HMRC launches crackdown on furlough claims

More than 450,000 employees were furloughed in the North West during the COVID-19 lockdown and now HMRC is cracking down on incorrect claims. Tony McDonough reports

HM revenue and customs sign
HMRC is cracking down on incorrect furlough claims

 

Merseyside and North West firms who may have wrongly claimed support under the Government’s furlough scheme during the COVID-19 lockdown are facing stiff penalties.

More than 9.6m were furloughed across the UK under the Coronavirus Job Retention Scheme (CJRS), which was launched by Chancellor Rishi Sunak in the spring. More than 450,000 employees were furloughed in the North West.

Now HMRC has written to around 30,000 businesses across the country who may have wrongly claimed from the CJRS. It has set a deadline of October 20 for companies to come clean on incorrect payments.

Accountancy firm Grant Thornton says it is dealing with a “flurry of enquires” about repaying the grants from worried businesses. The HMRC deadline is for any organisation to flag that it may have received payments erroneously. Coming forward greatly reduces the risk of fines and the potential of criminal investigations.

Grant Thornton says companies are asking for help even if they have not been directly contacted by HMRC. Common concerns include mistakes in the original grant submission or fears that a better than expected financial performance between March and October this year may demonstrate that a business was not, after all, eligible for support.

“The self-reporting timeframe is short but is the best way to avoid escalating the problem and risk,” said Mike Herdman, who is leading Grant Thornton’s CJRS review team in the North West.

“Eligibility is one of the big questions. If a company’s financial performance improved through the COVID-19 pandemic, it may be more difficult to evidence that coronavirus was the reason for furloughing.”

The level of claim is another key issue. Mr Herdman added: “The initial guidance came out shortly after the announcement on March 20 but was then updated several times. So companies worked out their own version of how calculations should be done, based on the initial announcements.

“That might not necessarily have been correct once the guidance was updated. We’ve seen numerous examples of unintentional mistakes resulting in either over claiming, or under claiming. Some firms are just paying back the grants to avoid any worry.”

HMRC has said that the CJRS, which has cost the UK £38.8bn so far, could remain under investigation for five years – and 20 years in cases where fraud is suspected. Any business that applied for grant support is strongly advised to gather evidence that documents the financial context and captures internal discussions around CJRS applications.

Mr Herdman says HMRC has made clear its determination to address flagrant abuse of the scheme. Whistle-blowers have already come forward with examples of actionable behaviour, including employees being told to use personal email to work ‘off the books’ or pressured to work on a ‘voluntary’ basis.

“It’s in the nature of a crisis for things to happen quickly,” he said. “The speed with which the CJRS was announced and implemented did mean confusion among both employers and employees. HMRC knows that employers could have inadvertently fallen foul of the rules and is offering this chance to self-identify any honest mistakes.

“Outright fraud will of course result in criminal proceeding and HMRC has moved significant resource into these audits. That’s why it’s important to conduct a review and have the right conversations.”

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