an individual 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 when calculating the amount to be claimed through the CJRS if the individual also decides to furlough themselves as an employee or director of their own PSC.

Other individuals who qualify

In addition to regular employees, the government have confirmed that other individuals who, aren’t strictly employees for employment law purposes, can be eligible for the scheme, including:

  • office holders
  • company directors
  • salaried members of a Limited Liability Partnership
  • agency workers and limb (b) workers.

To be eligible for the CJRS, these individuals must be paid via PAYE and care should be taken to follow the correct procedures to gain agreement to furlough such workers.


The new guidance gives welcome clarity surrounding the eligibility of these further groups of workers for the purposes of the CJRS. Each scenario described above has its own complexities and so should be considered carefully on its own facts.

For more information, please contact Caroline Harwood or your usual Crowe contact.

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