Furlough Scheme: Avoiding & Fixing Common Mistakes

16 June 2020

Although HMRC said they are going to investigate claims under the CJRS, it is possible to amend genuine mistakes with no repercussions.

advice : COVID-19 and Employment

The Coronavirus Job Retention Scheme, also known as Furlough Scheme or CJRS, has proved incredibly popular with UK employers. As of 14 June 2020 over 9.1m UK employees were furloughed and over £20bn had been already claimed under the Scheme.

Although the Scheme has been extended until October 2020, there will be changes starting next month with the introduction of flexible furlough and the employers being asked to contribute towards their employees’ NIC, pension contributions and salaries.

HMRC also received almost 1,900 reports of wrongful of fraudulent activity when claiming under the CJRS. Although HMRC stated that they are going to investigate the reports, and respond with fines or criminal action if evidence of intentional fraud is found, they also said that they won’t penalise genuine mistakes.

The good news is that, if you think you made a mistake in a previous claim, you can repay the excess out of your next grant. So, in order to avoid HMRC questioning your claims, it’s worth to look out for these common mistakes.

Claiming for employees who are required to work

One of the key requirements of the CJRS in its current form is that furloughed employees are not allowed to carry out any work for their employer.

While this is changing on 1 July 2020, with the introduction of flexible furlough, the changes only apply to those employees who were furloughed under the original conditions of the Scheme.

This means that if a employee has been doing any work between 1 Mar 2020 and 30 Jun 2020 while they were furloughed, your claim could be considered fraudulent and HMRC can ask you to pay it back with a fine.

HMRC has also set up an online whistle-blowing portal for employees to report wrongdoings form their employers.

It’s crucially important that, with the exception of training, absolutely no work activities can be performed while furloughed.

Claiming the wrong amount

Although HMRC published a handy calculator tool to work out the amount to claim back under CJRS, the calculation can still be tricky, and there are some caveats to keep in mind.

For example, there have been reports of a number of businesses making a claim under CJRS and including the full amount of employers’ NIC in the calculation, even though they were already benefitting from the Employment Allowance, which reduces their NI liability by up to £4,000.

Since Employment Allowance is not automatic, and it must be claimed separately, in many cases this has been a genuine mistake on the employer’s behalf, rather than a fraud attempt.

This means that some employers may have received a grant that is more than they’ll be required to pay once Employment Allowance is applied.

Other examples of mistakes in calculation may involve elements of an employee’s wages that are not covered by the CJRS. These include tips, discretionary bonuses and non-cash benefits.

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Not using the grant to pay employees

It is a key requirement of the Scheme that the grant is used exclusively to pay for employees’ salaries.

Failure to do so, will likely be considered a deliberate fraud attempt from HMRC, plus paying less than the agreed furlough salary could constitute a breach of contract.

Amending mistakes

HMRC told the FT Adviser that they will be lenient with employers who made genuine mistakes on their claims, although they plan on taking criminal action and charging fines against those who deliberately abused the system.

The Telegraph also reported that employers will be allowed a 30-days grace period to “confess” any wrongful claims with no repercussions, although this is yet to be confirmed.

As of now, it is possible to indicate an overpayment in your next claim, and take the excess amount off that grant as a way to repay it. No further action needs to be taken, although you should keep records of any adjustments for six years.

The information available on this page is of a general nature and is not intended to provide specific advice to any individuals or entities. We work hard to ensure this information is accurate at the time of publishing, although there is no guarantee that such information is accurate at the time you read this. We recommend individuals and companies seek professional advice on their circumstances and matters.