Contained in Finance Act 2020, which received royal assent on 22nd July 2020, is legislation which facilitates the clawback of coronavirus job retention scheme (CJRS) payments that the recipient was not entitled to. This is achieved via 100 per cent tax liability on such CJRS receipts and penalties.
HMRC has stated that it will be lenient in circumstances where genuine mistakes have occurred, and advises that previously overclaimed amounts should be included and adjusted as part of the next CJRS claim, providing notification is within the 90-day correction window. The notification is due by the latest of:
- 90 days after the date the claimant received the grant they were not entitled to;
- 90 days after the date they were no longer entitled to keep the grant because their circumstances changed; or
- 20 October 2020.
Directors of claimant companies need to be aware that, if they know of breaches and the company becomes insolvent, personal liability for the tax charge may result.
We are seeing increasing numbers of organisations, large and small, realising that they have made mistakes in their claims. It’s not surprising as the furlough scheme has had three key pieces of legislation and over 100 changes to the issued HMRC guidance since March, which makes it hard for everyone to keep up to date with. Additionally, we also have the increased complexity of flexible furlough claims from 1 July.
HMRC is starting to investigate claims, with one arrest at the time of writing for fraud , but it is also writing to 27,000 employers to invite them to correct their claims, which based on the data HMRC holds may be incorrect. HMRC is also looking into the employers of the 8,000 individuals who have made whistleblowing reports about claims breaches.
In its policy paper of 27 August, HMRC provided 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.’ This assurance must, however, be read with the emphasis on the last phrase: ‘as long as they put it right’.
Common mistakes we have seen in CJRS claims include:
- incorrect day counts;
- reference pay including discretionary payments;
- use of 2019/20 average pay details only;
- incorrect use of pre-salary sacrifice remuneration figures;
- employees only furloughed for holiday periods;
- problems with calculating the correct pension payments eligible for claims;
- not restricting National Insurance contributions calculations where required;
- misunderstanding of what employees can do when on furlough; and
- invalid earlier furlough days preventing a later valid claim.
The message is clear. This is Government money – HMRC audits are resulting in sanctions for those who have sought to abuse or defraud the scheme and those who have made errors, but a job retention scheme bonus, in 2021, awaits those employers that not only retain their staff, but also carefully follow CJRS requirements and correct any errors promptly.
Employers are therefore advised to go back and check earlier claims and correct any mistakes they’ve made within the correction window, without fear of a penalty or other sanction.