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Coronavirus Job Retention Scheme Treasury Direction published covering flexible furlough

29 June 2020
The Chancellor has issued a further Treasury Direction providing the legal framework to the new flexible furlough available from 1 July 2020 under the Coronavirus Job Retention Scheme.  

The latest direction modifies the effect of the previous Directions issued on 15 April and 20 May 2020.  HMRC's extensive guidance has already been published outlining the mechanics of flexible furlough.

The latest Treasury Direction is split into two parts:

  1. Part one sets out the legal framework for the CJRS in its original format to 30 June 2020. 
  2. Part two sets out the legal framework for the revised CJRS, detailing flexible furlough, which is applicable from 1 July until closure on 31 October 2020.  

The second paragraph of the Direction provides detail on the purpose of the CJRS as follows: 

"Integral to the purpose of [the] CJRS is that the amounts paid to an employer pursuant to a CJRS claim are used by the employer to continue the employment of employees in respect of whom the CJRS claim is made whose employment activities have been adversely affected by the coronavirus and coronavirus disease or the measures taken to prevent or limit its further transmission."

This renewed emphasis on continued employment does not sit easily with the concept of making employees redundant whilst on furlough and using the CJRS grant to cover salary costs of notice pay. However, HMRC guidance has specifically stated that employees can be made redundant whilst furloughed and so it would seem unlikely the Direction is intended to limit the CJRS in this way. 

Key clarifications provided by the Treasury Direction:

Key dates - As set out in HMRC's guidance the Direction states that the last date for claiming under the original CJRS (expiring on 30 June 2020) is 31 July 2020. The Direction also confirms that employers will only be able to qualify for the updated CJRS if they have made a claim under the original CJRS by 31 July 2020. The Direction provides confirmation that the final date an employee could be furloughed for the first time was 10 June 2020, to allow for the minimum three week furlough period.  

Exceptions to 10 June cut-off date – There are limited exceptions to 10 June 2020 cut-off date, including:

  • Those returning from family leave. 
  • Armed forces reservist employees.
  • Employees who have transferred to a new employer under TUPE after 10 June 2020. 

Written agreement – As set out in HMRC's guidance, the Direction is clear that a written agreement must be made between the employer and employee setting out the furlough arrangement. The agreement should be made before the beginning of the period to which the CJRS claim relates. However, the Direction does allow for the agreement to be altered to reflect any variation agreed between the employer and the employee during the period to which the CJRS claim relates. We would therefore recommend that where there is to be a change in the arrangements for furlough to account for flexible furlough there is either an addendum/ amendment or new agreement put into place ahead of the change. The Direction requires the agreement to be kept until at least 30 June 2025 ie a period of 5 years. We would recommend that all versions of any agreement are retained for this period of time.

CJRS grant tapering from August 2020 – The Direction sets out the mechanics of the CJRS from August 2020 when the CJRS grant will be tapered to reflect the phased return to work. Employer contributions to wages will increase on an incremental basis from 1 August to closure of the CJRS on 31 October 2020. 

Calculating a claim – The Direction also sets out the detailed methodology for calculating a flexible furlough claim under the CJRS. As HMRC's guidance has already demonstrated, the calculations are multifaceted and require a complex calculation of the employee's "usual hours". HMRC has published a number of worked examples which may assist employers.


It is unsurprising that a further Treasury Direction has been issued providing the essential legal framework to the updated CJRS. Further clarity and structure is welcomed as the new rules involve incredibly complex calculations. A key message for employers is to keep a paper trail, with an immediate focus on the flexible furlough agreement. 

Having reported over 3000 instances of fraud since April 2020, HMRC has made it clear that it is preparing to tackle fraudulent and erroneous claims made under the CJRS. Clarity is key. If a mistake is made employers should be mindful of the ability to correct an error as set out in HMRC's guidance Claim for wages through the CJRS.

If you would like any further information with regard to the issues raised in this update please contact your usual DWF contact or another member of the Employment Team.

Key resources

Treasury Direction
Coronavirus Job Retention Scheme summary page of guidance
Changes to the CJRS
Government CJRS guidance for employers
Check which employees you can put on furlough guidance
Steps to take before calculating your claim using the CJRS 
Calculate how much you should claim 
Claim for wages through the CJRS
Report a payment in PAYE RTI
Examples to help you work out 80% of your employees' wages - flexible furlough
Find examples to help you calculate your employees' wages

Further Reading