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:

• Carlick Contract Furniture Limited [2022] UKFTT 220 (TC): This relates to two employees not on the RTI return submitted to HMRC on or before 19 March 2020, as the legislation requires. Whilst they started on 24 February 2020, they missed February’s payroll and the March payroll was submitted after 19th March 2020. While the tribunal judge had 'every sympathy' HMRC correctly claw back the non-qualifying grant for these employees. 
• Oral Healthcare Limited ([2023] UKFTT 357 (TC)): Again, this case included ten employees who were not reported on RTI on or before 19 March 2020 due to payroll difficulties. It was noted that there was no provision in the legislation for any extension or reasonable excuse.
• Zoe Shisha Events [2023] UKFTT 398 (TC): This related to what counted reference salary (which included salary and dividends) used in the calculations for CJRS.  The tribunal rules payment of the dividend did not count towards reference salary; 
• Luca Delivery Limited [2023] UKFTT 278 (TC): This case related to the fact that the company/director notified its accountant that the director’s wife was to become an employee and confirmed her salary of £5,000 per year. The company paid the accountant for processing her salary via the payroll but due to a misunderstanding this was not done. A CJRS claim was made on the basis that this salary had been processed but this had not occurred before the relevant date, so again the grant was reclaimed by HMRC. 
• Raystra Healthcare Limited v HMRC TC08838, Due to a software issue this was a failure to file RTI returns on or before 19 March 2020, invalidating a claim.
• Glo-Ball Group Limited [2023] UKFTT 435 (TC): It was identified as part of a compliance visit from HMRC that one of the directors and employees had posted entries on the company's Facebook account while furloughed. The tribunal had to decide was whether the posts comprised of work for the purposes of the scheme. It was found to be work so the claim was invalid.
• Top Notch Accountants Limited [2023] UKFTT 473 (TC): This is another one where HMRC had no record of an RTI submission by the employer by the deadline of 19 March 2020. The employer made several claims that it had been submitted by the deadline, but the FPS ID numbers and dates of submission did not tie in with HMRC's data. 

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.