The Coronavirus Job Retention Scheme (CJRS) has now been extended until 31 March 2021, with the government to review the scheme again in January. Necessity being the mother of invention, the CJRS broke all speed records for a government IT rollout. And since its launch, most agree it has been a remarkable success, chiefly the result of its reliance on minimal information and maximum trust.
Audit and inspection
Yet from the outset, the government was clear that audit and inspection would follow – which in the circumstances is hardly surprising. Indeed, that process began almost immediately with HMRC auditing the limited information provided in each application.
As a result of that, some employers have received a gentle nudge via letter, advising them that CJRS payments may need to be repaid, either because the grant claimed appears to be greater than they are entitled to, or that they have otherwise failed to satisfy the conditions if the CJRS. The letter recommends the employer review their records and claims for accuracy, and thereafter report to HMRC to confirm whether or not they believe they have overclaimed.
As early as July, the press began to report arrests for CJRS fraud, which in some instances has run to hundreds of thousands of pounds. While such early cases were almost exclusively the result of whistleblowers, HMRC has now begun the process of contacting some employers to request evidence to support their claims.
Employers duty to check claims
As an employer, from the inception of the CJRS – and irrespective of any nudge from HMRC – you have been required to carry out reasonable due diligence and repay any amounts you were not entitled to. If you fail to do this, in addition to repaying the overclaimed grant, you may face a penalty of up to 100% of the overclaim. HMRC’s guidance says:
If you’ve overclaimed a grant and have not repaid it, you must notify HMRC by the latest of either:
- 90 days after the date you received the grant you were not entitled to
- 90 days after the date you received the grant that you were no longer entitled to keep because your circumstances changed
- 20 October 2020
If you do not do this, you may have to pay a penalty. If you do repay any overclaimed grant, this will prevent any potential tax liability in respect of the overpayment of Coronavirus Job Retention Scheme.
Not a witch hunt
But employers should not expect a witch hunt. On the contrary, HMRC says that “We will not be actively looking for innocent errors in our compliance approach”. Neither will they look to recover payments based solely on the employer’s choice of calculation, provided that it was reasonable. However, employers should be ready now to provide evidence on request. This is because requests can be made at short notice; in all likelihood just two weeks.
What will HMRC request?
As to what must be retained, HMRC’s original guidance was clear:
You must keep a copy of all records for 6 years, including:
- the amount claimed and claim period for each employee
- the claim reference number for your records
- your calculations in case HMRC need more information about your claim
- for employees you flexibly furloughed, usual hours worked including any calculations that were required
- for employees you flexibly furloughed, actual hours worked
In addition, it is advisable to provide HMRC with details (including the relevant calculations) of any subsequent adjustments or corrections.
Another issue to bear in mind is the requirement for consent from employees to be furloughed. A direction from HM Treasury on 15 April 2020 said that furlough will only be deemed valid by HMRC “if the employer and employee have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment”. Therefore, in respect of every employee, an employer should be able to provide on request a written agreement (a simple exchange of emails will suffice) that the employee will not continue to work during the furlough period.
What happens next?
Once the employer has provided the information requested, HMRC may then telephone them to seek further clarification. In most cases, that should be the end of the matter, but if HMRC does establish that there has been an overpayment, you must be ready to repay the money. HMRC has issued guidance on the repayment of CJRS payments.
