The government’s Coronavirus Job Retention Scheme (CJRS) is currently supporting 9.4 million jobs, according to the latest figures – but recent research suggests that a huge number could have been claimed fraudulently.
HMRC is said to be investigating almost 8,000 reports of furlough fraud received via its anonymous fraud hotline, but this could just be the tip of the iceberg.
A recent survey revealed that around two thirds of respondents continued to work for their employer after being placed on furlough, which is against the rules of the scheme. If the survey is representative of all CJRS claimants, it could mean millions of claims have been made fraudulently.
While many of the 1.14 million employers who have made at least one claim won’t need to worry, HMRC is encouraging those who have taken advantage of the system to voluntarily confess to furlough fraud through a 90-day ‘correction window’.
The tax authority says it will be lenient to any employer who uses this and returns the funds they claimed of their own accord – but those who don’t face hefty fines and potential reputational damage.
Here, we explain how to make a correction to the CJRS payments you’ve received if they were incorrect, plus the penalties HMRC could levy if you don’t.
How is HMRC dealing with furlough fraud?
It is down to employers to ensure that they, and their employees, are following the furlough scheme rules, and to make sure they have not been overpaid.
As an employer, you could be overpaid if you were claiming through the CJRS for employees who were still carrying out work for you, if you received more money than you were entitled to, or if your circumstances changed after you made the claim in a way that meant you were no longer entitled to the same amount of money.
The Finance Act 2020 includes civil penalties, which can be charged in cases where an employer is found to have used money paid through the CJRS for anything other than employees’ wages, National Insurance contributions (NICs), or pension contributions.
In the hope that employers will admit to overpayments rather than risk an investigation further down the line, HMRC says it has made the process of repaying the money ‘as easy as possible’.
If you want to make a correction
There are a few options to correct your claim if you’ve been paid too much through CJRS.
You can delete a claim straight away via the online service if the payment has been made within the last 72 hours.
Alternatively, you can declare it as part of your next claim – this will mean the amount will be adjusted and you’ll receive less to even it out.
If you’ve claimed a grant you weren’t entitled to and haven’t repaid it, you must tell HMRC within the 90-day reporting window. This is the latest of either:
- 90 days after you received the grant you weren’t entitled to
- 90 days after you received the grant you were no longer entitled to keep because your circumstances changed
- 20 October 2020.
Failure to do this will result in a penalty charge.
If you want to make a voluntary repayment
If you’re not planning to make any further CJRS claims, you can make a voluntary repayment directly to HMRC.
You’ll need to contact HMRC first to get your 14 or 15-digit payment number, which starts with an ‘X’. Then, you can make a payment directly to HMRC via Bacs, Faster Payments or Chaps.
- Find out more: furlough explained
HMRC penalties and how they’re issued
If an employer – which can be an individual, company or partnership – is found to have been overpaid through CJRS and has not declared it within the 90-day window, HMRC may issue an income tax charge.
At the very least this will be the CJRS payment you weren’t entitled to, including any amounts that weren’t used on furloughed employee payments, NICs or pension contributions within a reasonable period.
In addition, HMRC will make a judgement on whether or not the CJRS overpayment was ‘deliberate and concealed’. If they think it was, a penalty of up to 100% will be added to the amount you have to repay, and your details may be published along with other deliberate tax defaulters.
You’ll be given 30 days to pay the charge, and interest will be charged on late payments.
If the company has become insolvent and the tax cannot be recovered, company officers who knew about the overclaimed CJRS grant may be liable to pay it back instead.
In cases of partnerships, the amount due may be collected through income tax in the 2020-21 self-assessment tax return.
- Find out more: how to fill in a self-assessment tax return