Furlough errors: what to do

HMRC has started sending letters to employers it considers may have claimed too much under the coronavirus job retention scheme. It will be issuing 3,000 letters a week, an estimated 27,000 in total, urging employers to review their claims and rectify any errors. 

Overpayments

An overclaimed CJRS grant includes any amount that an employer was not entitled to receive, or any amount that they were no longer entitled to keep after their  circumstances changed - for example, if they no longer employ the employee but they  continued to receive the grant for them after they left.

If the employer notices the error within 72 hours of making the claim, it is possible to delete the claim in the online service. 

Employers that identify an overpayment of the grant have to pay it back to HMRC. They should do this by notifying HMRC in their next claim. This will result in an adjustment of that claim.  If they are not making another claim, they should contact HMRC by telephone in order pay the money back.  

Employers who have overclaimed a grant but not repaid it must notify HMRC by the later of:

• 90 days after the date they received the grant 
• 20 October 2020

If they do not notify HMRC within this timescale they may have to pay a penalty. Where employers notify HMRC of the overpayment, HMRC will make a tax assessment for the amount owed and the employer will have to pay within 30 days, otherwise interest and late payment penalties will apply.   

Underpayments

Where an employer has claimed too little, it must still ensure it pays its employees the correct amount.  It should contact HMRC to amend its claim and this will result in additional compliance checks by HMRC.

Furlough fraud and abuse

Cases of fraud or other abuse of the job retention scheme include, but are not limited to, claiming for employees who are still working (or for hours they are working, if flexibly furloughed) and not using the grant to pay furloughed employee costs.  

As with errors in claims, HMRC will also recover the overpayment through a tax assessment and issue penalties. These can be as high as 100% of the overpayment. Company officers will be jointly and severally liable where they deliberately made a claim the company was not entitled to make and both the individual and the company may be named and shamed. The company and its officers could also face criminal sanctions. Back in July the police arrested a man on suspicion of defrauding the scheme to the tune of £495,000 and as at 22 July HMRC had received 6,749 reports of furlough fraud. 

The Government has published a fact sheet containing information about the recovery of overclaimed grants and associated penalties.