Carousel_Arrow Chat icon_cookie IHT_trust_wills IR35 Combined Shape 2 Group 10 Login Mobile Menu Share Share Email SubMenuMobile Group 9 VAT View_Gallery View_List capital_allow Triangle 2 Copy Close construction cyberpro employment_tax_shares emplyer_solutions entrepreneurs_corps fee_protect Group 7 grant_fund Group i_Clock i_Consult i_Done i_Eligibility_Tick i_Enter i_Filter i_HMRC i_Negative i_Play i_Plus i_Reset i_Support_Legal i_Support_TaxDesk i_Support_VAT i_Tick noun_marketing_1872083 noun_online_2126759 i_download i_meet Group Copy 24 Group 18 noun_electrical_1240755 copy noun_Technology_2125422 noun_Science_2031115 i_tick_bullet_block international_tax patent_box private_client property_sdlt r_and_d reliefs_incentives Search specialist_tax status tax_indemnity valuation YouTube
Markel Tax

22 Jun 2020

Avoiding the pitfalls of CJRS claims

The speed at which the CJRS was introduced and the need for frequent updates after a significant number of claims had already been made inevitably increased the chances of incorrect claims. Steve Price and Jacqui Mann consider the areas in which errors could commonly occur and what HMRC are now doing to put things right.

While it is to the government’s credit that it acted quickly to preserve jobs, the way in which the situation has evolved has inevitably created the potential for mistakes and misinterpretation of the rules as well as the opportunity for unscrupulous employers to undermine the spirit of what was intended and push the boundaries of their claims.

Resumption of compliance activity

It is understood that HMRC has resumed some of the enquiry work they had paused, which is perhaps sooner than expected. It is likely that this prompt restart is partly due to pressure on HMRC to retrospectively police employers’ CJRS claims as soon as possible, given the unprecedented level of public funds involved. Early claims could well be targeted first as they will carry the most risk of being incorrect.

Some of this pressure comes from the 1,900 or so reports HMRC has already received through its digital reporting service, in addition to the thousands of calls from employees, reported through whistleblowing organisations, about employers who allegedly have made false claims through the CJRS scheme.

However, fraudulent claims aside, HMRC have also been considering how to best deal with situations where employers have simply made mistakes.

Amendments to previous claims

HMRC has been working on procedures to allow amendments by the claimants to previous claims. This is important, as it underlines the expectation that employers will act responsibly in reviewing past claims in light of the changing guidelines to ensure they are correct, and make amendments if they are not.

It has just been announced that the online application form has now been altered to allow employers to include details of any over-claimed amounts in previous applications. This will ask if the new claim needs to be reduced by the amount of the previous over-claim. Procedures are not yet in place for employers who have previously over-claimed but do not intend to make future claims but an announcement on this is expected from HMRC very soon. However, HMRC will expect employers to identify errors now in readiness to make the necessary amendments as soon as the facility becomes available.

The risk of complacency

It is pertinent here to remind ourselves of the assurance employers automatically provide to HMRC when making a claim:

By submitting your claim, you are confirming the following:

  • You are claiming costs of employing furloughed employees arising from the health, social and economic emergency resulting from coronavirus

  • Your claim is in accordance with HMRC's published guidance

  • The information you have provided is correct, to the best of your knowledge

  • All employees have been paid their wages before the claim was submitted, or will be paid in the next payroll

  • If any of this information changes, you will contact HMRC to amend the claim.

With the benefit of the current guidance material we list some of the criteria which may have been misinterpreted or not met, which in turn may have led to incorrect claims. This list is by no means exhaustive; the details of all claims need to be considered on their own merits.

  • To be eligible, employees must have been on the payroll and their first RTI submission made on or before 19 March. Late RTI submissions render employees ineligible.

  • Workers must sign a written agreement to vary their existing contract

  • Each furlough period must be for a minimum of 21 days or 3 weeks

  • The full amount of grants must be used solely to pay employees in the form of money

  • Workers on reduced hours or reduced pay not eligible

  • Workers on unpaid leave on or before 28 February cannot furlough until the date on which it was agreed that they would return to work

  • Furloughed workers not allowed to do any work that makes money for or provides services to the business

  • Particular care needs to be taken to ensure that company directors who are furloughed do not fall foul of the scheme’s conditions

  • The £2,500 monthly cap applies to each separate employment

  • Discretionary bonus & commission payments and tips should be excluded from calculations

  • Employers choosing to top-up salaries beyond 80% cannot claim for the additional NIC or pension contributions

  • Pension costs claimed are restricted to the mandatory employer contribution through automatic enrolment, which is 3% of income above the lower limit of qualifying earnings

  • The total grant for employer’s NIC cannot exceed the total amount of employer’s NIC due to be paid

  • In calculating employer’s NIC any Employment Allowance claimed in the

  • period should be deducted from the claim

  • Entities who receive income from public funds have special restrictions which impact upon the amounts they are able to claim

  • Earlier versions of HMRC’s online calculator contained an error in expressing numbers of days

  • Calculations including for example variable pay rates, salary sacrifice schemes and the like can make this area more complex than it first appears and create a greater risk of computational issues

It is essential that full documentary evidence is retained to support the claims made, for a minimum of six years. It should be noted that HMRC’s initial publications mentioned five years but this has since changed.

Such documentary evidence includes the pay records, contract variations, calculations made and any other record supporting the information within the claim. If HMRC subsequently challenge a claim and this detailed information is not available it is likely that it will try to claw back all or part of the original grant(s).

It is also worth reiterating that all grants received should be included in business income, in accordance with recognised accountancy practices. HMRC are very likely to check this aspect as part of its overall review of claims made.

Finally, bear in mind that from 1 July, the furlough scheme is being extended, but with significant changes in the rules. As these changes have been announced well in advance of the implementation date, with detailed guidance to be issued on 12 June, hopefully the scope for potential error will be much smaller than it originally was.

Markel Tax specialises in all types of tax compliance work and has particular expertise in dealing with PAYE & employment tax issues. If you would like to discuss any aspects of the CJRS or need help with claims please contact Steve Price or Jacqueline Mann or call Markel Tax on 0333 920 5708.

Our COVID-19 Hub contains a range of information and resources to best support our clients during this difficult time. To receive the latest news and insights by email sign-up here.

Tagged Tax investigations Tax investigations COVID-19
Next article in series

22 Jun 2020

Family investment companies – the way forward?