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Courts take a hard line on historic CJRS claims

The Coronavirus Job Retention Scheme (CJRS), in place from March 2020 to September 2021, allowed employers to reclaim certain employee costs in the form of a government grant administered by HMRC when their employees were furloughed. Around £69bn was paid out to 1.3m employers. HMRC estimated that 5-10% of the amounts paid were overclaimed due to fraud or error and set up a Taxpayer Protection Taskforce (TPT) to pursue error and fraud in the Coronavirus schemes. Whilst by September this team will be integrated back into the HMRC compliance teams it would be a mistake to think we have heard the last of CJRS.

Although the scheme is closed, CJRS claims had to be reported on tax returns and legislation allows HMRC to claw back overpaid CJRS claims under Schedule 16 of Finance Act 2020 effectively in the form of a tax charge equal to 100% of the amount of over-claimed grant. HMRC does not operate on a ‘materiality’ basis, so every mistake can count. Where the total overclaim exceeds £25,000, HMRC has the power to publicly name the employer.

What became apparent to many early on in the scheme life was the complexity where those being claimed for were anything but monthly paid and salaried, with HMRC's compliance activity continuing we have seen cases going before the tax tribunals.

Examples are shown below:

As the above show if you haven’t already reviewed your claims one key test is against RTI returns for the key qualifying dates. Don’t forget under the first version of the scheme, you had to be validly furloughed for 21 days in a row and only if you were could a claim also be made for you under the second version. Such a check is therefore a valuable risk assessment. Don’t forget as well as HMRC enquiries, though, the potential of any CJRS clawbacks is of interest to auditors or during a due diligence exercises.

Whilst its now back to business as usual for the TPT CJRS enquiries will continue for as long as HMRC feels they are cost effective. Organisations should therefore make sure they kept all the records used in the calculations (including for example furlough agreements, any proof employees did not work, employee communications) for the required six years ideally along with notes made of the key decisions taken at the time in case they get selected. In the meantime, we can expect to see more tribunals on the subject.

If you have any questions about CJRS or an HMRC employer compliance reviews, please do get in touch with Susan Ball or your usual RSM contact.

authors:susan-ball