HMRC furlough investigations are set to double to 30,000 – information and support for business owners

As of July 14 2021, the Coronavirus Job Retention Scheme (CJRS) – commonly known as the furlough scheme – has supported businesses with £67.4 billion to help pay employee wages throughout the pandemic, with 1.9 million jobs still furloughed at the end of June 2021. Due to the extent of the support and the 27,000 cases of fraud reported to them by April 2021, quite rightly, HMRC is wishing to review the legitimacy of claims.

Of the reported fraud cases, HMRC had opened 6,150 enquiries into CJRS suspected overpayments and just over 4,000 Self Employment Income Support Scheme (SEISS) overpayment claims. Originally, HMRC had expected to investigate 15,000 claims over the next two years but with the formation of the Task Force – due to the number of registered fraud cases – this expectation has now doubled to 30,000.

This article goes some way in preparing business owners and management teams for what to expect and actions you can take to prepare and minimise the impact of an investigation.

Firstly, it is important to note, deliberate or not, if you become aware of an over-claim within your organisation you must amend the claim within 90 days from the date the over-claim arose to prevent any penalties.

How is CJRS fraud categorised?

1. Error – legitimate claims; genuine mistakes in claims and calculations

2. Opportunistic – legitimate but artificially inflated claims

3. Organised Crime (OC) – fictitious claims or hijacking of legitimate claims

What systems do HMRC have in place to monitor claims?

• A comprehensive application process and scheme design

Only registered and authenticated employers can claim through the CJRS, and specific details have to be provided for each employee. HMRC have promoted ‘good compliance’ throughout the application process via their regularly updated in-depth guidance manuals. The CJRS application process makes it relatively simple to correct errors, and provides a 7-day window to complete your claim and a 72 hour window to delete a claim, providing plenty of time to claim accurately and amend if required.

So far, HMRC have written to 60,000 employers and self-employed individuals, where initial checks on their claims have indicated that an error may have been made. These are known as ‘nudge letters’ and HMRC will ask that claims are checked for errors which they believe have occurred, and that those errors are corrected and over-claims repaid.

• Analyst experts checking for opportunistic and OC fraud

As payment should be made within 6 working days of submitting a claim, HMRC have data and risk analyst experts looking at claims in the 72 hour window after a claim is made. Analyst experts are primarily checking for opportunistic and OC fraud, and they will block claims if required. However, they will also ensure that low-risk employers get their claims promptly.

As part of the Taxpayers Protection Taskforce launched in March 2021, there are currently 1,265 staff involved in checking CJRS and SEISS claims over the next two years. These specialist investigators have opened enquiries into suspected fraud or error on CJRS and SEISS claims, requesting extensive additional evidence to support their investigations. To understand what to expect when your business is compliance checked, you can read our article.

Various research methods and trigger points can prompt an investigation, including checks on an employers’ credit and debit card revenue during periods when furlough was claimed, using industry intelligence, and failure to stick to regulatory protocols such as not repaying over-claims within 90 days. They are also cross checking CJRS related information disclosed on company tax returns against CJRS claims that have been previously submitted, and investigating any anomalies between the two.

What are the repercussions if you mistakenly over-claim?

HMRC are aware that the vast majority of employers have claimed in the spirit of the scheme, and errors are likely to be honest mistakes. They also recognise that employers will have made claims when their businesses were under significant financial pressure. Consequently, HMRC will take proportionate action against such employers, being supportive and reasonable during these checks and enquiries.

What should you do if you receive an enquiry letter from HMRC regarding a compliance check of the CJRS grant?

There can be a lot of information to digest if you receive one of these letters, but firstly you should make a note of all the deadlines requested of you. Some of these deadlines could be relatively imminent, so you may potentially need to contact HMRC and try and agree a time extension. The initial letter will probably require you to collate a significant volume of supporting information, ranging from the furlough letters with your employees, to supporting calculations and pay information relating to those employees. It is important to provide all the information that HMRC is requesting in full, and in a clear format. You should also be prepared to send in additional information as the enquiry progresses.

Also consider that HMRC may challenge you on how you interpreted the CJRS guidance at the time you made the claims. It is important to clearly articulate the reason why you calculated the way you did; this could differ to how HMRC meant the guidance to be read.

Due to the volume of information requested and, how HMRC could challenge you on how you have interpreted the guidance, albeit in the good faith at the time, you should strongly consider taking professional advice to reduce the burden on management teams and to benefit from their experience.

What if you have mistakenly over-claimed furlough grants?

If you have made a mistake in your CJRS claim and need to contact HMRC, you have a deadline of 90 days from the date you received your grant. You can read more on paying CJRS grants back here. HMRC may then carry out a check into your claim to make sure you have met the right conditions for receiving a CJRS grant and check why the correct amount was not originally claimed.

What if an employer has mistakenly over-claimed furlough grants, and has become aware of this after the notification deadline of 90 days?

If you become aware of an over-claim after the 90 days, then you need to contact HMRC promptly, and they may carry out the necessary compliance checks regarding this claim. In our experience the repayment of an over-claimed grant should be accepted without any undue delay. However, this will depend on a number of factors and you should expect further questions or investigations. You can find out more regarding what penalties you may have to pay if you don’t inform HMRC here.

What if an employer has knowingly over-claimed furlough grants and does not disclose?

If after becoming aware of an over-claim you knowingly keep grant monies, HMRC can request up to twice the initial claim plus interest back and, if more serious, criminal prosecution.

What if my interpretation of the framework differs to that of HMRC?

At the time the CJRS scheme was introduced, the legislative framework was designed in a relatively urgent manner and, to their credit, the Government had the lifeline for businesses available very quickly. There were also numerous updates to the scheme, particularly during the first Lockdown, and further amendments and revisions as 2020 progressed. This will, as a consequence, mean that some areas of the CJRS scheme are open to interpretation.

Therefore whilst claims will have been made in good faith, they may not always be correct in the eyes of HMRC, if they interpret the guidance differently to you. Compliance checked business owners should take time to review their calculations against the guidance that was issued at the time. This review will help the analyst understand the context surrounding the calculations. If you believe that your interpretation of the guidelines and conditions differs, then you should seek professional advice from those firms with experience in understanding the framework and in challenging and working with HMRC.

Key takeaways

• HMRC have a comprehensive application process to tackle fraudulent activities, including 1,265 analyst experts looking into CJRS and SEISS claims. So far, over 10,000 enquiries regarding both CJRS and SEISS claims have been opened – with a plan to open a further 20,000 over the next two years.

• If you receive a compliance check letter from HMRC regarding an over-payment of a CJRS grant, then you should review all claims thoroughly and respond to HMRC in a timely and structured manner.

• Some employers may have interpreted the HMRC guidelines of CJRS claims differently to how HMRC intended it and, upon receiving a compliance check or enquiry letter, HMRC may challenge you on these matters. If this is the case, then it is recommended to seek professional support.

If you require further support regarding HMRC compliance checks, repayment of a CJRS or SEISS grant, or any support regarding employment or payroll please contact Stuart Curtis, a Partner at Price Bailey and Head of our payroll team, 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.


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