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Coronavirus Advice  •  financial advice  •  governance

Update on CJRS: New HMRC letters are alarming employers

By RJP LLP on 16 September 2020

The extent to which fraudulent claims for furlough scheme grants have been made is now becoming very apparent. HMRC thinks that between 5% and 10% of all the grants issued through the Coronavirus Job Retention Scheme (CJRS), either contain mistakes or are cases of fraud. The cost of this to the treasury is estimated at between £1.75bn to £3.5bn.

Clearly the majority of claims have been made in good faith – deliberate fraud is nearly always the exception. However, there are likely to be some small errors and mistakes on claims, mainly because the whole process of calculating furlough payments was a new procedure for everyone involved. Some of the rules – especially concerning maternity pay or holiday pay and where an individual had multiple jobs – were complicated and confusing.

Letters being issued to businesses suspected of incorrect claims

HMRC has confirmed that its focus will be investigating around 27,000 suspected fraudulent CJRS claims rather than cases involving genuine mistakes. Initial enquiries will focus on 11,000 cases and letters are being issued to these employers, stating that there may be a discrepancy between what was claimed and what was actually due.

The problem with the letters is the lack of detail provided to recipients about what HMRC believes the problems actually are, and which claim they might relate to. For instance, a compliance letter could indicate that mistakes made relate to ineligible employees being included, or because too much was claimed – without stating the amount overclaimed, or which employees were not eligible. Not very helpful. To respond, employers will need to cross reference every claim made since April to double check for accuracy and compliance.

It may be possible that data captured from payroll systems in March 2020 is a key trigger for why some companies will receive a letter. For instance, any of the following conditions could be picked up by HMRC as a breach of the rules, when in fact the claims could be legitimate. These are:

  • transfers from another employer under TUPE;
  • transfers from another PAYE scheme as a result of a scheme reorganisation;
  • employee returning from parental leave;
  • employee returning from active military service after 10 June;
  • exceptions that may not have been picked up by the HMRC computer when it compares the payroll details the employer submitted in March 2020 to the list of employees on furlough for a later time period.

It is also known that HMRC has received many tip-offs. For example, from disgruntled staff who were put on furlough and then required to work, and these tip offs will instigate an enquiry.

If you receive a compliance letter and would like further advice, please contact us to discuss your circumstances. There is also a HMRC phone line for reporting concerns that you may have been targeted in error. Any complaints need to have been received initially by 22 September 2020 or you may risk incurring penalty charges.

If you spot a mistake relating to an overclaim of the CJRS, you are entitled to make a voluntary correction. This will avoid any penalties being due, provided that the excess is corrected either: within 90 days of receiving the grant, or by no later than 20 October 2020. Note: there are no penalties if the mistake relates to a lower grant payment.

If you have any concerns relating to the furlough scheme or these compliance letters, please get in touch: via partners@rjp.co.uk.

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The extent to which fraudulent claims for furlough scheme grants have been made is now becoming very apparent. HMRC thinks that between 5% and 10% of all the grants issued through the Coronavirus Job Retention Scheme (CJRS), either contain mistakes or are cases of fraud. The cost of this to the treasury is estimated at between £1.75bn to £3.5bn.

Clearly the majority of claims have been made in good faith – deliberate fraud is nearly always the exception. However, there are likely to be some small errors and mistakes on claims, mainly because the whole process of calculating furlough payments was a new procedure for everyone involved. Some of the rules – especially concerning maternity pay or holiday pay and where an individual had multiple jobs – were complicated and confusing.

Letters being issued to businesses suspected of incorrect claims

HMRC has confirmed that its focus will be investigating around 27,000 suspected fraudulent CJRS claims rather than cases involving genuine mistakes. Initial enquiries will focus on 11,000 cases and letters are being issued to these employers, stating that there may be a discrepancy between what was claimed and what was actually due.

The problem with the letters is the lack of detail provided to recipients about what HMRC believes the problems actually are, and which claim they might relate to. For instance, a compliance letter could indicate that mistakes made relate to ineligible employees being included, or because too much was claimed – without stating the amount overclaimed, or which employees were not eligible. Not very helpful. To respond, employers will need to cross reference every claim made since April to double check for accuracy and compliance.

It may be possible that data captured from payroll systems in March 2020 is a key trigger for why some companies will receive a letter. For instance, any of the following conditions could be picked up by HMRC as a breach of the rules, when in fact the claims could be legitimate. These are:

  • transfers from another employer under TUPE;
  • transfers from another PAYE scheme as a result of a scheme reorganisation;
  • employee returning from parental leave;
  • employee returning from active military service after 10 June;
  • exceptions that may not have been picked up by the HMRC computer when it compares the payroll details the employer submitted in March 2020 to the list of employees on furlough for a later time period.

It is also known that HMRC has received many tip-offs. For example, from disgruntled staff who were put on furlough and then required to work, and these tip offs will instigate an enquiry.

If you receive a compliance letter and would like further advice, please contact us to discuss your circumstances. There is also a HMRC phone line for reporting concerns that you may have been targeted in error. Any complaints need to have been received initially by 22 September 2020 or you may risk incurring penalty charges.

If you spot a mistake relating to an overclaim of the CJRS, you are entitled to make a voluntary correction. This will avoid any penalties being due, provided that the excess is corrected either: within 90 days of receiving the grant, or by no later than 20 October 2020. Note: there are no penalties if the mistake relates to a lower grant payment.

If you have any concerns relating to the furlough scheme or these compliance letters, please get in touch: via partners@rjp.co.uk.