As the Coronavirus Job Retention Scheme (CJRS) has been amended, the head of employment and partner at a law firm has given tips on how employers can avoid committing accidental ‘furlough fraud’.
Philip Pepper, head of employment and partner at the law firm, Shakespeare Martineau tips are:
- Review the company’s use of furlough arrangements after 1 July.
- Understand the methodology for calculating a claim and ensure all records are up to date.
- Review historical claims to confirm whether they have been processed correctly.
- Ensure all managers are educated around the amendments to the Coronavirus Job Retention Scheme and what they are permitted to ask of employees.
- Be aware of the consequences around failing foul of the CJRS rules.
- Employers that believe they may have abused the CJRS will have a 30-day period (which may increase) to admit any mistakes – take advantage of this.
Mr Pepper said:
While the main features of the new scheme remain as outlined by the Chancellor on 29 May, recent changes to the CJRS have created a minefield for employers, increasing their chances of accidentally committing what’s now been dubbed as ‘furlough fraud’.
For employers across the board, now is not the time to bury their heads in the sand. Offices and directors of the company remain jointly liable for any fraud that is committed, so taking active responsibility is key.
Communication in the workplace has never been more crucial, particularly when it comes to managing workload. For example, it can be easy to fall into the trap of asking individuals to undertake additional roles and responsibilities. Before managers ask someone to work extra hours or shifts, they should consider whether this falls outside of the employee’s furlough agreement. It is down to the employer to ensure this training is provided and the agreement is honoured.
Under the new legislation, companies who have dishonestly claimed furlough based on misleading or inaccurate information will face financial sanctions or criminal action. HMRC has promised leniency for genuine mistakes, and that penalties will only be charged for ‘deliberate non-compliance’ but it’s important that employers don’t get caught out.
On 29/05/20 Rishi Sunak, Chancellor of the Exchequer announced changes to the CJRS. Such as from September companies must pay 10 per cent and then 20 per cent in October of the 80 per cent of wages the furlough scheme entitles to employees.
Also, the amendments to the scheme outline that employers will pay National Insurance Contributions (NICs) and pension contributions from August onwards. Workers will be allowed to work part-time whilst on furlough from 1st July instead of 1st August which was previously announced. Employers have to pay the full amount of salary for the time worked where the CJRS will cover 80 per cent of the remaining days that did not see the employee at work.
On 18/06/20 research from Crossland Employment Solicitors, found that 34 per cent of employees have been asked to commit ‘furlough fraud’ on purpose, as they were told to continue working despite being on the scheme. Also, 29 per cent were told to undertake more administrative tasks whilst on furlough, and a fifth (20 per cent) have even been asked to work for a company linked to theirs.
In response to the above concerns, a proposed amendment to the Finance Bill has been made on how HM Revenue and Customs (HMRC) should deal with employers who made errors relating to the furlough scheme, stating that they should have 90 instead of 30 days for companies to confess ‘furlough fraud’.
Dawn Register, tax partner at BDO, an international network of public accounting, tax, consulting and business advisory said:
The window of opportunity to correct mistakes in furlough claims or other COVID-19 support payments administered by HMRC is to be extended from 30 to 90 days. This is a welcome change that gives businesses a more realistic time period to check their claims and notify HMRC of any corrections. Given the huge volume of government guidance and changes in July already, we consider the extension to a 3 month period is crucial to allow businesses time to review claims and seek professional advice where necessary.
The legislation will now also cover the new Coronavirus Statutory Sick Pay scheme, in addition to the furlough (CJRS) scheme, the SEISS and other Covid-19 grant schemes.
If a company received ‘furlough monies’ which it was not entitled to then it will be subject to 100 per cent income tax on those monies. The legislation now confirms that this tax is not payable under Quarterly Instalment Payments (QIPS), which is also a helpful clarification for larger companies.
We expect there will be many cases where innocent mistakes are made given the difficult trading conditions for businesses during Lockdown. Also a ‘catch up’ exercise may be needed on paperwork. Businesses should start to check and double check now that their Government support claims are correct.
The 90-day period will start after Royal Assent of the Finance Bill and this is expected before the end of July 2020.