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Markel Tax

11 May 2020

CRJS - consider the implications of getting claims wrong

The current Coronavirus pandemic has prompted various Government initiatives, one of which is the Coronavirus Job Retention Scheme (CJRS).

Much has already been written about what the CJRS is and how the scheme operates, but it is not too soon to consider the implications of getting claims wrong. Steve Price and Jacqui Mann of Markel Tax explore the inherent risks of getting the CJRS claim wrong.

Faced with the spectre of an economic meltdown due to the restrictions imposed to stem the spread of Covid-19, the government faced huge pressures to act immediately to protect employees’ jobs and created the CJRS to do this.

While CJRS appears fairly straight forward on the surface, a closer look reveals a number of strict requirements and factors to consider, including the following:

  • The interaction of CJRS with other initiatives

  • The type of employee included

  • The strict terms of furlough

  • Written records of furlough must be kept for five years

  • The importance of not only the date that an employee was set up on the payroll, but when HMRC was first notified on RTI

  • Special rules for employees made redundant or stopped working, those on fixed-term or reduced-hours contracts, directors, agency staff, LLPs etc.

  • Special rules for SSP, SMP, benefits in kind, salary sacrifice arrangements

  • How the calculation should be made

  • How the grant is used

  • How the grant should be treated in the business accounts

Out of necessity, the broad principles of the scheme were announced before there was time to consider the detail of how it would work in practice. Those details followed shortly after but, due to the haste in which they were introduced, some of the finer points had not been clarified before employers began to make claims. Further problems were found in the online calculator where, for example, a four weekly period was expressed as 31 calendar days rather than 28.

To its credit, the government has been active in working with claimants and their agents to resolve these issues as and when they have arisen.

However, as a consequence of employers making claims before some of the finer points were clarified and not realising that there were errors in the calculator, some claims may have been submitted incorrectly.

The burden of work on agents has also been an issue, with those administering multiple-client payrolls facing a deluge of high priority and time consuming work in lodging claims. This is particularly so in the case of employers with less than 100 employees, where line-by-line entries need to be individually input for each and every employee. Agents were also up against a 15-minute time-out function built into the software of a system already painfully slow due to the sheer volume of traffic.

Many a long hour has been spent by agents dealing with this deluge, but it is inevitable that mistakes will have been made, in most cases due simply to the sheer pressure generated by the volume and urgency of the work.

All of these factors have increased the risk of errors leading to incorrect claims, most of which are likely to have been made in good faith. Unfortunately, there will also be an element of less scrupulous individuals who will use CJRS as an opportunity to obtain grants that they would not otherwise be entitled to. Jim Harra, HMRC’s First Permanent Secretary and Chief Executive referred to this directly when he commented:

 “We are going to be paying out a vast sum of money in a rapid period of time….. Any scheme like this is a target for organised crime.  Any scheme that pays out I’m afraid attracts criminals that want to defraud it and people that are genuinely entitled to it who inflate their claims.”

When CJRS was first introduced any mention of compliance was secondary, but those messages have come to the fore as the process has evolved.

In its publication of 23 April, HMRC stated that it will check claims made through the scheme and that payments made may be withheld or need to be repaid in full if the claim is based on dishonest or inaccurate information or found to be fraudulent. It added that it will continue to monitor businesses after the scheme has closed.

HMRC has also announced the launch of an online portal for employees and the wider public to report suspected fraud in the CJRS. A further FAQ document from HMRC confirmed that HMRC will retain the right to retrospectively audit all aspects of claims made.

Within the claims process HMRC has stated that:

By making a claim you agree that:

  • The grant you receive can only be used to pay your employee’s salary and the employer national insurance contributions and pension contributions you must pay in relation to the salary paid to your employee

  • You will return any grants back to HMRC immediately if you’re unwilling or unable to use it to pay your employee’s salary and the employer national insurance contributions and pension contributions

You must not make the claim if you do not accept that you only use the money you claim for making those payments and that it must be returned to HMRC if you do not.

While the Coronavirus Act 2020 does not appear to present any specified regulations covering the operation of CJRS, there is no doubt that HMRC will check claims and take a robust stance against those who have over-claimed or not used the grant for its intended purpose. This will be supported by existing compliance legislation.

It is known that HMRC has suspended ordinary enquiries and most other compliance work for the time-being in order to redeploy its officers to deal with the administration of CJRS and other similar initiatives.

On receipt of claims, HMRC is already carrying out basic checks against RTI and rejecting those which are clearly invalid. However, the procedure is very similar to the self assessment ‘process now, check-later’ method, in that most claims will be paid up front and then if required, scrutinised later. This will mean that employers will be open to question about their CJRS claims for many years to come.

This compliance work that HMRC will undertake is likely to be carried out using existing methods ranging from desk-top enquiries via correspondence, to comprehensive site-based employer compliance-style checks, depending on HMRC’s view of the circumstances. The outcomes are likely to range from repayment of all or part of the original claim plus interest and penalties, to criminal prosecution.

HMRC has already indicated that it will take a robust approach to compliance with the scheme, so it is important that those making honest mistakes are not treated the same as those deliberately exaggerating or making entirely fraudulent claims.

The CJRS Direction says that a claim cannot be made “if it is abusive or is otherwise contrary to the exceptional purpose of the CJRS”.   How that statement will be interpreted remains to be seen, but it may be prudent for employers to check their claims retrospectively to make sure that they were accurate and met all of the required criteria. Where errors are discovered, they should be notified to HMRC and the necessary repayments made. A proactive approach is a far-preferable alternative to errors coming to light during an invasive check by HMRC at a later date.

Markel Tax specialises in all types of compliance work and has particular expertise in dealing with PAYE & employment issues and helping individuals and businesses make disclosures of irregularities in returns and submissions to HMRC.

If you have any concerns about claims you have made or for any other assistance, please contact Steve Price or Jacqueline Mann on 0333 920 5708.

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