The Exchequer tried to design coronavirus support schemes to reduce the likelihood of mistakes and fraud occurring. HMRC told the Public Accounts Committee on 7 September that the error and fraud rate in this scheme could be between 5 and 10 per cent and that HMRC will be focusing on tackling abuse and fraud.
The furlough scheme has had three key pieces of legislation and over 100 changes to the issued HMRC guidance since March. With the increasing complexity of flexi-furloughing claims from 1 July, claimants may dispute assertions that the schemes were designed to reduce mistakes. We are now seeing increasing numbers of organisations, large and small, realising that they have made mistakes in their claims.
The Finance Act gave HMRC investigatory powers, and they are starting to investigate claims in depth. HMRC is writing to 27,000 employers to invite them to correct their claims and looking into the employers of the 8,000 who have made whistleblowing reports about claims breaches.
This is public money paid out at pace within six working days of claims without question to those with their RTI records in order. Now is the reckoning though, so it’s time to check, correct and notify HMRC if mistakes have been made by businesses under stress during a pandemic.
HMRC’s assurance that “no-one who has tried to do the right thing but made an honest mistake has any need to be concerned, as long as they put it right” must be read with the emphasis on the last phrase: as long as they put it right. HMRC reiterated to Parliament on 7 September that it expects employers to check their claims and repay any excess amount. Claimants must understand that the onus is on them to get claims right or, if mistakes have been made, to correct them. Time is very short to make these checks. Claimants can correct any mistake they’ve made without fear of a penalty or other sanction, provided they notify HMRC by 20 October 2020, or within 90 days of receiving the grant, whichever is latest.
Failure to meet the deadline may result in 100 per cent tax charge on the overclaimed amount, plus penalties. Directors of companies need to be aware that, if they know of breaches and the employer becomes insolvent, personal liability for the tax charge may result.
It seems unlikely that the £1,000 Coronavirus Job Retention Bonus will be paid for previously furloughed employees where uncorrected claims mistakes become known to HMRC, but that may be the least of employers’ worries. Check, correct and notify overclaims today before time runs out!