As we’re all aware the Coronavirus Job Retention Scheme has been extended yet again to now run until March 2021. Another hasty government decision that was put into effect just a day before the proposed JSS Scheme was set to start.
Over recent months, MPs have expressed their apprehensions over the speed at which the furlough scheme was drawn up, leaving the economy victim to a concerning number of fraudulent claims. HM Revenues & Custom have now estimated that “up to £3.5bn of furlough payments made by August 2020 (approx. 10%) have been fraudulent or paid in error.” With this figure in mind, it’s been anticipated for a while that HMRC will be ramping up claim checks.
What is there to know?
- Payments may be withheld or required to be paid back if claims are found to be fraudulent or based on incorrect information.
- HMRC can pursue employers that have made employees work despite claiming corresponding furlough payments, as well as those that have failed to pass on payments to the employees concerned.
- Employers have 30 days to self-declare any mistakes they may have made and repay without penalty.
- Undeclared mistakes and failure to repay may result in criminal prosecutions.
Your employees are watching you too!
HMRC has not held back in encouraging employees to report suspected Furlough Fraud and even set up a CJRS fraud hotline, which is reported to have received nearly 8,000 reports back in August.
The Government has now released updated guidance on the extended Coronavirus Job Retention Scheme which states that ‘From December 2020, HMRC will publish employer names for companies, who have made claims under the scheme…’. Confidentiality laws previously prevented this from happening, but the Coronavirus Act 2020 now provides for the release of this information which, in turn, makes it easier for employees to shop their employers and will assist HMRC in pursuing businesses that have committed furlough fraud as well as those that have continued to trade profitably and so didn’t need to claim under the CJRS in the first place.
A recent NAO report suggested that 1 in 10 furloughed employees were asked to work during what was supposed to be a period of furlough leave, and that up to £2billion of taxpayer’s money went straight to fake companies established by criminal gangs.
Now that the scheme has been extended and redundancies are continuing to be made, it’s expected that more whistleblowing claims may come through as a result of redundancies being challenged. Employees who seek to contest their selection for redundancy may raise concerns about being asked to work whilst on furlough. In this case, we would advise you to seek legal advice as early as possible.
HMRC will likely be undertaking a large number of random checks considering the substantial number of fraudulent claims that have already been reported. Please see below an example letter that HMRC has started to send out to employers notifying them that some or all of their claims are undergoing thorough checks. The evidence and information you are required to produce will include:
- Details of how you calculate the employee’s ‘usual’ pay and how you calculated their furlough pay
- Evidence that you paid the employee at least the amount claimed (e.g. a BACS list or employee signature for receipt of payment)
- The amount paid in pension costs and evidence thereof
- Written evidence of the employee confirming their furlough status
- Details of how the business was affected by COVID
- Whether the business continued to trade in any capacity during the period of the furlough claim(s) and if so, details of the activity/activities that continued as well as the employees that continued working.
A 14-day timescale applies to the employer’s response.
We are seeing a change in how businesses approach the CJRS with caution this time around, but with the right advice and support, this scheme will continue to be a lifeline for many businesses and industries that simply would not survive without it.
If you would like any more information on how to ensure you don’t find yourself handling a fraudulent furlough claim, get in touch on 01942 727200