All good things come to an end, or so they say. The Coronavirus Job Retention Scheme (CJRS) has been with us for getting on for six months but is due to be phased out by the end of October. This fact is widely known but what may not be so well known is that there is a subtle change in the way that HMRC is looking at this scheme which from their perspective is entering a different phase. At the beginning when the scheme was first introduced the most important thing was to get money out to those who needed it as quickly as possible. The magnitude of this task cannot be understated. Existing systems were simply not geared up to cope with this kind of scheme involving millions of employees across the country without undertaking months of preparation. Time was needed to plan the scheme out properly. Unfortunately time was one thing we did not have. Given the priority of getting money out as quickly as possible normal rules were bypassed. It was a creditable achievement to get the money out to millions of qualifying bodies and employees, without more in the way of major glitches.
Whilst the initial phase of setting up the scheme and getting the money out as quickly as possible was in play, HMRC basically took a light touch to checking that those requesting the money were actually entitled to it. However, in the phase which we are now entering this is all changing. HMRC will be taking a number of steps to ensure that those claiming CJRS payments were entitled to them. Employers should now be checking the claims they have made and coming forward with any corrections where they believe that mistakes have been made. This could be purely an innocent error made when everybody was under a great deal of pressure in the early days and the guidance was not fully developed. No matter, if such mistakes have been made then now is the time to put them right.
HMRC have been sending out letters since the middle of August reminding employers of their responsibilities in this area. They have stated that they will be concentrating their activity on those employers who they think have been abusing the system and making fraudulent claims. They have also given some reassurance that if errors are made innocently then they will be sympathetic in such circumstances. HMRC are going to be very busy. By the end of August the CJRS Fraud Hotline had received over 8,000 calls. Evidence that HMRC gave to the PSC this month suggests that they estimate between 5-10% of claims could have been overpaid as a result of fraud or error. There are certain things they will definitely be looking out for. For example, employees furloughed before 1 July should not have been doing any work at all for the company who had furloughed them though they could undertake certain training activities. If they did any work whilst on furlough then the employer is at risk of having to repay some or all of the grant they have been given.
There will be penalties for those who have not met HMRC requirements. Employers who become aware that they were not entitled to a grant must notify HMRC. Such notification must be given at the later of 90 days after the employer received the grant they were not entitled to, 90 days after they received any grant that they were no longer entitled to keep because their circumstances have changed, and 20 October 2020. If these time limits are not complied with the penalties may be harsh as HMRC may treat the failure as deliberate rather than accidental. Word is that potential penalties could be in the region of 30-100% of the overclaim if employers come forward voluntarily or 50-100% if they only come forward because HMRC has prompted them. These are important rules and breaking them accidentally or otherwise could have expensive consequences. This is allied to new rules that from 25 August any files uploaded for 100 or more furloughed employees which are not in the right format may now be automatically rejected. Anyone responsible for looking after payroll matters needs to make sure that they catch up with the latest HMRC guidance in this significant area as quickly as possible to avoid unforeseen problems arising.
Wayne Bartlett is an author for accountingcpd. To see his courses, click here.