As HM Treasury's furlough scheme starts to wind down, this is the time for employers to look back and take stock. As the virus began to take hold and the economy began to shut down Chancellor Rishi Sunak announced the Coronavirus Job Retention Scheme (the Furlough Scheme) where the Government would pay 80% of an eligible employees wages which would include employee pension contributions up to the Auto Enrolment limit.
The details of the scheme are complex and the accompanying guidance has rapidly evolved. Originally intended to cease on 30 June, the scheme was extended to October 2020 with the possibility of further extensions should more lockdowns be announced.
Two important concerns have arisen. First, as guidance changed, many employers struggled to keep abreast when claiming under the Scheme. While HMRC has said the process was relatively simple and quick, for the employer to assess who could be claimed for and what those employees could then do by way of work involved considerable administrative challenges. By May, it was estimated that claims in respect of nearly 8m employees had been made and over £10bn claimed. It is inevitable that mistakes would have been made and claims processed for employees not entitled.
With claims emerging that the Scheme has been fraudulently applied it is highly likely that HMRC will be looking to pursue criminal sanctions against blatant cases of tax fraud where it considers there is clear dishonesty or exploitation. There is historical precedent for HMRC wanting to make an example of such companies.
What then can you do to protect yourself and your company from the fallout? First ask yourself the following questions:
1. Did you put in place a Furlough Agreement with all the employees you furloughed?
2. Did you check the CJRS guidance every time it was updated to ensure you complied with it?
3. Did you review the HMRC directions when published to ensure you complied with their terms and applied them correctly?
4. Can you be satisfied that your record keeping of a good enough to prove you complied with the CJRS ? Do you have an audit trail?
5. Did you have procedures in place to ensure your Furloughed employees didn’t actually work for you. Were these procedures documented?
If the answer to any of these cause you concern do not panic, but take professional specialist advice. We have set up a multidisciplinary team of employment and tax specialists that can assist. We can audit your compliance with the CJRS and guide you through the process. HMRC has announced a 90-day ‘amnesty’ for employers to come clean if they think they may have got it wrong innocently. The clock started ticking from 22 July 2020, so time is of the essence.
