At times, it’s been difficult for businesses to keep up with the constant developments of the coronavirus job retention scheme.
Since its launch earlier this year, there have been several changes to the way the scheme works and its qualifying criteria. This leaves more room for error, which could lead to an investigation by HMRC.
So, how can employers ensure their coronavirus job retention scheme claims are in line with the law?
The scheme so far
The UK’s coronavirus job retention scheme was launched in March this year as a result of the ongoing COVID-19 pandemic, aimed at businesses to avoid the need to make wide-range redundancies.
However, HMRC has announced between 5% and 10% of furlough money has been wrongly awarded, which lost the government around £35 billion.
Jim Harra, HMRC’s permanent secretary, said:
“We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between 5% and 10%.
“That will range from deliberate fraud through to error.”
The tax authority revealed that somewhere between £1.75 billion and £3.5bn could have been wrongly paid out. It also reported an estimated £30bn in tax was lost in 2019 due to taxpayer errors and fraud.
The news comes a week after the Government threatened to take criminal action against people and companies who had made fraudulent claims under the Government's furlough scheme.
What counts as furlough fraud?
The Government revealed that the following actions could form an over-claimed furlough grant:
- Claiming any amount the employer was not entitled to receive
- Claiming on behalf of an employee who is no longer employed by the company
- Asking furloughed employees to work whilst on furlough
- Making a backdated claim that includes times when employees were working
HMRC said employers will not be charged if they were not aware of the overpayment at the time it was received, and the money is repaid within 12 months from the end of their accounting period.
Sole traders and partners will have until 31 January 2022 to repay.
Repaying overpaid grants
On 1 July, HMRC updated its guidance on furlough claims, to enable employers who have miscalculated and overclaimed through the scheme to either correct the error in their next claim, or make a payment directly to HMRC.
Employers will need to contact HMRC to receive their payment reference numbers for the payment to be made.
If companies repay over-claimed funds, it will prevent any tax liability relating to the coronavirus job retention scheme grant. The repayment needs to be made within 90 days after receiving the false payment, 90 days after circumstances have changed, or by 20 October 2020.
Companies that have miscalculated and received claims under the coronavirus job retention scheme can contact HMRC to amend the claim, and employers will need to contact the financial authority to receive their payment reference numbers.
Get in touch to discuss your furlough claims.