Correcting Coronavirus Job Retention Scheme claims
As the end of the Coronavirus Job Retention Scheme (CJRS) approaches, employers need to be aware that HMRC have moved into the post-transaction review phase of the scheme. This means that they are turning their attention to making sure that claims under the scheme have been made in accordance with their published guidance.
Employers should therefore consider checking their claims and coming forward with any corrections by the deadlines set out below – particularly any claims made in haste early on in the scheme when everyone was under a great deal of pressure and the guidance was not fully developed.
The first batch of ‘nudge’ letters where HMRC have concerns about claims landed on doormats in mid-August.
For those anxious about having made genuine mistakes under pressure, it might be reassuring to know that HMRC are concentrating their compliance activity on those who they think have been abusing the system and making fraudulent claims. HMRC appreciate that this was a challenging period for all concerned and say they that they will not be actively looking for cases where the employer has simply made an innocent error.
HMRC certainly has plenty of potentially fraudulent claims to review, with reports of over 8,000 calls made to their dedicated CJRS fraud hotline by the end of August. HMRC also reported to the Public Accounts Committee in September that they estimate that between five to 10 percent of claims could have been overpaid as a result of fraud or error.
There has also been research suggesting that up to two-thirds of individuals on furlough continued to work for their employer during the early months of the scheme. Flexibility for a furloughed worker to work part time for an employer (and receive furlough pay for the balance of their usual hours) was not introduced until July 1 so, prior to that date, employees should not have done any work for their employer while on furlough.
Working while on furlough prior to July 1 (or in any furloughed hours under the flexible scheme from that date) is a clear breach of the scheme rules and any employer who asked staff to do this faces the risk of having to repay some or all of their grant.
If during the course of their work, a tax adviser either knows, suspects or has reasonable grounds for suspecting that someone (not necessarily a client) has asked their staff to work while they are furloughed – or knowingly claimed a coronavirus relief to which they are not entitled – the agent should consider carefully whether they need to report to their MLRO or direct to the NCA.
The legislation to claw back any coronavirus support payments which were overpaid – including payments under the CJRS – has been incorporated into Finance Act 2020.
HMRC is able to use these powers to claw back any amounts of support not due – for example because the employer was not eligible or did not use the payments to pay wages – by charging tax equal to 100 percent of the overpayment which has not yet been returned.
The clawback provisions do not apply where the appropriate repayment has already been made. Guidance on repayments of CJRS is available on GOV.UK. The simplest approach where an employer realises that they need to make a repayment is to make an adjustment to their next claim. If they are not planning any further claims, the employer should call HMRC on 0300 322 9430.
Repayments need to be made by January 31, 2022 (where the employer is a sole trader or a partner) or 12 months from the end of the accounting period (where the employer is a company).
HMRC can charge penalties for failure to notify where an employer knew they were not entitled to a grant and did not notify HMRC. The deadline for notification of such an over-claim is the later of:
Where an employer fails to notify any known over-claims within the above time limits, the penalties can be harsh as the rules require HMRC to treat the failure as deliberate and concealed. This means that even if the employer has what might otherwise be a reasonable excuse for their failure, that possible defence will be ignored and penalties will still applied.
Treating behaviours as deliberate and concealed exposes employers to potential penalties in the region of 30-100 percent of the over-claim if they come forward voluntarily (ie unprompted), or 50-100 percent if the employer only comes forward because HMRC have prompted them.
Where an employer didn’t realise that they were not entitled to the grant when they received it (or failed to realise that a change of circumstances meant they were no longer entitled), a penalty will only arise if the repayment is not made by the later dates for repayment given in the previous section.
Further details on penalties are available in an HMRC factsheet CC/FS48.
Employers who want to review their earlier claims (or who want to check the basis of a claim following an enquiry by HMRC) will need to go to the GOV.UK archive to find the guidance relating to the first version of CJRS which ran between March and June. A link to the main page of archive guidance can be found at the top of current guidance.
Details on accessing all pages of archived CJRS guidance is available on the ATT website.
In addition to compliance work, from the end of August, HMRC has also been applying stricter controls to ensure that claim data is of good quality. Employers who don’t provide all the information requested could find their grant claim denied or delayed. HMRC may also contact employers to ask them to complete missing information for earlier claims.
From August 25, files uploaded for 100 or more furloughed employees may now be automatically rejected if an incorrect format is used – for example too many columns or sheets. If an employer’s file is rejected, they will receive a message to say it has not been accepted and their claim will not continue. Employers should use HMRC’s updated templates to reduce the risk of their remaining claims being delayed.