Dartboard

HMRC ramps up furlough enforcement as the scheme winds down

Andy Hamman, Director, Employment Tax and John Cassidy, Partner, Tax Resolutions
14/07/2021
Dartboard

As we pass the middle of July 2021 – the seventeenth month of the Coronavirus Job Retention Scheme (CJRS) – the amount that can be claimed by employers through the scheme drops to 70% of employees’ usual wages. Employers will be required to top up the remaining 10%.

In August the claim percentage will drop further to 60% and remain at this level until the end of September, when the scheme finally comes to an end. However, from HMRC perspective, this is when their work begins.

By March 2021, HMRC had already opened 7,384 investigations into organisations for their use of the furlough scheme. In addition, by 16 June 2021, HMRC had received over 28,000 reports from workers over potentially fraudulent claims made by their employers.

These statistics show why the Treasury announced £100 million worth of funding to HMRC to tackle fraudulent claims and errors, including a 1,250-person taskforce.

The number of enquiries opened by HMRC will continue to increase and will likely last a number of years. Over the next few months, HMRC’s activity will filter down from those who have acted fraudulently to those who have made innocent errors.

Areas of concern

While the majority of employers have acted faithfully, HMRC are well within their rights to challenge any employer who has accidentally overclaimed through the furlough scheme.

HMRC will be looking to claw back any amounts that shouldn’t have been paid, regardless of why the errors have arisen. From our experiences with clients, we have seen overclaimed grants for a wide range of reasons, including:

  • not realising that employees had undertaken work or were dealing with emails while on furlough
  • inadvertently claiming for employees who weren’t eligible
  • calculating the reference pay incorrectly
  • not following HMRC’s guidance when calculating the amounts to claim.

What to do now

As we move into the final stages of the scheme, employers may be tempted to move on and put prior claims to the back of their minds. However, it is important that employers are confident no errors have been made or identify any errors that were made.

Strictly, to avoid any penalties, employers must notify HMRC of any overclaims within:

  • 90 days of the date they received the grant they were not entitled to
  • 90 days of the date they ceased to be entitled to keep a grant, for example because circumstances changed.

Employers who miss this deadline are more likely to face reduced penalties, or avoid them altogether, if they identify their own errors and voluntarily repay overclaimed amounts through HMRC’s online facility. Coming forward to make a disclosure unprompted by HMRC will always lead to a more favourable penalty position.

Not coming forward is automatically deemed to be ‘deliberate and concealed’ behaviour, irrespective of the actual behaviour, meaning that a penalty of up to 100% of the repayable grant can be levied, effectively doubling the payment to HMRC. Any employer with something to disclose, or facing a penalty challenge from HMRC, should seek appropriate specialist advice.

people working at desk

How Crowe can help

Our experiences so far are that, despite best efforts during the midst of the pandemic and evolving guidance, innocent errors leading to overclaims are common. We have worked with a number of clients to review their claims, agree the quantum of overclaims and repay them to HMRC.

If you would like assistance in checking your claims, or even help contacting HMRC to notify them of an error from a previous claim, Crowe can assist.

Our Tax Resolutions team can also provide specialist expertise on mitigating and minimising any penalties as well as on the options when determining the best disclosure route to use when approaching HMRC.

Please get in touch with Andy Hamman or your usual Crowe contact if you would like any assistance.

Insights

Andy Hamman, Nick Irvin, and Navin Sharma discuss the changes to the IR35 legislation from April 2021 and what you need to know.
We assess the tax implications as many who have been working from home return to their offices.
We look at how COVID-19 will impact the reporting requirements for P11Ds and PSAs providing the key deadlines for the 2020/21 tax year.
We look at how you can ensure that your furlough claims are compliant.
Andy Hamman, Nick Irvin, and Navin Sharma discuss the changes to the IR35 legislation from April 2021 and what you need to know.
We assess the tax implications as many who have been working from home return to their offices.
We look at how COVID-19 will impact the reporting requirements for P11Ds and PSAs providing the key deadlines for the 2020/21 tax year.
We look at how you can ensure that your furlough claims are compliant.

Contact us

Andy Hamman
Andy Hamman
Director, Employment Tax
London
John Cassidy
John Cassidy
Partner, Tax Resolutions
London