Tick Tock…the countdown to remedy furlough mistakes has begun.Jo Mackie
When on 20 March 2020, the Chancellor Rishi Sunak announced the Coronavirus Job Retention Scheme (CJRS), it was seen as an unprecedented measure to support businesses and their employees. CJRS has evolved since its inception, becoming increasingly complex to navigate, notably with the introduction of flexible furlough and the tapering amount of support on offer, all of which has led to increasingly complex and time consuming calculations for employers in order to get CJRS claims right.
Unfortunately, like every financial benefit CJRS is open to abuse. By the end of July, HMRC said it had received in excess of 4,400 reports of suspected furlough fraud. It confirmed its first arrests at the same time, including a Solihull employer who was arrested for allegedly claiming £495k that his business was not entitled to.
The threat of investigation and prosecution is significant for employers. HMRC has a separate Fraud Investigation Service, which has recently been expanded, and it can call on the National Crime Agency which leads on serious fraud in the UK to give further support. It will come as no surprise that Investigators have the power of seizure and the power to freeze accounts – effectively making business grind to a halt – albeit this may be on the basis of a ‘reasonable belief’ rather than on confirmed fact. This is particularly damaging as business risks being effectively shut down based on suspicion rather than conviction. It is vital therefore to check claims and contact HMRC quickly if you spot any mistakes so that they can be corrected without incurring penalty or suspicion.
There is some good news for employers on this point. The time a business has to check and remedy mistakes has been extended. The Finance Act 2020 received Royal Assent on 22 July 2020. It imposes civil penalties for furlough fraud and gives HMRC the power to recover overpayments made by imposing a 100% tax charge on any organisation that has received a CJRS payment to which they were not entitled. HMRC also has the power to charge a separate financial penalty which could be substantial.
When it was still in draft form the Government’s plan was to allow penalties to be imposed on employers just 30 days after the date the employer received the grant they were not entitled to (in the reasonable belief of HMRC’s Fraud Investigation Service). The good news for employers is that employers now have up to the later of:
- 90 days after the day on which the Finance Act 2020 was passed (22 July 2020); or
- 90 days after the day on which income tax becomes chargeable
This extension of time is in recognition of the very real burden faced by businesses in calculating and amending furlough claims as the pandemic continues and recovery begins.
If a free consultation on this or any other employment law related issue would be of help, don’t hesitate to reach out to us https://lexleyton.co.uk/free-consultation/
If a free consultation regarding your business claims for the CJRS and issues arising (such as Notice pay and how the CJRS can be used to finance that cost) or any other employment law related issue would be of help, don’t hesitate to reach out to us https://lexleyton.co.uk/free-consultation/
To contact HMRC
Or call 0800 024 1222