The Government's furlough scheme is the most significant government support package ever introduced in the UK. It has and continues to be a lifeline for many employees and businesses alike since it was introduced at very short notice by the Chancellor to be effective from 23rd March 2020. See our Coronavirus: Job Retention Scheme article for up to date information on the scheme, who it applies to and how to claim under it.
Two thirds of British private sector businesses have used the scheme since it was announced with a third having furloughed at least 75% of their workforce. The Office for Budget Responsibility has estimated that the furlough scheme will cost the Government at least £42 billion. Being transferred to furlough means employees continue to be paid by their employers; however, they are not able to conduct any work for the employer who is claiming the furlough grant. There are also rules regarding what training and volunteering an employee can undertake for their employer so as not to be in breach. However a BBC report states that there have been more than 3,000 reports of furlough fraud to HMRC since April 2020, including blatant fraudulent claims where the employee was not even aware their employer was claiming for them under the scheme. A recent survey found that more than a third of furloughed employees have been asked to undertake work by their employer. HMRC are looking to bring in legislation quickly to address this issue through measures currently within the Finance Bill 2020, which is expected to become law in early July 2020. HMRC has published an information notice setting out the impact of the legislation on the taxation of Coronavirus support payments. The Revenue are insisting that they are “not trying to catch out” businesses who claim through the job retention scheme (CJRS) or the self-employed through their equivalent scheme (SEISS) (see our Coronavirus: FAQs on Help for the self-employed for further details of the SEISS), and have promised leniency for those who have made genuine mistakes with their applications. However the draft legislation does provide for criminal sanctions including penalties and the possibility of custodial sanctions for “the most serious” fraudulent claims under the schemes and deliberate non-compliance. Under the draft legislation, businesses that believe they may have abused or claimed mistakenly under the CJRS or SEISS will have a 30-day period from making an error (or from when the legislation comes into force if later) to admit their mistakes. It is proposed that the penalty will not be applied to employees who self-declare under this window of opportunity. There will be a campaign highlighting to employees who suspect their employer are in breach of the rules to inform HMRC, therefore the 3,000 reports already made are likely to increase significantly.
Next Steps
We urge employers to ensure they are not breaking the rules when submitting claims under the CJRS. We appreciate furlough was introduced at very short notice at the start of lockdown, however it is now time to check and double check for accidental or mistaken claims especially in the area of employees working or training whilst on furlough status, making sure paperwork (which should be retained for 5 years) is accurate and government guidelines are adhered too. Employers can now repay any over claimed money via the HMRC portal.If you require any more information regarding compliance with the CJRS or SEISS please contact Lynne Ingram.
If you would like to talk through the consequences for your business, please email us and one of our team will get in touch.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.