The Coronavirus Job Retention Scheme (CJRS) was first announced back in March 2020 and funds 80% of an employee’s wages if there is no work for them to complete due to COVID-19. For further information and eligibility criteria of the CJRS, you can read our article on the Coronavirus Job Retention Scheme (CJRS).
As at 18 October 2020 9.6m employees had been furloughed by 1.2m employers, with a total cost to the UK of £41.4bn; with this number set to rise as lockdown V2 plays out and we hit the winter months.
For those of you that have received State Aid or any other Government or EU grant, you will be aware of the regulation involved in using these schemes. Often a lengthy application process and depending on the size of the grant/ loan possibly ongoing monitoring or a post works review.
Due to how quickly the impact of the pandemic took hold the Government were not able to add red tape to those using CJRS, businesses needed support, and they needed it quick. Therefore HMRC issued the funds but confirmed they might carry out checks in the future. These checks are starting to be completed and are known as ‘compliance checks’. HMRC are requesting vast amounts of information, often, dating right back to the businesses first CJRS claim to confirm compliance.
The checks are there to make sure businesses have met the conditions of receiving the grants, and have claimed the correct amounts. We are aware that HMRC issued ‘nudge letters’ to users of the scheme throughout CJRS V1, to prompt businesses to make sure they were using the scheme compliantly. Not all companies received these letters; and as to whether they were sent specifically to those they suspected to be using the scheme in the wrong manner, possibly due to the size of their claim versus their standard wage bill, or their use of the scheme compared to those in the same sector, or they were sent randomly, we are unsure.
What is involved in an HMRC compliance check?
Our early experience shows these compliance checks come with extensive information requests with very tight timescales; two weeks from the date of the letter to provide the information requested. It is common for HMRC letters to be received with a delay of up to two weeks. Our experience so far is the delays are leaving clients with just days to respond. We have found that HMRC has been supportive once contacted to extend the date but only in the first instance and only for a short time. This means that businesses should be pre-empting these requests and using sound systems to store data and records ready for supply.
The letters note that if on review, whilst compiling the paperwork requested, you spot you have made a mistake then you should contact your compliance officer, noted personally at the top of your letter, immediately. You are also required to confirm a direct contact and the best number to contact this person.
Requests are substantial and are on a per-employee basis. Meaning the more employees that utilised the scheme (9.6m in total across the UK), the more information you are required to provide. Much of the information requested is also per wage payment; meaning those that pay weekly are needing to supply much more information than those that pay monthly.
Information/ evidence that has been requested from the claims we have seen so far (this is per employee and per claim):
- The employees, name, address and NI number
- The furlough start and end date
- Details of how their normal pay is calculated
- How their furlough pay was calculated
- Whether you paid the employee at least the amount on the claim (evidence required)
- The amount paid in pension costs (evidence required)
- The number of hours usually worked
- The number of hours worked
- The number of hours on furlough
- The employer NI contribution claimed
- The employer pension contribution claimed
As well as supplying all the above information, details of any corrections or adjustments to your CJRS claims are also required. All the information is to be supplied electronically by email to your named contact and confirmation that you understand the risks of sending sensitive information electronically is required separately and before sending.
We are yet to see compliance checks of the legal condition of the grants, i.e. contract amendments and furlough agreements but understand these were a clear and well-documented stipulation of receiving the grant.
We are yet to see any trends in the sector or size of business and expect for consistency HMRC will include a variety of business in different sectors, of different sizes and with varying levels of claims. What we do know is that when a compliance check is carried out, considerable time is required to gather the information requested, both from a business’s internal team and their professional support.
How can you mitigate the cost of an investigation?
Price Bailey proudly offer a Tax Investigation Service, an annual insurance policy that reimburses our professional costs should our clients have an HMRC tax investigation regarding:
- Self-assessment full or aspect enquiry
- Personal affairs of directors/ partners
- Employer compliance disputes
- IR35 disputes
- VAT Disputes
- Schedule 36 enquires
The Price Bailey Tax Investigations Service provides for reimbursement of up to £125,000 of professional fees in the event of an accepted claim on our practice policy. Importantly this covers investigations into CJRS.
This article was written by Matthew Hector, Business Development Manager at Price Bailey. For any further information on HMRC compliance checks with regards to the Coronavirus Job Retention Scheme, you can contact Matt using the form below.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.