Be proactive against ‘Furlough Fraud’

According to the latest figures, the Coronavirus Job Retention Scheme (CJRS) has paid UK employers in excess of £35 billion for furloughed staff since it launched in April 2020. However, the Government has also announced that up to £3.5 billion is believed to have been claimed fraudulently or paid out in error.

The Finance Act 2020 introduced legislation to provide HMRC the ability to instill various penalties and fines against employers who made a claim for an employee who continued to work or used the furlough payment for anything other than employees’ wages, National Insurance contributions (NICs) or pension contributions. With almost 8,000 reports of potential ‘Furlough Fraud’ being reported through the HMRC online reporting furlough scheme form, and the first high profile arrest made in July, it is hoped that employers will admit to overpayments rather than risk an investigation further down the line.

As an employer, it is your responsibility to make sure that each CJRS claim is made correctly but if an error has been made, HMRC has made the process of correcting the error and repaying the money ‘as easy as possible’.

If you want to make a correction

If you’ve been paid too much through CJRS, and the payment has been made within the last 72 hours, you can delete a claim straight away via the online service. Alternatively, you can declare it as part of your next claim – this will mean the amount will be adjusted and you’ll receive less in that claim to even it out.

If you’ve made a claim you weren’t entitled to and haven’t yet repaid it, you must tell HMRC within the 90-day reporting window and should be done by the latest:

• 90 days after you received the grant you weren’t entitled to,
• 90 days after you received the grant you were no longer entitled to keep because your circumstances changed,
• 20 October 2020.

Failure to do this will result in a penalty charge, as detailed below.

If you want to make a voluntary repayment

If you’re not planning to make any further CJRS claims, you can make a voluntary repayment directly to HMRC. First you must contact HMRC to get your 14 or 15-digit payment number, which starts with an ‘X’, then the payment can be made directly to HMRC via Bacs, Faster Payments or Chaps.

How ‘Furlough Fraud’ penalties will be issued

If an employer is found to have been overpaid through CJRS and not declared it within the 90-day window, HMRC may issue an income tax charge and you’ll be given 30 days to pay the charge, and interest will be charged on late payments.

If HMRC believe the overpayment was ‘deliberate and concealed’, a penalty of up to 100% will be added to the amount you have to repay, and your details may be published along with other deliberate tax defaulters.

Even if the company were to become insolvent, and the tax cannot be recovered, company officers who knew about the overclaimed CJRS grant may be liable to pay it back instead. In cases of partnerships, the amount due may be collected through income tax in the 2020-21 self-assessment tax return.

If you suspect you may have made a mistaken or wrongful claim under the government scheme, contact our Employers Solutions specialists who can offer professional advice to hopefully reduce the financial implications.