Furlough: Mistakes when making a claim

20th August 2020

This blog sets out the actions that employers should take in the event that they have made a mistake in claiming payments under the Coronavirus Job Retention Scheme.

What to do if you have made a mistake when making a claim under the Coronavirus Job Retention Scheme

As a result of the Coronavirus pandemic, the UK government introduced a significant lifeline to employers in the form of the Coronavirus Job Retention Scheme (CJRS), which is also known as the furlough scheme.

Whilst the CJRS has aided many employers in keeping their businesses afloat, there have been reports of a significant rise in cases of payments under the CJRS being wrongly claimed by employers.

This blog sets out the actions that employers should take in the event that they have made a mistake in claiming payments under the CJRS.

Making a mistake under the CJRS

Some employers will have made genuine mistakes when making claims to the CJRS. For example, employers may have:

• made administrative errors when inputting details of claims;
• made errors when calculating the amount of pay that is being claimed under the furlough scheme (particularly in light of the complex rules
• when calculating flexible furlough payments);
• accidentally made a claim in respect of an employee that has recently left the business or who has gone onto maternity leave.

What to do in the event that you have made a mistake when making a claim under the CJRS

Where the error is noticed within 72 hours, the claim can be deleted in the online service.

If an employer has made an error in a claim that has resulted in an over-claimed amount, they must pay it back to HMRC. This can be reflected in the employer's next claim and the amount paid in respect of that claim can be adjusted accordingly. If an employer takes this approach, they do not need to do anything further with regard to the amount over-claimed because it will be rectified in the next payment from HMRC. However, a record of the adjustment ought to be kept for six years.

In the event that an employer is not making any further claims to the CJRS, they will need to contact HMRC to pay the money back.

Where an employer has overclaimed a grant from the CJRS and has not repaid it, HMRC must be notified by the latest of either:

• 90 days after the date the employer received the grant they were not entitled to;
• 90 days after the date the employer received the grant that they were not longer entitled to keep because their circumstances changed (for example, where an employee is no longer employed by the company but the employer mistakenly continued to receive the CJRS grant for them after they left); or
• 20 October 2020.

If an employer does not do this, they may need to pay a penalty.

After notifying HMRC of an overpayment, employers that are companies must then repay the overpayment within 12 months from the end of their accounting period, and sole traders by no later than 31 January 2022. Where the employer is a partnership, one of the partners must include the overpayment amount in their 2020-21 tax return, although all partners will be jointly and severally liable for the amount due.

Possible consequences of not reporting a mistake to HMRC

HMRC has made it clear that its priority is to support customers, while addressing deliberate non-compliance and criminal attacks. It aims to make it as straightforward as possible for employers to pay back overpayments which been mistakenly claimed.

HMRC has stated that it will not hesitate to take action against those who fraudulently claim under the CJRS. A non-exhaustive list of sanctions available to HMRC are as follows:

Audit and claw-back of funds. HMRC has the right to retrospectively audit all aspects of the scheme with scope to claw back fraudulent or erroneous claims;

• Powers to recoup through income tax assessments and charge penalties. HMRC now has the power to:
• raise income tax assessments to recover CJRS payments from employers who were not entitled to the payments, or where payments received under the CJRS have not been used to pay the costs of furloughed employees;
• charge penalties in cases of deliberate non-compliance or in cases where a person has claimed one or more CJRS payments and deliberately does not use it for the costs it was intended to reimburse.
• Individual liability. Company officers may be jointly and severally liable where an officer has deliberately made a claim to which the company was not entitled.
• Criminal liability. There are also potential criminal sanctions for abuse of the scheme. HMRC has the power under warrant to search an individual's home and/or business premises.

What should employers do now?

It is advisable for all employers to carry out an audit to make sure that they have complied with the CJRS rules and to double check that they have not made any errors when submitting their claims. Employers should carefully check whether their employees are eligible for the furlough payments claimed, the accuracy of the information submitted in those claims and ensure that all the funds have been correctly paid to employees.

In the event that errors have been made, employers should look to take steps to repay monies to HMRC as set out above.