Job retention scheme

Overview

The Coronavirus Job Retention Scheme (CJRS), set up in March 2020, helped employers pay their workers’ wages if they were unable to work during the coronavirus crisis. As well as situations where the business had to close or temporarily reduce its capacity, this could also include workers who:

• had caring responsibilities resulting from coronavirus, such as caring for children who were at home as a result of school or childcare closing, or
• were clinically extremely vulnerable, or in the highest risk group for severe illness from coronavirus.

Under the Coronavirus Job Retention Scheme, employers could claim a government grant so that a ‘furloughed’ worker could receive up to 80% of their usual wages, via the payroll, up to a total of £2,500 each month.

These grants were taxable income for employers carrying on a business. However they should have been offset by the related employment costs. For more on reporting the payment, see the guidance below under Report your Coronavirus Job Retention Scheme grants.

Treasury Direction and guidance

The underlying scheme rules (the Treasury Directions) can be found on GOV.UK.

GOV.UK guidance

The government's guidance on the Coronavirus Job Retention Scheme, split over a number of pages, can be found in the collection on GOV.UK.

Employment law guidance

There were requirements around furloughing workers from an employment law perspective. Guidance and articles can still be found on the internet. 

The main thing to note is that the employment relationship continued through the furlough period and employers continued to have certain obligations – for example, workers may have continued to accrue holiday. 

Incorrect calculation/claim?

Many employers got their calculations of furlough pay/grant amounts wrong, particularly in the early stages of the scheme when there was a lot of confusion about the rules.

There were obvious issues if an employer paid out too much by way of furlough pay (as they would have paid out more than they could legitimately claim for under the Coronavirus Job Retention Scheme). However, there were also potentially serious ramifications where they did not pay out enough furlough pay (that is, they paid out less than the ‘reference pay’ required under the scheme rules). Indeed, it could mean that the employer was not actually eligible to make a claim for a grant from the Coronavirus Job Retention Scheme at all.

If you underclaimed a grant, the window to rectify this was short, even if there was a reasonable excuse for the failure to make the claim/amendment in time. HMRC gave examples of what they considered might be a reasonable excuse in their guidance on GOV.UK (now withdrawn).

Therefore if an employer discovered an underpayment of furlough pay to an employee, which under the scheme rules they had an obligation to make good, this might have had to come from their own funds. Employers were required to make good any shortfall to employees within a ‘reasonable period’ – see our guidance below under the heading Payments to employees.

If you overclaimed a grant, you may need to pay some money back to HMRC – more on this below. Employers were previously able to reduce their next claim by the overclaimed amount, although this is no longer possible. 

Checking your claims

Now the Coronavirus Job Retention Scheme has come to an end, HMRC may still check some claims. HMRC say that they are concentrating their compliance activity on those who they think were abusing the system and that they are not actively looking for cases where the employer simply made an innocent error. 

HMRC might look for issues such as the following, before approaching employers about Coronavirus Job Retention Scheme claims being wrong:

• whether the overall claim looks larger than they would expect based on previous filings
• whether the number of employees and the type of employees claimed for appears credible
• whether the pattern of Real Time Information (RTI) filings and claims is broadly in line with what they would expect

Due to the complexity of the scheme, there will be many more employers with innocent errors in their claims’ histories (particularly in the early days when there was a lot of confusion), than HMRC are likely to check. However, it is a good idea to review your claims so that you are satisfied they are all correct, or alternatively so you can take action to put any mistakes right sooner rather than later. There is always the small chance that you will be randomly picked for an HMRC check and it is better for you to have corrected any errors than for HMRC to spot mistakes and require you to make amendments.

Typical errors could include:

• for variably paid workers, the use of 2019/20 average pay details only (without doing the comparison);
• misunderstanding what employees could and, importantly, could not do when on furlough;
• once flexi- furlough came in, incorrectly recording hours as worked rather than on furlough;
• continuing to claim 80% of reference pay for months when the limit was 60% or 70%;
• incorrect use of pre-salary sacrifice pay figures;
• counting discretionary pay items as usual reference pay.

You can find the full collection of guidance on the Coronavirus Job Retention Scheme to help you check previous claims, work out claim amounts and pay grants back on GOV.UK. All employers, at the very least, need to keep records for six years, supporting the grants they have claimed, in case HMRC want to check them.

Offsetting

In terms of mistakes with claims, employers would either have claimed too much grant (known as an overclaim) or they would have not claimed enough grant (known as an underclaim).

HMRC’s position is that employers can offset overclaims and underclaims for different employees in the same claim period. Therefore, employers only have to repay any overclaim to HMRC to the extent that it is more than any underclaims in the same claim period. HMRC give an example in their guidance.

The errors must have arisen in the same claim period to be offset. 

Pay back any amounts owing to HMRC

Where employers overclaimed an amount of Coronavirus Job Retention Scheme grant, HMRC asked them to ‘voluntarily’ repay the overclaimed amount directly to HMRC, for example, by bank transfer or debit card. To do this, employers should have requested a payment reference number, which began with X – and then made payment within 30 days.

If employers did not do this, these excess payments were treated as tax that needed to be collected back from the employer at a rate of 100%. As such, employers could repay HMRC by including the excess amounts on the relevant tax return, which would then trigger the tax liability. This also gave HMRC the right to raise an assessment to claw back any excess payments.

For overclaims arising in 2020/21 for sole trader business employers, these needed to be included on the 2020/21 self assessment tax return – usual deadline 31 January 2022. For 2021/22 overclaims, these needed to be included on the 2021/22 self assessment tax return – usual deadline 31 January 2023. See below for more information under the heading Report your Coronavirus Job Retention Scheme grants. For limited company employers, the rules can be found in the Company Tax Return Guide available on GOV.UK.

Reporting requirements and penalties

Paying back any overclaimed money through the appropriate tax return was not the end of the story. Strictly, employers were required to notify HMRC of the overclaimed amount within 90 days from the receipt of the payment/the change of circumstances that meant the grant was received incorrectly, or potentially face ‘failure to notify’ fines – more on these below. There was no prescribed way of notifying HMRC.

If employers – who did not know that their Coronavirus Job Retention Scheme grant was incorrect at the time they received it - did not meet the 90-day notification requirement above, they still needed to ensure they paid back any overclaimed amounts via their tax return by the appropriate deadline. By doing so, there would be no potential lost revenue and so no failure to notify penalty. This is in line with general failure to notify principles – for a discussion of these, and also the associated reasonable excuse provisions, see HMRC’s dedicated factsheet.

Note that different, more severe, penalty rules applied for employers who knew that their Coronavirus Job Retention Scheme grant was incorrect at the time they received it and who didn’t report it/pay it back. They were treated as having made a deliberate and concealed failure to notify. They could be charged a penalty of up to 100% of the amount over-claimed as at the end of the notification period.

2025 voluntary repayment scheme

On the 12 September 2025 the government provided Covid scheme recipients with a ‘no questions asked’ window to repay outstanding money they were not entitled to or did not need. The GOV.UK reporting portal closed on 31 December 2025. 

The government said the ‘use it or lose it’ opportunity came ahead of tougher sanctions to follow for those who didn’t come forward. 

Payments to employees

If an employer underclaimed an amount of Coronavirus Job Retention Scheme grant and it resulted in them underpaying an employee (meaning that they would not have received 80% of their reference salary at the time), the employer had to make good any amount that they owed the employee. Not doing so may have meant that those workers did not receive the minimum amount that they were entitled to under the Coronavirus Job Retention Scheme, which may have invalidated the claim for that employee.

Where the 80% of reference salary requirements were met as a whole for an employee over all claim periods (despite there being shortfalls within some claims), HMRC said they would accept that the employer had paid 80% of reference pay to the employee for the total period covered by all the claims.

Making good any amount owed to an employee had to be done within a ‘reasonable timeframe’ for Coronavirus Job Retention Scheme purposes. We understand from the GOV.UK guidance, that for most sole trader business employers, this meant by 31 January 2022 for any underpayments arising in 2020/21 tax year and 31 January 2023 for 2021/22. The deadlines for limited company employers are available on GOV.UK.

To the extent that an employer paid an employee an amount which they now need to pay back to HMRC, they need to think very carefully before attempting to claw an amount back from the employee.

An employer’s position under the Coronavirus Job Retention Scheme is a separate issue to its obligation to pay its employees under employment law. There is no automatic right for an employer to require an employee to repay an amount of Coronavirus Job Retention Scheme grant paid to them, even where it subsequently proves to be incorrect under the law governing the Coronavirus Job Retention Scheme.

Whether employers can recover payments that are repayable to HMRC from employees is dealt with by existing employment law rules. The Employment Rights Act 1996 allows employers to make deductions from an employee’s future wages to recover overpayments of wages made by mistake. This could potentially be used if an employer discovers they made an error and over-claimed their Coronavirus Job Retention Scheme grant and overpaid an employee, in good faith, an amount which they now need to pay back. However, it is sometimes possible for an employee to object to such a deduction.

Employers should seek appropriate employment law advice, for example from Acas.

Report your Coronavirus Job Retention Scheme grants

Employers should have included the Coronavirus Job Retention Scheme grants in the appropriate tax return as explained in Reporting requirements and penalties above. If they were a sole trader business employer, these grants were taxable income for their business and should have been entered in box 16 of the full self-employment pages or box 10 of the short self-employment pages of the self assessment tax return for the relevant tax year. The wages paid out to employees under the Coronavirus Job Retention Scheme should have been deducted as a business expense as usual and so should have been offset against the grant when calculating the taxable profits.

There was a box to tick on page TR8 (box 20.1) of the tax return to confirm that these payments were included as taxable income for the purposes of calculating profits.

If an employer overclaimed an amount of Coronavirus Job Retention Scheme grant and they have not already told HMRC about/paid it back, they should not now include that amount as business income in the self-employment pages. They need to include it in box 1 on page TR5 of the main tax return in the section called ‘Incorrectly claimed coronavirus support scheme payments’. For limited company employers, the rules can be found in the Company Tax Return Guide 

Any Coronavirus Job Retention Scheme grant received by an employer who was an individual and not employing staff in the course of a business (for example, someone who employs a carer or a nanny) was not taxable and did not need to be included in a tax return.

The GOV.UK guidance on reporting Covid-19 grants and support payments can be found here.