As employers review their claims, they should look at the Third Treasury Direction issued 25 June which has retrospective impact. This records as integral to the CJRS that the amounts claimed are used to continue employment for those whose activities have been adversely affected by the coronavirus. Employers may also recall that, prior to this, the HMRC scheme stated: If you cannot maintain your workforce because your operations have been severely affected by coronavirus (COVID-19), grants could be claimed.
The word ‘severely’ was dropped from the scheme guidance at the same time as the adverb 'adversely' (qualifying) affected appeared in the legislation. Also, that 'no claim may be made if it is abusive'or 'contrary to the exceptional purpose of the scheme'. Shortly after this, a number of high street names announced they were repaying their grants. Speculation at the time was that this was done to court the favourable publicity from repaying public money once the immediate pandemic storm subsided.
Might the real position be more prosaic? Companies inspire confidence when run with sound financial management. Therefore, a healthy set of accounts and balance sheet are key. At its simplest (and this is a complex area), companies pay a dividend from profits. If a company is making profits, should it be taking public money to support its workforce costs?
Although time limits have been extended for corporate filings, a well organised company would be looking at what its dividend position was by the summer. It may well be interesting to look at the correlation between those corporates who declared dividends and those whose directors signed off their financial statements with sunny expressions of the strength of the corporate balance sheet who, at the same time, were claiming substantial furlough sums – which will presumably be shown as receipts in those statements. It may be some months to come before this analysis is done.
The Finance Act was passed on 22 July and with it came HMRC guidance entitled 'Receiving grants you were not entitled to.'
The guidance highlights the tight deadlines for corrections, notifications and more generous times for repayment, and points out that the 100 per cent tax charge on overclaims is not just for those whom HMRC audits and spots overclaims. Instead, employers are directed to include the overpaid grant on their corporation tax return. Whilst corporates will have challenges but little difficulty in checking their figures’ methodology against the HMRC guidance, they can be less certain about whether they correctly met the purpose of the scheme, as it has been differently expressed over time.
Coupled with publicity about 8,000 fraud whistleblowing reports to HMRC, and reports of widespread employees working whist on furlough at the employer’s request, perhaps it was not the metrics, but the nebulous wider purpose of the scheme, coupled with the 100 per cent self-reporting tax charge (with added risk of penalties and interest) that have caused them to repay.