Any employer who has used the Coronavirus Job Retention Scheme (CJRS) will be familiar with the claim process by now. However it is not yet clear how HMRC intends to audit these claims to ensure they are reasonable and legitimate.
What we do know is that the Government is introducing penalty legislation as part of the Finance Bill. This will include a 30-day period to notify them of any mistakes regarding a claim, and failure to comply could result in a 100 per cent tax charge.
The CJRS guidance is being updated continually and it is important that employers continue to ensure they have followed the guidelines from the beginning. Here are the top things to consider and check.
- Have the furlough calculations been done accurately for each employee? It is likely that HMRC will issue penalties for incorrect claims. As the guidance has developed, it’s important to go back and review all of your calculations. Get advice from an expert to ensure peace of mind about your calculations being correct, particularly around the more complicated flexible furloughing.
- Have you kept good records? When calculating your claims, did you keep clear notes and information showing how you arrived at those figures? This type of evidence may be useful in any future discussions with HMRC. If an error has been made, such workings may show a true mistake rather than a fraudulent claim.
- Were employees correctly furloughed? If a claim has been made for an employee who wasn’t on the last payroll prior to 19 March 2020, this should be revised as these employees cannot be furloughed. Also, did the furlough agreement contain the right information?
- Was the admin process strong enough? Are there clear records of communication with employees regarding furlough agreements and what they are and are not allowed to do whilst on furlough? Were they clear enough? A furlough agreement should provide notice to the employee that they will be going on furlough and explain clearly how, and how much, they will be paid. If on review you don’t feel these agreements were clear enough, you may need to consider issuing new ones. Again, this is especially important if you’ve used more complicated flexible furloughing arrangements.
- Whilst on furlough, employees can only do certain activities. Have you checked these rules have been adhered to? HMRC is encouraging employees to report employers who have asked them to work when they are on furlough.
Employers must keep CJRS records for six years and furlough agreements for five years. There are many more specific areas and examples of what to review ahead of any potential review by HMRC. And HMRC might not be the only interested party, as your auditors may also decide that your use of CJRS needs to be reviewed as part of their audit work.