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Furlough grants and inaccuracies

HMRC is checking furlough claims and if employers do not disclose mistakes now, they are in danger of incurring significant penalties.

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The Coronavirus Job Retention Scheme (CJRS) was introduced early in the pandemic to provide grants to more than one million businesses to temporarily furlough employees rather than make them redundant.

The scheme ends on 30 September 2021 and has already paid billions of pounds to support businesses. When the scheme ends, HMRC will focus on checking the legitimacy of claims made with a view to recovering overclaimed funds.

Why review past claims?

While the majority of employers have acted faithfully, HMRC is well within its rights to challenge any employer who has accidentally or deliberately overclaimed support payments.

The CJRS rules and conditions changed several times since the scheme was first introduced. For example, the employee eligibility conditions were strict and changed during different phases of the scheme and the calculation of the 'reference salary' is complex, especially when an employer is making multiple claims for employees with differing circumstances.

As a result of these complexities, errors could easily have been made. HMRC has committed vast resources to review claims and the penalties can be significant if errors are found.

HMRC activity

Given the huge amounts paid to taxpayers and the potential for abuse of the schemes, HMRC has made investigating fraudulent claims a top priority. We are aware that HMRC has:

  • opened several thousand investigations relating to CJRS and made five arrests
  • opened several thousand investigations into SEISS claims
  • opened several hundred investigations into the 'eat out to help out' scheme and made three arrests
  • pledged to invest over £100 million into a taskforce of more than 1,000 HMRC staff solely dedicated to investigating fraudulent claims
  • issued nudge letters to thousands of employers asking them to review the accuracy of their claims.

HMRC has a furlough fraud hotline which reportedly receives over 10,000 reports per month.

Other measures put in place to identify issues include:

  • publishing online details of the amounts claimed by employers since December 2020
  • giving employees information on their Government Gateway personal tax accounts that their employer has made a claim for them
  • comparing claims against electronic sales records to check if businesses continued to trade with staff continuing to work, despite furlough payments being claimed
  • reviewing information from the pension regulator where grants intended to cover regular contributions into occupational pension schemes were not used appropriately.

What will I have to pay if I’ve made a mistake?

HMRC recognises that employers may make innocent mistakes in claiming CJRS payments. Nonetheless, HMRC will be looking to claw back any amounts overpaid, regardless of why the errors have arisen.

The Finance Act 2020 gave HMRC powers to recover overpaid CJRS grants by treating them as taxable income, meaning the overpayment can be recovered by way of a 100% tax charge.

The penalties for inaccurate claims are draconian. 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 overclaimed grant can be levied. This effectively doubles the amount that must be paid to HMRC.

Any employer with something to disclose, or facing a penalty challenge from HMRC, should seek appropriate specialist advice.

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How we can help

Where a CJRS grant has been wrongly claimed, you must notify HMRC and make a full disclosure of the amount within 90 days of receiving an incorrect payment or the claim no longer being valid.

Crowe’s specialist Tax Resolutions team works in conjunction with our colleagues in the Employer’s Advisory Group to undertake a thorough review of furlough claims. We can identify errors and help you make a disclosure to HMRC.

We will discuss the circumstances with you and advise you if we believe there are any mitigating circumstances to reduce your exposure to penalties.

Related insights

Review your CJRS payments to avoid unnecessary penalties.

Contact us

Sean Wakeman
Sean Wakeman
Partner, Head of Tax Resolutions
John Cassidy
John Cassidy
Partner, Tax Resolutions