The Coronavirus Job Retention Scheme (CJRS) ended in September but many firms could still be subject to a CJRS compliance check in the weeks and months ahead.
HM Revenue & Customs (HMRC) has been sending out letters to employers throughout the year telling them they need to pay back CJRS payments because they claimed too much or are suspected of furlough fraud.
What is a compliance check?
In addition to checking CJRS payments, HMRC could write or phone to say they want to check:
- Any taxes you pay
- Accounts and tax calculations you have submitted
- Your Self-Assessment tax return
- Your company tax and VAT returns
- PAYE records and returns, if you employ people.
These compliance checks can even be sent at random where there is no suspicion of illegal or inappropriate activity.
How does HMRC determine CJRS fraud?
HMRC classes furlough fraud as:
- Not paying employees the full amount they are entitled to
- Employers claiming furlough payments for workers who are still working for them
- Claiming payments for non-existent employees
- Not telling staff they are furloughed, who only find out when they receive their wages
- Backdated claims that include periods in which the employee was working.
What if my business was not entitled to payments?
HMRC can claw back any money paid out which the employer was not entitled to via a 100 per cent income tax charge whether the claim was made innocently or deliberately. This includes overpayments of a CJRS grant due to errors.
The compliance check will request details of staff members and how much money they received while furloughed. HMRC will typically give a short timescale to provide this information – usually around 30 days.
HMRC will write to tell you the results of the check. You will then be:
- Told no additional tax is due;
- Repaid if you’ve paid too much tax – you may also get interest on the amount you’re owed; or
- Asked to pay additional tax within 30 days if you owe more – you’ll normally have to pay interest from the date the tax was due.
You may also have to pay a penalty. When issuing fines HMRC will look at:
- The reasons why you underpaid or overclaimed the tax
- Whether you told HMRC as soon as you could
- How helpful you’ve been during the check.
If you have problems paying, you should tell HMRC immediately, as it may be possible to arrange a time to pay arrangement.
If I am penalised, how much will I pay?
The penalty percentage will fall within a range and depends on the type of behaviour and whether the disclosure was unprompted or prompted. They fall broadly into three categories:
- Deliberate and concealed or treated as deliberate and concealed
Each carries a different penalty, which can be seen here.
If you do get a letter or phone call about a CJRS compliance check then you should seek immediate assistance from an accountant.