Overclaimed Coronavirus Job Retention Scheme payments
The Coronavirus Job Retention Scheme (CJRS) was put in place during the COVID-19 pandemic to support employers financially by subsidising wage costs. The scheme has supported over 9.4 million employees to date, but care must be taken to ensure that overclaims are not made, and if they are that they are reported and rectified.
What could cause an overclaim?
- HMRC has stated that the following actions constitute an overclaimed CJRS grant, and if unreported and left unrectified, could be treated as furlough fraud:
- the employer claiming for any amount they were not entitled to receive
- the employer having not reported a change in circumstances in respect of an employee for whom they have claimed a furlough grant (i.e. the employee has left the business, the employee has reduced their hours)
The Government has now introduced legislation to help in the recovery of overpaid furlough grants. HMRC are keen to follow up deliberate cases of fraud concerning the CJRS and are not obliged to look into what they view as ‘innocent errors’ which result in unintended overclaims.
Employers will not be charged a penalty if they did not know of the overclaim at the time it was received, and if it is repaid within the following timescales:
- Companies will have until 12 months from when their accounting period ends to rectify errors
- Sole traders or partners will have until 31 January 2022
Failure to report errors of overclaim from the CJRS can incur such penalties as:
- income tax charge — full overclaimed amounts may be recovered if HMRC make a tax assessment for the amount overclaimed, of which payment of the assessed amount will be due 30 days after the assessment (otherwise interest will be charged on the tax from day 31)
- company officers can be made personally liable to pay the tax charged on overclaimed grants in the case of insolvency — if officers of the employer knew of the overclaimed grant, or tax incurred on the grant, but this cannot be recovered from the company
- 100% penalty for failing to notify HMRC, within the below notification period, that the employer is chargeable for income tax on an overclaimed furlough grant
- details of employers that deliberately overclaim may be published
- partners will be jointly and severely liable for any overclaimed grants repayable.
What to do if you’ve overclaimed
Notification of any overclaimed furlough grant payments need to be made within any of the following notification periods:
- 90 days after receiving the overclaimed payment
- 90 days after the day circumstances changed
On 1 July, HMRC updated its guidance on the furlough scheme to enable employers who have overclaimed through the scheme to either:
- correct this error in their next claim, or
- make a payment directly to HMRC if the employer will not be making any future claims; employers will, however, first need to contact HMRC to receive a payment reference number before paying via bank transfer, online or telephone banking.
The Government has emphasised that any overclaimed grant payments must be repaid and, as mentioned, one option is to repay it to HMRC in the next furlough claim.
Employers should notify HMRC of the amount that has been overclaimed as an additional step to making a new furlough claim. Any new grant payments made to the employer will then reflect any deductions made due to previous overclaimed payments.
Employers should keep records of this for six years.