HMRC ramps up investigation of job retention scheme claims

Covid-19 lockdown

Employers in the South West who may have inaccurately claimed support from the Coronavirus Job Retention Scheme (CJRS) are being warned to act now to avoid significant penalties from HM Revenue & Customs (HMRC).

Leading business and financial adviser Grant Thornton UK LLP (Grant Thornton) says it is dealing with a flurry of enquiries from clients about repaying the CJRS grants ahead of an HMRC deadline of 20th October.

HMRC has already written to some 30,000 businesses across the country, the start of a major investigation into a scheme that has benefited 1.2 million employers and seen 9.6 million UK jobs furloughed. According to government figures, the number of furloughed jobs in the South West is 357,500 and Wales has 195,600. (latest data to 31 July).

The HMRC deadline is for any organisation to flag that it may have received payments erroneously. Coming forward on an unprompted, voluntary basis greatly reduces the risk of fines and the potential for criminal investigations.

Grant Thornton says its clients are asking for help even if they have not been directly contacted by HMRC. Common concerns include genuine mistakes in the original grant submission or fears that a better than expected financial performance between March and October this year may demonstrate that a business was not, after all, strictly eligible for the support.

“The self-reporting timeframe is short but is the best way to avoid escalating the problem and risk,” said Matt Parfitt, who, as Director and Head of Employment Taxes & Payroll, South, is leading Grant Thornton’s CJRS review team in the region.  “Eligibility to claim under the CJRS is one of the key questions.  If a company’s financial performance was maintained or has improved since March through lockdown, it may be more difficult to evidence that coronavirus was the reason for furloughing and hence for claiming the Government financial support.”

The quantum of claim is another issue causing uncertainty. “The initial guidance came out shortly after the announcement in March 20 but was then updated several times,” he added.  “So companies worked out their own version of how calculations should be done, based on the initial announcements, that might not necessarily have been correct once the guidance was subsequently updated. We’ve seen numerous examples of unintentional errors resulting in either over claiming, or under claiming. We have also seen some clients are-paying back the grants to HMRC to avoid any worry.”

HMRC has said that the CJRS, which has cost the nation £38.8 billion so far, could remain under investigation for five years – and 20 years in cases where fraud is suspected. Any business that applied for grant support is strongly advised to gather documentary evidence that supports the financial context for the claim and captures internal discussions around CJRS applications.

HMRC has made clear its determination to address flagrant abuse of the scheme. Whistle-blowers have already come forward with examples of actionable behaviour, including employees being told to use personal email to work ‘off the books’ or pressured to work on a ‘voluntary’ basis.

“It’s in the nature of a crisis for things to happen quickly,” said Matt Parfitt. “The speed with which the CJRS was announced and implemented did mean confusion amongst both employers and employees. HMRC knows that employers could have inadvertently fallen foul of the rules and is offering this chance to self-identify any honest mistakes.

“Outright fraud will of course result in criminal proceedings and HMRC has moved significant resource into these audits. That’s why it’s important to conduct a review and have the right conversations. The letter might not come for a couple of years, so getting your rationale, documents, and evidence together now, while you still have it, is advisable.”