Since the introduction of the Coronavirus Job Retention Scheme (CJRS) the Government has made it clear that HMRC will have the authority to retrospectively audit claims and take action where incorrect sums have been paid out. The introduction of the Finance Act granted HMRC the power to seek recovery of incorrectly claimed funds and HMRC have wasted no time in taking action.
HMRC has begun writing to 27,000 employers it believes may have claimed too much money through the CJRS based on the information it holds about them. This is roughly 2% of the total businesses which have claimed.
This news further confirms the degree of seriousness with which HMRC are taking instances of furlough fraud and serves as a warning for employers to audit their claims during the self-reporting window which in the main closes in October 2020. During this time, employers are able to notify HMRC of any incorrect calculations without facing a penalty.
Employers will still be able to self-report after the closure of this window in circumstances where the following dates fall after 20 October:
- 90 days of receiving the CJRS money they’re not entitled to; or
- 90 days of when circumstances changed so that they were no longer entitled to keep the CJRS grant.
We understand that the tone of the correspondence is conciliatory, with HMRC explaining that they “understand mistakes happen, particularly in these challenging times, and will not seek out innocent errors and small mistakes for compliance action”.
This will no doubt come as a welcome relief to employers as the complexities of the CJRS and the multiple updates to Government guidance have made it easy for innocent mistakes to be made.
Inconsistencies in the guidance given by HMRC and the Treasury has caused particular problems for employers.
For example, the unclear guidance could have led to employers unintentionally over-claiming in relation to employees who are sick whilst flexibly furloughed.
This issue was initially unclear at the outset of the CJRS, as HMRC guidance and Treasury Directions gave conflicting advice on whether sick employees should receive SSP or furlough pay. This confusion was rectified by the introduction of an updated Treasury Direction on 22 May which clarified that employers could choose whether to keep sick staff on furlough leave and continue to claim the wages via the CJRS, or move them onto SSP which they had to pay themselves.
However, applying this principle to those who have been flexibly furloughed since 1 July leads to further confusion and raises a number of questions.
Where an employee falls sick during a period of flexible furlough, should they be receive SSP or furlough pay? How is this to be calculated?
Paying SSP will result in the furloughed employee received less pay which seems contradictory to the purpose of the CJRS. However, an entitlement to furlough pay is unlikely to be dealt with in the flexible furlough agreement between the employer and employee. This could potentially lead to HMRC investigating the employer at a later date for over-claiming.
Despite guidance on the CJRS being released in June, these questions remain unanswered and reflect how easy it is for employers to have made mistakes whilst claiming furlough support.
We have been advising clients on how to navigate issues such as this throughout the past six months, and we can assist with any questions you may have about your claims. We can also provide a full audit service if you have concerns, or would just like some peace of mind.
If you receive a letter from HMRC or find yourself facing an HMRC inspection, we can advise how to respond, and guide you through any inspection process, including, where appropriate, making representations on your behalf, defending any allegations and challenging any penalties.
If you have any questions please contact a member of the Brabners Employment Team.