In The News

Coronavirus Guidance Update

Article Date: 03 December 2020

HMRC made a rather innocuous yet significant announcement on 1st December concerning the Coronavirus Job Retention Scheme.

The link is set out below;

Check if your employer can use the Coronavirus Job Retention Scheme

On page 7 under the heading “Holiday Pay”, HMRC have made two new announcements;

  1. Employees can only be put on furlough if coronavirus (COVID-19) is affecting your employer’s operations.
  1. Employees cannot be put on furlough just because:
  • you are going to be on paid leave
  • your employer usually does less business over the festive period

These new rules are significant for all employers and this announcement bears all the hallmarks of an HMRC announcement which is vague enough to give their inspectors significant scope to argue for furlough payment clawbacks in the future

It is clear from this announcement that furloughing staff simply to cover a period of holiday, including the Christmas festive period, is not permitted.

It clear that HMRC have recognised that many businesses will close for up to two weeks at Christmas notwithstanding Covid and that consequently furlough monies may have been paid for non-covid reasons.

It is also clear that HMRC have recognised that many businesses who may remain open would have less activity seasonally at this time of year and therefore employers could have looked to furlough staff to reduce their wage bills in December.

This appears to be the first occasion when HMRC have sensed checked the furlough system to try to focus on Covid at the exclusion of other reasons for any downturn in activity.

This will be a factor for motor dealers who traditionally end the calendar year with a drop off in sales and aftersales activity. There is certainly the scope for a future argument over whether the drop in activity and hence the requirement to use the furlough scheme, was a result of Covid or a normal seasonal downturn. There are no fixed rules for example over whether an employee already furloughed can stay on furlough if the business normally has a lower level of activity in December, or how many days a person has to be furloughed in order to enable the furlough of his or her holiday entitlement as part of that period. As always where there is no absolute clarity, there will be winners and losers in a system designed to help businesses retain employees because of Covid.


These rules will cause uncertainty and many businesses may already have made decisions in good faith based on the previous rules. The retail motor sector always has a drop in vehicle sales and service hours in December as a result in the lower number of working days, however trade has undoubtedly been impacted by Covid, not least through the enforced showroom lockdowns.

Proving that Covid was the reason why employees were furloughed now when December sales levels are always lower could cause a significant debate with HMRC in the future. If the decision were made in good faith, the worst-case scenario would seem to be that the business may be obliged to repay the support, however this could still cause significant challenges for retailers.

ASE Plc continues to acknowledge that the furlough scheme has and continues to be a very welcome aide to ensure economic prosperity. However, its application has always been subject to many grey areas. These two simple new rules have made things even more difficult to interpret in future and will no doubt produce a debate with any business who is claiming furlough payments in December.

Our advice is that businesses should only claim furlough where they believe they can prove that if staff were at work activity would be or has been reduced because of Covid.

On the basis that HMRC are undoubtedly going to challenge December furlough claims, employers may choose to push the button now on redundancies which have been held in abeyance utilising the furlough scheme, rather than ultimately be left footing the bill for employees they may well not ultimately need.

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