Despite the government guidance being updated on 9 April 2020, uncertainty as to whether or not organisations in receipt of public funding are entitled to reimbursement under the Coronavirus job retention scheme remains.

Please see our latest update on the Coronavirus Job Retention Scheme here.

Whilst it is clear that those solely in receipt of public funds will not be eligible and therefore cannot furlough their staff and claim under the scheme, the position of those in receipt of mixed funding (some public and some private) remains confusing.

Where the public funding element has been granted specifically to fund certain roles, it appears clear that the organisation will not be able to furlough those staff and reclaim the funds.  The reason for that is because the government wishes to guard against “double dipping” in respect of a single salary.  If public funds have already been provided for the salary to be paid, then there is no justification for accessing the Scheme.

However, if an organisation receives public funds, but has trading subsidiaries which are self-supporting, the staff in the subsidiaries can be furloughed and a claim made under the Scheme.

The difficult area is where the public funding is mixed with commercial or other sources of funding (such as for instance a theatre receiving funds through the Arts Council (public funding) but also through sponsorship and trading), and where it is assumed that the public funding element is by way of a core grant towards general running costs (of which salaries are likely to be the largest cost) or a grant in respect of a project rather than salaries.

In those circumstances it is more likely that the Scheme will be available, in whole or in part.

This is the unofficial view of the Arts Council in its advice to arts organisations and the informal view expressed by the Lottery. It has also been suggested that publicly funded colleges could furlough some staff (although apparently not lecturers because the expectation is that they would continue to be providing online courses, apart from any other reason). That is advice to be taken with extreme caution. It has also been stated that Academies (which are all in receipt of public funding) cannot furlough staff.

Our generic advice is that if you only receive public funding you cannot furlough under the scheme. If you have mixed funding where there has been no earmarking of the public funding to specific roles it is more likely that reimbursement under the Scheme will arise if staff are furloughed, but you should take advice, as the risks are high and HMRC can review any payment it makes in the following five years.

Should you furlough your staff?

If the reality is that you have no work for your staff, then provided that the organisation is in receipt of mixed funding, there is little to be lost by furloughing staff either on full pay or reduced pay, and making a claim under the scheme. It is expected that HMRC will accept the vast majority of claims in full, at least in the short term due to the need to get funding out to organisations that are furloughing staff, and in due course review the claims.

In the case of mixed funding, the expectation is that HMRC is going to want to be reassured that there is no “double dipping” in respect of those staff.  That is going to depend on the circumstances of each organisation.  By way of an example, if an organisation receives a 70% core grant, and if staff are furloughed and only paid the same amount as is reimbursed by the government, capped at £2,500 per month, it is likely that HMRC will take the view that there has been double dipping.  70% of the income of the organisation is from public funds and therefore arguably at least 70% of salaries are met from public funds (salaries usually being the largest expense).  In the circumstances if the employer is only paying out what the government is reimbursing the employer under the Scheme, there must be double dipping as the funds provided to meet the salaries of the individuals have not been used for that purpose.  In such circumstances the expectation is that HMRC, if it undertakes some form of enquiry, is likely to reimburse at a lower level.  It is probably not a question of HMRC simply saying that an organisation is eligible or ineligible, in circumstances where there is mixed funding.

Furloughing staff is not dependent upon whether or not the organisation will be reimbursed by HMRC.  There is nothing to stop an employer agreeing with staff either that they will be furloughed (under the terms of the Scheme i.e. no work for the employer and a minimum period of three weeks), or agreeing some other variation such as furlough (but outside the terms of the Scheme), or reduced pay or reduced pay and reduced working.  To be eligible under the Scheme the individual cannot work at all.  For an employer with mixed funding, whether or not to take the furlough option, in the hope of reimbursement, or to agree with all staff reduced/part-time working, is going to be dependent on the needs of the organisation and the risk that the employer will not be reimbursed under the Scheme, in respect of those who have been furloughed, and the cost of the final alternatives including making redundancies.