Undoubtedly the Coronavirus Job Retention Scheme (CJRS) has been a lifeline for many businesses in recent months.
There are however growing numbers of stories about abuse of the CJRS and, by June 2020, HMRC’s CJRS fraud reporting portal had received over 2,000 reports of wrongful claims.
Examples of such wrongful claims include:
- Claiming furlough payments for staff who continue to work normally.
- Furloughing staff but asking them work “voluntarily” on an unpaid basis.
- Claiming furlough payments for “ghost” employees, and/or employees who left employment before 19 March 2020.
- Not paying furloughed staff the full amount that they are entitled to under the CRJS.
- Failing to account for PAYE tax and NIC in relation to genuine furlough payments to staff.
The 2020 Finance Bill was amended in May 2020 to give HMRC the power to recover incorrect furlough payments by imposing a 100% tax charge in relation to any employers who have claimed and received payments to which they are not entitled, or who have not used the amounts received wholly for employees’ costs. In this way the Government can use HMRC’s established debt collection mechanisms to recover the overpaid amounts.
In addition, companies who have dishonestly claimed CJRS based on dishonest or inaccurate information will face penalties, or even criminal action. The civil penalties are 100% of the claimed amounts that have not been used for employees’ costs.
Claimants are also required to notify HMRC within 90 days of the non-entitlement to the furlough receipts and there is a separate penalty for failure to notify. Added to this are powers for HMRC to transfer CJRS penalties to the directors of an insolvent company if their company does not pay them.
HMRC has said that it will be lenient in relation to genuine mistakes, and that penalties will be charged only in cases of deliberate non-compliance. However, as experienced practitioners will know, HMRC’s “starting point” can often be to treat all errors as deliberate unless the taxpayer can prove otherwise.
This is clearly a rapidly evolving position, but our sources suggest that HMRC is putting very significant resource into recovering CJRS overpayments and, in view of the high-profile of the scheme, this is likely to be a priority for HMRC in the short to medium term.
We would therefore suggest that employers should check the accuracy and validity of their CRJS claims as a matter of priority, and ensure that any inaccuracies or errors are disclosed to HMRC as quickly as possible.
If you would like any more information in relation to the above, please do not hesitate to contact us on 01757 630010 or Team@independent-tax.co.uk. Alternatively, we will be discussing the subject as part of a webinar hosted by PFP at 12 noon on 30 July 2020. If you would like to join this webinar please follow the link below;
PFP Webinar at 12 noon on 30 July 2020