01 April 2022
The Coronavirus Job Retention Scheme (CJRS) brought in three new concepts, all of which were utilised in determining the amount that could be claimed. These concepts are:
- furloughed workers/employees;
- regular wage or salary/reference pay (based on set HMRC calculations); and
- for flexi furloughed employees: Usual hours (based on set HMRC calculations) less worked hours are furloughed hours.
Employers who claimed based on the initial guidance back in March 2020 may have worked out their own version of how calculations should be done. This may have been done for variable paid employees (engaged before 19 March 2020) where the 2019/20 average is required, as the initial guidance was less than clear. Those employers may not have revised their calculations each month and spotted changes or the expansion of the HMRC guidance, making it very clear over the following months how HMRC thought the calculations should be done.
Since the introduction of the penalty legislation, many employers have started to review claims. If you’ve made mistakes or you haven't reviewed your previous claims, we recommend acting as soon as possible. Where mistakes have been made, consider what action needs to be taken to rectify the mistakes.
In order to tackle claims review, the differing versions of the CJRS need to be explored. There are three versions of the scheme to consider:
- V1: CJRS original fully furloughed scheme, 1 March 2020 to 30 June 2020
- V2: CJRS flexible scheme, 1 July to 31 October 2020
- V3: CJRSE flexible scheme, 1 November 2020 – 30 September 2021.
Let’s look at the differences between these versions.
CJRS V1: 1 March to 30 June 2020, full furlough required for a minimum 21 consecutive days
The maximum grant reclaim value was 80 per cent of a furloughed employee’s wages (calculated using the new concept of reference salary, which is defined as to which components are included) up to a cap of £2,500 per person per month plus employer National Insurance (ER NICS) and employer’s auto enrolment minimum pension contributions on that reference salary at 3 per cent.
CJRS V2: 1 July to 31 October 2020, flexi-furlough as well as full furlough allowed and only provided an employee was eligible/claimed for under v1, subject to maximum number of employees in a claim. This version of the scheme changed from July to October as follows:
- 1 July to 31 July: as above but only for furloughed hours.
- 1 August to 31 August: the maximum grant for furloughed hours is 80 per cent of a furloughed employee’s wages (the reference salary, which is defined as to components included) up to a cap of £2,500 per person per month.
- 1 September 2020 to 30 September 2020: the taxpayer contributed 70 per cent and the employer 10 per cent of furloughed employees’ wages during furlough periods; and
- 1 to 31 October 2020: the taxpayer contribution was 60 per cent and the employer contribution was 20 per cent.
- The employer was required in August, September and October to continue to contribute employer’s National Insurance and employer’s pension contributions.
CJRSE V3: 1 November to 30 September 2021, flexi-furlough allowed, and employees can be claimed for if not previously claimed under V1 and V2
The maximum grant reclaim value is 80 per cent of a furloughed employee’s wages (the reference salary, which is defined as to components included) up to a cap of £2,500 per person per month.
What should you be doing?
If you receive one of the HMRC letters requesting a reply by a set date, take it seriously, review your claims and reply to HMRC.
Don’t forget that if you are large enough and covered by the Senior Accountancy Officer regime, this does apply to CJRS grant money received.
Also be aware that HMRC may not be the only interested party, your organisation’s claims auditors are likely to want to make sure the claims are materially correct as well. Reviewing them early with professional advisers will smooth that audit process for you and give comfort to management and its auditors as early as possible.
Errors are often made in three broad categories:
- an administration error when inputting details of a claim
- calculating the amount of claim due particularly considering the complex rules
- accidentally making a claim in relation to an employee who is not eligible.
Watch our webinar to find out how to spot errors in pay and correct mistakes in your CJRS claim.
Why should you think about having your claims independently checked?
- Legislation allows for employer corrections within 90 days of a claim without penalties.
- Legislation allows for 100 per cent penalties for incorrect claims and recovery of overclaims from employers and directors.
- HMRC have said if claims are fraudulent, they will consider criminal prosecution.
- Claims fall within the Senior Accounting Officer regime.
- Employers must keep claim information for six years (the furlough agreement for five years), so HMRC can check them at any time.
- Will your auditors, shareholders, audit committees, Directors or Trustees require assurance claims are correct?
What are some common mistakes?
- Use of the incorrect number of days (working days rather than calendar days).
- Staff working for the employer whilst on furlough.
- Not factoring top ups or additional payments, into the NIC element of the calculations, claiming when no NIC is due or not capping based on the furlough grant element when making a claim for employers NIC?
- Claims made for ineligible employees (employee not on the last RTI/payroll before 19 March 2020 or, for claims from 1 July to 30 November 2020) not previously furloughed before 10 June).
- Staff called back from furlough before 21 days, yet included in claim(s) under V1 and V2.
- Grant payments not been paid over – to employees, HMRC and the pension scheme.
- Underclaims where the reference pay has incorrectly included or excluded elements.
- A lack of understanding of employment contracts and the different components through which an employee is paid meaning that grant pay under CJRS is incorrect.
- Furlough agreements do not clearly identify how pay / benefits will continue during the furlough period. For example, pension, salary sacrifice or net pay benefits under flex schemes.
- A lack of understanding about how to deal with holidays when on furlough.
- Salary sacrifice pension arrangements not correctly applied in relation to pay whilst on furlough and incorrect amounts paid over to the pension scheme.
- Approved training days not being recorded nor working days after 1 July therefore leading to potential employee underpayments as they are entitled to NMW or contractual pay.
- Inadequate documentation of start and end dates of furlough and flexi furloughing being applied.
How can RSM help?
We have undertaken reviews of claims or helped submit claims, and have developed a comprehensive understanding we use to assist with the checking of computations and claims submissions.
We can help with:
- Reviewing the organisation’s own CJRS claims or payroll provider made claims.
- Reviewing linked payroll calculations.
- Making sure that salary sacrifice schemes have been dealt with correctly and, where they are pension related, the correct pension payments are identified and made.
- Reviewing and checking if furlough documentation is effective to support the requirements to make a claim.
- Using data analytics tools to help organisations assess compliance around working and non-working days.
- Assistance with reporting any claims corrections needed to HMRC.
For more information, please contact Susan Ball or Charlie Barnes.