HMRC issues letters on furlough claims
An estimated 3,000 employers, including Owner managed businesses (Limited Company Directors) will have received letter from HMRC about Coronavirus Job retention Scheme (CJRS) claims.
When launched, due to the situation and nervousness in the market, the CJRS operated based on "pay now, check later". To date it is estimated c£30 billion has been paid to various employers. As part of the ‘check later’ HMRC has commenced the process of sending letters to employers, requesting them to review their claims.
The letter asks employers to review their CJRS claims and contact HMRC to confirm whether there has been a mistake or not. This check should include both the numerical accuracy of the claims and the justification for making them. This is likely to be the first stage and it is almost inevitable that more employers will be contacted soon.
The letters are being sent to employers who might have claimed too and/or they claimants never met the conditions for CJRS. It is not helpful that the letters don’t specify what is wrong with the claim, or even which month’s claim HMRC has an issue with, making it a tedious task to review.
Our understanding these letters have not been sent based on a detailed review of an individual’s claims but more on a generic level. However, if you are one of those who has received the letter, then it needs paying attention to as inaccurate responses can be used as the basis for a fraudulent investigation.
As this was a brand-new scheme and a massive learning curve for all involved, there are undoubtedly errors which have been made in calculating furlough pay. We at Locumkit understand that HMRC’s focus is not on cases where an actual error has been made but to focus on potential fraudulent claims.
Ambiguity of HMRC letter
As stated above, the letter from HMRC asks you to review your claims but does not state:
- Which claim period they are asking you to review; or
- If there was an over claim, by how much it might be; or
- Who the potential ineligible employees are
This could result in a mammoth task where you will have to go through each submitted claim and revisit your calculations. See our Locumkit tips below on how to review your calculations etc.
What to do?
Always respond to an enquiry from HMRC, whether you think you have a problem or not. If HMRC have the impression they are being ignored, they will step up their enquiries into your business.
- If you believe your claims were accurate then you are asked to contact HMRC by telephone to discuss this
- If you have found errors in your claim, you are then asked to reply by email, and then instructions will be given to make a formal disclosure.
If deemed to be inaccurate claims, HMRC has the power to recover amounts equivalent to CJRS payments by imposing a tax charge (penalty) equivalent to 100% of any payment to which the recipient was not entitled to. This charge (penalty) is applicable regardless of if the inaccurate claim was due to a genuine error or intentional.
To avoid penalty and interest on inaccurate claims, HMRC has given you a period of grace to revisit your claims and offer a voluntary correction.
The date by which an employer must notify overpayments to HMRC is the latest of:
(a) 90 days after receiving CJRS monies to which it was not entitled;
(b) 90 days after a change of circumstances, so that it was no longer entitled to CJRS monies; and
(c) 20 October 2020, provided that (a) or (b) was before 20 July 2020.
Due to condition ‘C’ above, we recommend you act now to review and make any voluntary disclosures, before 20 October 2020 to avoid any fines. In addition, we strongly recommend that you engage with a specialist before responding to HMRC, particularly if it is necessary to notify HMRC of any potential liabilities.
As part of your review process, we advise you look to have the following supporting documentation:
- Your financial forecasts showing highlighting the impact of Coronavirus on the business
- Evidence that the appropriate amounts have been paid to furloughed worker
- Evidence that a discussion took place with your furloughed employees informing them that they could not work during the period they were furloughed for the company
- Breakdown of your calculation and payments made to furloughed employees
- Evidence that the employees met the CJRS conditions