HMRC could be set to address CJRS errors to increase Treasury revenues

The chancellor is reportedly looking to recover billions in government funds lost to Covid-related fraud. With HMRC anticipated to receive additional funding per Labour’s manifesto commitments, HMRC could be set to review claims for the Coronavirus Job Retention Scheme (CJRS) with a renewed focus.

The CJRS, implemented by HMRC, was a lifeline for many businesses during the Covid-19 pandemic. According to HMRC publications over £69bn was paid out in total to support employers under the CJRS only. However, HMRC estimated that c.£3.5bn (or approximately 5%) of CJRS payments may have been subject to fraud or error. This led to an increase in CJRS enquiries conducted by HMRC. 

Two other key pandemic support schemes, alongside the CJRS, were ‘Eat Out to Help Out’ and the Self Employed Income Support Scheme. The combined support payments from these schemes were close to £29bn and HMRC estimates that the percentage of incorrect claims was similar to or potentially higher than for the CJRS. 

HMRC has historically been proactive in investigating CJRS claims. At Budget 2021, the Conservative government announced a £100m investment into establishing the Taxpayer Protection Taskforce (TPT). The TPT had recovered a total of £256.1m in overpaid CJRS grants up to the end of March 2023. Prior to the TPT being established, HMRC had already recovered £518.8m, bringing the total to £774.9m. 

However, as HMRC expected to see a diminishing return from the TPT over time (as employers are no longer able to make claims), the TPT was wound down from March 2023 and Covid-19 scheme compliance activity was left to be undertaken alongside broader compliance activity. 

Given that only 22% of the total estimated fraud and error within CJRS claims was collected by HMRC, many may be surprised to learn that the TPT has now been disbanded. The rules around claiming CJRS were very complicated and were ever-changing, meaning that many employers could have made involuntary mistakes. It arguably does not feel appropriate to task HMRC staff to also investigate the compliance within these claims, alongside normal compliance enquiries, given the large further amounts of error likely to have occurred. 

There have been several tax cases recently brought to the First-tier Tribunal regarding incorrectly claimed CJRS payments, so clearly HMRC action has not stopped. However, prior to this intervention from the chancellor, it did not appear that it was intended to continue being a strong area of focus. 

By identifying and rectifying instances of fraud and error in CJRS claims, HMRC may recover funds that can contribute to the Treasury’s revenues. This not only ensures the integrity of the CJRS but also helps maintain the fairness of the tax system as a whole. With limited room for the chancellor to manoeuvre, Rachel Reeves will be hoping that HMRC will be able to ease the financial constraints upon her.