Chancellor Rishi Sunak announced the Coronavirus Job Retention Scheme on 20 March 2020. It launched on 20 April 2020, backdated to 1 March 2020, and closed on 30 September 2021. By the end, 11.7 million jobs had been placed on furlough at some point and claims totalled roughly £70 billion.
HMRC continues to pursue civil and criminal investigations into fraudulent claims. The government grant initially covered 80% of a worker's usual monthly wage costs, capped at £2,500. Businesses could choose to top up wages above the 80% grant but were not required to. To qualify, a worker had to be on a PAYE payroll on or before 19 March 2020. The scheme, originally set to run until 31 May 2020, was extended multiple times.
Eligibility for Employers and Employees
Any UK organisation with a PAYE payroll could claim. The critical cutoff was the individual's presence on that payroll on or before 19 March 2020. This excluded workers hired after that date, even if they were later made redundant or placed on unpaid leave during the pandemic.
Furloughed staff could not perform any revenue-generating work for their organisation during the hours they were recorded as on leave. They could volunteer or train, but only if that training did not generate income. The prohibition on revenue-generating work was central to the scheme's design and a frequent focus of HMRC compliance checks after closure.
What counted as revenue-generating work
HMRC guidance stated that providing services, generating income, or carrying out any work that contributed to business activities was prohibited. Simply being available for work or answering a work email during furlough hours could breach the rules.
How Employers Claimed the Grant
Claims were submitted through the HMRC online portal. The organisation had to input details including the number of hours the employee normally worked and the amount being claimed. It calculated the grant based on the individual's usual wage, applying the 80% rate and the £2,500 cap.
The grant covered wage costs only. Businesses remained responsible for employer National Insurance and pension contributions on the furloughed wages. These costs were not reimbursed. The organisation had to pay the furloughed worker the full amount claimed, less any deductions for tax and National Insurance, and report the payments through the Real Time Information system.
Timing of claims
Claims could be made in advance of the payroll run, but the claim had to match the actual payroll data. HMRC processed claims within a few working days. The scheme was structured as a reimbursement, not a loan. The worker had to be paid before the claim could be submitted.
Tapering of Government Contributions from July 2021
From 1 July 2021, the government contribution reduced to 70% of wages, capped at £2,187.50 per month. Firms were required to pay the remaining 10% to bring the total to 80% of wages. This was the first time businesses were legally obliged to contribute beyond the optional top-up.
From 1 August 2021, the government contribution fell further to 60% of wages, capped at £1,875 per month. Companies had to pay 20% to maintain the 80% total. The scheme closed entirely on 30 September 2021. No claims could be submitted after that date, and no furlough payments were made for any period beyond it.
Employer National Insurance and pension contributions
Throughout the scheme, organisations remained liable for employer National Insurance and minimum automatic enrolment pension contributions on the full amount paid to the furloughed individual. These costs were not covered by the government grant and had to be paid from the business's own funds.
Legal Basis and HMRC Compliance Investigations
The scheme was established under the Coronavirus Act 2020. Subsequent Treasury Directions provided the detailed legal framework for claims, eligibility, and enforcement. These Directions were published after the scheme launched, creating a retrospective legal basis for claims made in the early weeks.
HMRC established the Taxpayer Protection Taskforce to investigate furlough fraud. The taskforce examines claims that may have been inflated, claims for staff who continued working while on furlough, and claims made by entities not entitled to the grant. HMRC can impose penalties of up to 100% of the overclaimed amount and can pursue criminal prosecution for deliberate fraud.
As of April 2024, HMRC continues to investigate both civil and criminal cases. The scheme's legacy includes a large compliance operation expected to run for several years. Businesses that made errors in their claims are expected to repay the overclaimed amounts, with interest, even if the error was not deliberate.
Key Facts
- Announced: 20 March 2020 by Chancellor Rishi Sunak
- Launch date: 20 April 2020, backdated to 1 March 2020
- Initial grant: 80% of wages, up to £2,500 per month
- Employee eligibility cutoff: On PAYE payroll on or before 19 March 2020
- Closure date: 30 September 2021
- Total jobs furloughed: 11.7 million
- Total cost: Approximately £70 billion
- Tapering from July 2021: Government 70% (cap £2,187.50), employer 10% from 1 July 2021; government 60% (cap £1,875), employer 20% from 1 August 2021
- Post-scheme enforcement: HMRC Taxpayer Protection Taskforce investigating fraudulent and erroneous claims
Government Contribution Tapering Schedule
| Period | Government contribution | Government cap | Employer contribution | Total paid to employee |
|---|---|---|---|---|
| March 2020 to June 2021 | 80% | £2,500 | 0% (optional top-up) | 80% |
| July 2021 | 70% | £2,187.50 | 10% | 80% |
| August to September 2021 | 60% | £1,875 | 20% | 80% |
Frequently Asked Questions
Could an employee be furloughed and still work for the same employer?
No. Furloughed staff could not perform any revenue-generating work for the organisation during the hours they were recorded as on leave. They could volunteer or train, but only if that training did not generate income.
What happened if an employer claimed too much furlough grant?
HMRC can impose penalties of up to 100% of the overclaimed amount and can pursue criminal prosecution for deliberate fraud. Even non-deliberate errors must be repaid with interest.
Did the scheme cover employer National Insurance and pension contributions?
No. The government grant covered wage costs only. Businesses remained responsible for employer National Insurance and minimum automatic enrolment pension contributions on the full amount paid to the furloughed individual.
