Coronavirus Job Retention Scheme UPDATES
20 October 2020 deadline
HMRC has started their review of the Coronavirus Job Retention Scheme (CJRS) by contacting around 3,000 employers they believe may have overclaimed or not actually met the conditions to receive the grant i.e. including ineligible employees.
HMRC is asking those businesses contacted to review their CJRS claims and contact HMRC to confirm whether or not there has been a mistake. The letters do not specify what HMRC believes is wrong with the claim or even which month’s claim HMRC has an issue with.
There are a number of triggers for the letters from HMRC. If you receive a letter you must contact HMRC.
A trigger for these letters may be that the claim is showing up on HMRC’s systems as high risk, for example:
• HMRC’s systems will show if the amount claimed appears incorrect based on the corresponding salary data they are receiving from the Real Time Information system
• if HMRC’s systems have identified that the employer included employees who were not paid through the PAYE scheme in February or March 2020 who might qualify for example if they were transferred from another employer under TUPE or returned from parental leave.
• HMRC may have had a report which has been made from an employee (or even a competitor business) that employees were furloughed but continued working in practice.
The head of HMRC is anticipating that 10% of claims may be incorrect, and with the latest Government statistics showing that £35.4bn has been paid out to around 1.2m employers, HMRC could be seeking reclaims of £3.5bn from employers!
Sector Value of claims made Potential reclaim exposure
Accommodation & food services £4.8bn £477m
Manufacturing £3.8bn £384m
Construction £2.9bn £293m
Business administration/support £2.8bn £280m
Professional, scientific & technical £2.2bn £220m
Transport & storage £1.7bn £168m
Arts, entertainment, recreation £1.3bn £133m
It is also clear that HMRC is willing to prosecute fraudulent claims. Two people have recently been arrested (a company director and accountant) over a suspected £70,000 CJRS fraud. The first arrest for suspected CJRS fraud was made in July for allegations of a £495,000 fraud. HMRC is taking a very strict approach to those who are making fraudulent claims.
The government has pledged to do “everything possible” to claw back taxpayers’ money which has been wrongly handed out.
Employers need to act now to review their claims and make any amendments by 20 October to avoid HMRC activity and penalties.
With penalties ranging from 15% to 50% for errors that are negligent and new legislation imposing penalties of 100% where claims are fraudulent, proactivity is better than inactivity. We are here to help you.
HMRC has said that if employers voluntarily correct CJRS errors before 20 October 2020 they will not seek to penalise them for these mistakes. However, if you do not correct errors and HMRC identifies these errors at a later date you will be subject to the penalties above, in addition to any other penalties based on their enquiries.
HMRC guidance on how to correct errors can be found below and it provides for very strict timescales for notification and payment.
Most common CJRS Errors
There are many re-occurring errors which we have seen when reviewing CJRS claims including:
- Inability to evidence the correct reference pay to ensure employees are correctly paid and CJRS claims maximised
- Use of incorrect reference pay
- Lack of or poor documenting of the furlough consultation and ‘agreements’
- Breaching the daily claim limit caps
- Apportionment on the wrong basis i.e. payroll based on paydays and furlough based on calendar days
- Over and underclaims of NIC, based on pro-rata of total for pay period, not NIC just on furlough pay
- Overclaims of Pension
- SMP above the Statutory Pay incorrectly treated
- Not identifying ‘full’ furlough and ‘flexi-furlough’ from July onwards and so using incorrect
- Confusion of overlapping pay and claim periods and amounts able to be recovered
This is where we can help.
It is not just about the calculations. The practical aspects of the furlough scheme impact on employment rights and employment law, including:
• employee communications,
• variations to contracts, payments and benefits,
• the treatment of absences such as sickness and maternity, and
• the termination of employment – employers can still face claims from employees and Tribunals.
There are numerous aspects you need to ensure are correct. If in doubt, speak to a specialist.
Having to repay furlough claims with penalties and interest could have a major impact on some businesses and could have an adverse effect on the strength of your balance sheet or ability to correctly forecast for lenders, so there is a lot to think about and there are large claims to protect.
HMRC guidance for CJRS claims is changing all of the time, with the most recent update being made on 11 September, therefore it is imperative that you are preparing your claims using the most up to date guidance.
Please get in touch if you have ad hoc queries, if you have claims you would like us to review or if you would like a full CJRS risk review undertaken.