Time for an audit? Notification deadlines for overpayments under the CJRS

Time for an audit? Notification deadlines for overpayments under the CJRS

What help is available for start-ups and SMEs whilst the world is on hold tackling COVID-19?

Whilst many employers are turning their focus on the details of the new Job Support Scheme, employers should not forget their obligations under the Coronavirus Job Retention Scheme (CJRS).

HMRC believes it may have paid out up to £3.5bn in incorrect or fraudulent claims under the CJRS. Given the lack of clarity in the rules of the CJRS, the repeated changes in the guidance, the inconsistency between this government guidance and the HMRC Treasury Directions and the complexity of flexible furlough, it will not be a surprise if many employers have made mistakes in their furlough claims. As well as innocent mistakes, some employers have deliberately claimed furlough monies that they were not due, for example by asking employees to work whilst on furlough leave. HMRC recently disclosed that their working assumption is that the error and fraud rate overall could be between 5% and 10% of all claims.

During the course of the CJRS, employers have been able to rectify errors made in claims under the scheme (such as claiming more than they were entitled to) in their next claim. Any over-claimed amount could be reflected in the employer's next claim and the amount paid in respect of the next claim would be adjusted accordingly.

HMRC has issued some guidance about what employers should do if they make an error in a claim and do not plan to make any further claims. Firstly, employers can repay any overpayment within 30 days by getting a payment reference number using an online service.

If an employer has over-claimed and not repaid within the 30 days, they must notify HMRC by the latest of either:

  • 90 days after the date they received the grant they were not entitled to
  • 90 days after the date they received the grant that they were no longer entitled to keep because their circumstances changed or
  • 20 October 2020

This means that for grants received on or before 22 July 2020, employers must notify HMRC by 20 October 2020. For grants received after 22 July 2020, notification must be within the relevant 90 day period. The employer then needs to pay any amounts owing within the ‘relevant period’ – for companies this is 12 months from the end of the relevant accounting period and for sole traders or partners the relevant period will end on 31 January 2022.

If an employer fails to repay or notify before the deadline, HMRC can recover the full amount of the over-claimed amount and also charge a penalty of up to 100% of the amount of the grant wrongly received. A failure to tell HMRC of the overpayment (when the employer knew about it) within the notification period is deemed by law to be deliberate and concealed. HMRC can also seek repayment and penalties against individual partners of a partnership and company officers of insolvent companies. In some serious cases involving fraud, a criminal investigation can be instigated. HMRC can also publish details of deliberate defrauders.

HMRC have said that they will not actively look for innocent errors in their compliance approach. They will be focusing on deliberate non-compliance and criminal acts. However, they do expect all employers to check their claims and repay any excess amounts. HMRC has the right to do spot checks and compel the disclosure of information. They have been encouraging whistleblowing during the course of the scheme and now have significant information about alleged breaches of the scheme which they will be investigating.

Employers now have a narrow window in which to audit grants received under the CJRS to seek to verify that they were legitimately entitled to the amounts they received. CJRS records must be kept for six years for tax purposes, so employers should have details of the amounts claimed, claim periods, claim reference numbers, calculations and for July onwards usual and actual hours worked. This information should assist employers with this review.

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