Reviewing your Coronavirus Job Retention Scheme claims

Kate Arnott, head of professional services, partner at MHA MacIntyre Hudson, warns SME law firms not to wait to review their Coronavirus Job Retention Scheme claims, before it’s too late.

By the end of August nearly 10 million workers had used the Coronavirus Job Retention Scheme (CJRS), and it’s estimated nearly two-thirds of these may have worked during that period, this coupled with the complications of the scheme has led to many businesses inadvertently, or deliberately, committing furlough fraud.

HMRC has commenced reviewing CJRS claims, and with significant sums involved, we recommend that you act now to review your claims and make amendments by 20 October to avoid penalties.

HMRC is already focused on businesses it believes may have claimed more than they’re entitled to, or who may not have met the conditions to receive the grant. Particular focus will be on businesses HMRC believes have included ineligible employees on a claim, or any business reported to their whistleblowing line by employees who may have been expected or required to work while furloughed.

To support their ‘clawback’ activity, HMRC is also likely to question where businesses are recording strong turnover/profits. Firms could come under scrutiny through no fault of their own simply by successfully trading out of this crisis.

Many law firms will have made these claims under intense pressure and against the backdrop of changing legislation without any external review of their calculations/methodology. Despite best efforts, we have reviewed a number of claims and seen errors covering:

• Inability to evidence the correct reference pay to ensure employees are correctly paid and CJRS claims maximised
• Use of incorrect reference pay
• Lack, or poor documenting, of the furlough consultation and ‘agreements’
• Breaching the daily claim limit caps
• Apportionment on the wrong basis
• Over and underclaims of national insurance contributions
• Overclaims of pension
• Statuary maternity pay above the statutory pay incorrectly treated
• Not identifying ‘full’ furlough and ‘flexi-furlough’ from July onwards and so using incorrect claim parameters
• Confusion of overlapping pay and claim periods and amounts able to be recovered.

HMRC charge penalties ranging from 15% to 50% for errors that are negligent and new legislation imposes penalties of 100% where claims are fraudulent. Having to repay furlough claims with penalties and interest could have a major impact on law firms and individual partners – who would be personally liable, so there’s a lot to consider.

Proactively reviewing your claims, rather than doing so under the scrutiny of HMRC, is always going to be preferable. Time is running out fast, the deadline is imminent, if you have any questions, would like support reviewing your claims or would benefit from a full CJRS risk review, please get in touch as soon as possible.